SPH's net profit surges 81% to $175m in third quarter - Jul 12, 2006 (ST)

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The Straits Times / The Business Times News On SPH

SPH's net profit surges 81% to $175m in third quarter

Earnings boosted by write-back of provision for The Paragon asits valuation increases.

By Lee Su Shyan, Companies Correspondent
Jul 12, 2006
The Straits Times

THE surging value of The Paragon shopping mall in Orchard Road has helped third-quarter profit at Singapore Press Holdings (SPH) soar by 81 per cent to $174.6 million.

HOLDING ON: 'The valuation of The Paragon is expected to stay healthy... The directors are committed to holding on to The Paragon for the foreseeable future.' - Mr Alan Chan, SPH CEO

Operating revenue for the quarter ended May 31 also rose, up 2.2 per cent at $265.7 million.

The increased revenue includes the core newspaper and magazine segment - covering circulation and print advertising revenue - which rose by 0.6 per cent to $237.2 million.

It also includes revenue from the property segment, which increased by 8.3 per cent to $24.3 million.

However, the key bottom line boost came from an exceptional gain of $69.1 million due mostly to a reversal of an earlier provision for a drop in value of The Paragon.

SPH also said that it was committed to keeping the upmarket shopping centre 'for the foreseeable future' - countering earlier indications that it might consider selling the building if the price was right.

The Paragon has been doing well. Property yields are healthy and the property was recently revalued from $1.38 billion to $1.52 billion.

Market-watchers say that the value of Orchard Road properties could appreciate even further, given the ongoing rejuvenation of the shopping strip.

SPH chief executive Alan Chan said yesterday: 'The valuation of The Paragon is expected to stay healthy on the back of a sustained recovery in the property market.

'Together with ongoing efforts to enhance rental yields, the fundamentals of The Paragon remain strong.

'The directors are committed to holding on to The Paragon for the foreseeable future.'

Operating expenses were 9.6 per cent higher at $173.5 million.

This was partly due to higher newsprint costs: consumption and prices were both up.

Higher depreciation was another factor as were 'other operating expenses'.

These were costs associated with SPH units such as its outdoor advertising and other media businesses.

Group investment income fell from $38 million to $31.5 million, a victim of poorer market conditions and lower trading volume.

Earnings per share for the third quarter rose from six cents to 11 cents. Net asset value per share also improved, from $1.02 as at Aug 31 last year to $1.23.

No dividend was declared.

For the nine months to May 31, SPH recorded a $357.6 million profit compared with $413.3 million for the same period last year.

Last year's figure was buoyed by a large exceptional gain from the sale of a stake in telecommunications firm StarHub.

Circulation of the flagship newspaper The Straits Times over the nine months to May rose 1.5 per cent, while that of The Sunday Times increased 3.6 per cent.

SPH said that although there are concerns over the global economic environment in areas such as high oil prices and rising interest rates, 'the group's print advertising revenue for 2006 is expected to remain comparable to the prior year'.

Newsprint prices are expected to continue rising, although the pace will be 'measured'.

'Overall, the directors expect the recurring earnings for the current financial year to be satisfactory,' SPH concluded.

SPH shares lost two cents to close at $4.08 in moderate volume of 1.34 million shares yesterday.

The results were released after the market closed yesterday.