Published October 11, 2008

SPH profit slips 12.4% on lower investment gains

Earnings from group's media and property businesses up 17.5% at $501.7m

By CHOW PENN NEE
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SINGAPORE Press Holdings (SPH) has reported a 12.4 per cent drop in net profit to $437.4 million for its full year ended Aug 31, 2008 as investment income tumbled.

RESULTS BRIEFING
SPH CEO Alan Chan (left) and chairman Tony Tan at yesterday's briefing for the group's latest full-year results

Net income from investments sank 67.3 per cent to $47.7 million amid global financial turbulence. It was also affected by a downward fair valuation. And there was a $26.7 million impairment charge to write down the carrying amount of investments in associates - mainly Chinese billboard company TOM Outdoor Media Group - to the estimated recoverable amount.

Fully diluted earnings per share fell to 27 cents from 31 cents.

The previous year's higher investment income stemmed largely from profits on the sale of investments and gains from capital reduction exercises by MobileOne and StarHub.

Excluding the drop in investment income this time around, net profit from SPH's media and property businesses rose 17.5 per cent to $501.7 million, driven by the better performance of its print media and a higher contribution from its Sky@eleven condo project.

Full-year operating revenue rose 12.1 per cent to a record $1.3 billion. Revenue from the core newspaper and magazine division rose 5.7 per cent to $1 billion, with print advertisement revenue jumping 7.6 per cent to $780.1 million.

On the immediate prospects for advertising revenue, SPH senior executive vice-president of marketing Leslie Fong said: 'There is no doubt that the past two or three weeks have been pretty testing times and there is a general lack of confidence in the market, so it stands to reason that advertisers would be cautious.'

But Mr Fong is not too downbeat. 'I think the impact will be quite contained,' he said.

In the property segment, revenue jumped 43.6 per cent to $255.3 million, boosted by a $138.1 million contribution from Sky@eleven and a $10.1 million increase in income from rental and related services at Paragon retail complex.

Total operating expenses rose 9.3 per cent to $814.5 million. Property development costs for Sky@eleven accounted for $15.8 million of the increase, while staff costs grew 10.4 per cent as a result of increased headcount and annual salary increments. Headcount in August 2008 came to 3,918, up from 3,735 a year ago, as SPH continued to develop its new media and magazine businesses.

Fielding questions on what SPH management will do to bolster the company in these trying times, chief executive Alan Chan said: 'There's a whole slew of activities one has to do, from ensuring organisational efficiency to coming out with contingency modelling.'

Mr Chan downplayed the coming challenges. 'Frankly, it's nothing new to SPH,' he said. 'We've seen through the times of the Asian financial crisis, we've seen through the times of Sars. The senior management will have to sit down and be prepared to take measures to meet economic challenges.'

Asked if job cuts or hiring freezes are in the offing, Mr Chan said that it is 'premature' to talk about such things.

On the positive side, he stressed that merger and acquisition (M&A) activities are attractive in economic downturns. 'In fact, in difficult times, it is one of the best times for M&A as assets will become cheaper,' he said. 'We're always on the lookout for companies or activities that can add to our shareholder value.'

For the year ahead, Mr Chan said: 'The outlook for the global economy has deteriorated, given the heightened concerns over the financial turmoil and slowdown in the major economies.'

With Singapore's GDP growth forecast for this year revised down to about 3 per cent, SPH's advertising revenue is expected to move in tandem, he said. But the property segment 'is expected to contribute significantly to the group's performance, through the progressively recognised profit from Sky@eleven'. And recurrent earnings in the current financial year are expected to be 'satisfactory'.

SPH chairman Tony Tan said: 'The coming months will be difficult. We have to brace ourselves for trying times.'

But he noted that 'SPH is resilient, has a well-diversified earnings base and this will stand us in good stead'.

SPH has proposed a final tax-exempt dividend of 19 cents a share for FY2008, comprising a normal dividend of nine cents per share and a special dividend of 10 cents per share. Together with an interim dividend paid out during the year, the total dividend for the year will be 27 cents.

SPH's share price fell 33 cents or 8.6 per cent to end at $3.50 yesterday amid a broad market downturn.