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Decrease in SPH revenue largely due to decline in Media business; but stable profits maintained from major costs savings - 2018 Annual Report

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Singapore Press Holdings Limited (SPH)

Source: SPH

Incorporated in 1984, SPH is Asia’s leading media organization. Its core business is in the publication of newspapers, magazines and books in both print and digital editions. The company also owns a digital portfolio, and has investments in property and the aged care sector.

FY 2018 Financial Highlights:

Source: SPH Annual Report 2018

  • SPH’s operating revenue declined by 4.8% year-on-year to SGD 982.6 million for the year ended 31 August 2018 (FY 2018).
  • Nevertheless, cost savings negated much of the decline which resulted in the company’s FY 2018 operating profit increasing slightly by 0.4% to SGD 206.3 million.
  • In addition, SPH chieved a 113.8% year-on-year jump in investment income to SGD 115.2 million in FY 2018.
  • However, the company’s net profit attributable to shareholders in FY 2018 still decreased by 19.7% to SGD 281.1 million. This was mainly attributed to the absence of the one-off gain on divestment of a joint venture recorded in FY 2017. If that one-off gain was excluded, net profit attributable to shareholders actually improved by 2.4%.

Performance Drivers:

Source: SPH Annual Report 2018

SPH continued to suffer declines in profit for its core Media business, as well as its Property business, as a result of the tough retail environment. Nevertheless, it recorded gains for its Treasury and Investment business, as well as its Aged Care and Digital Portfolio sectors (under Others), on the back of a new acquisition and gains from divestments.

Performance Drivers (Positive Factors)

  • Treasury and Investment Business

SPH’s Treasury and Investment business, which manages the investment activities of the company, achieved a 110.4% year-on-year increase to SGD 99.0 million in FY 2018. The increase was driven by a gain on the divestment of treasury portfolio investments to fund other strategic initiatives, such as its property asset management sector.

  • Others Business

FY 2018 revenue from the Others business improved by 34% to SGD 84.4 million. This was mostly due to the first full-year contribution from SPH’s investment in the Aged Care sector. The company owns Orange Valley, Singapore’s largest private nursing home operator, which saw bed capacity increase by 18% from FY 2017 to FY 2018.

Further, SPH’s Digital Portfolio recorded gains from various divestments, including Qoo10’s Japanese subsidiary (gain of SGD 9.4 million) and Kaidee (SGD 2.2 million). The company also registered a revaluation gain of SGD 22.2 million for SPH Ventures portfolios.

Performance Drivers (Negative Factors)

  • Media Business

SPH’s core Media business continued to suffer a decline in revenues, with its FY 2018 revenue decreasing by 9.6% year-on-year to SGD 655.8 million. Nevertheless, the decline has been moderating, and Media remains a profitable business for the company. SGD 92.8 million in operating profit was recorded for FY 2018 – supported by lower staff costs, newsprint costs and depreciation charges.

In addition, with the falling popularity of print media, SPH has been pushing towards the digital forum. As a result, overall circulation actually grew in FY 2018, led by an increase in digital subscriptions. Further, digital revenue had increased to account for 15% of total media revenue in FY 2018.

  • Property Business

Despite a challenging retail environment, FY 2018 revenue recorded by the company’s Property business remained stable at SGD 242.4 million. However, additional financing costs for a real estate development and increased professional fees for acquisition projects led to a 6.9% year-on-year decline in operating profit to SGD 151.8 million. Nevertheless, SPH’s Property business remains the largest contributor to overall profit.

Source: SPH Annual Report 2018