SPH revamps for better footing in digital information age

Singapore

MEDIA giant Singapore Press Holdings (SPH) will take a sharp cut in the cost base of its core media business, as it looks to re-position itself quickly and efficiently to meet the demands of the new digital information age.

This was the thrust of the group's message when it announced its results for the full year ended Aug 31, 2017, on Wednesday.

New CEO Ng Yat Chung - who took over the reins officially on Sept 1 - said that the group's planned restructuring exercise, which would take the form of job cuts and a streamlining of operations and processes, was to enable it to do better in its new business environment.

"The rationalisation of the newsroom is only the means to an end," Mr Ng said at a media briefing, "we have to fix the cost base because the business is changing. At the same time as we are streamlining, we are also investing in new capabilities that will put us in a better state in this new environment."

At stake in the rationalisation are some 230 jobs, of which about 200 will come from the group's core media business. Of the 230, some 130 will be retrenchments, with the rest being a combination of contract terminations, retirements, resignations and outplacement of staff.

The rationalisation is also part of an ongoing exercise first announced by SPH in October 2016, when the group said that it was looking to reduce its staff count by 10 per cent over two years. Mr Ng clarified that that timeline had simply been accelerated, with the group now looking to complete the 10 per cent staff reduction exercise by the end of this calendar year.

"We intend to wrap this up quickly so we can focus on growing the core media business," he said. "(The) print (business) still has legs - it will be a big revenue and profit driver for some time to come, but we also recognise that we now have to go to a first-to-digital strategy."

The group is already focused on investing in new capabilities - as well as enhancing existing ones - in order to position itself to better perform in the new digital media age.

"To enhance our capability to thrive in the age of digital disruption, we will be enhancing our capabilities in digital, data analytics, video and content marketing. We will also be investing in radio broadcast, because radio has been a bright spot for us this last year," Mr Ng said.

"With these capabilities, we will be seeking new growth and we hope to be able to better meet the rapidly changing needs of our readers, our audience and our customers. At the same time, we will also strive to grow the international reach of our flagship products through better digital subscription."

SPH is also continuing to explore opportunities in the non-media arena, to grow both its top and bottom line.

"We will continue to look at opportunities in the property business," Mr Ng said. "We are continuing to look at opportunities to expand our interest in aged care. We are also looking at opportunities to further invest in areas such as education platforms and non-media-related digital businesses. The non-media business as a whole is tracking well."

And the group's FY2017 results echoed the picture painted by its CEO. SPH's operating revenue was 8.2 per cent lower year on year, to S$1.03 billion from S$1.12 billion for FY2016, with the disruption to the media industry continuing to impact revenue. Its media business revenue was down 13 per cent at S$725.4 million, with advertisement and circulation revenue falling 16.9 per cent and 5.1 per cent, respectively.

Revenue from its property segment rose 1.2 per cent to S$244.2 million, on the back of higher rental income from the retail assets of the group. Revenue from the group's other businesses increased 28.9 per cent to S$62.9 million, thanks mainly to income from its newly acquired healthcare business.

For its bottom line, SPH reported a 32 per cent jump in net profit attributable to shareholders of S$350.1 million, from S$265.3 million a year ago, boosted by a gain of S$149.7 million from the partial divestment of its stake in the regional online classifieds business, and a S$57.4 million fair value gain on investment properties.

These gains were partially offset by charges of S$96 million, which included impairment of the magazine business amid unfavourable market conditions, writedown of printing presses due to consolidation of printing capacity, and writedown of investments in associates to realisable value.

The effect of these items was a net gain of S$127.6 million compared to the previous financial year.

The group's recurring earnings, excluding impairment charges, declined S$67.5 million or 20.2 per cent year on year.

SPH's earnings per share rose to 22 cents, from 16 cents for FY2016. The group declared a special dividend of six cents per share, and a final dividend of three cents per share, taking total dividend for FY2017 to 15 cents. For FY2016, SPH had declared a special dividend of three cents per share and a final dividend of eight cents per share, with total dividend at 18 cents.

The group's share price was down two cents at the close of trade on Wednesday, to S$2.69.

Commenting on SPH's performance, Eli Lee, senior investment analyst at OCBC Investment Research, said: "SPH's Q4 FY17 results came in within our expectations. While there is no denying the impact of digital disruption on the group's core media earnings - which continue to decline over the latest quarter - our view is that the management team's approach in rationalising the business is mostly realistic and sound.

"On the other hand, we are also encouraged that SPH continues to gain traction in its efforts to diversify into property and aged healthcare. In addition, against an improving economic backdrop, we believe the group will gain some leeway as it crafts a strategic position to accommodate for the secular forces of traditional media decline."