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Fall in investment gains cuts SPH second-quarter earnings by 12% - Apr 13, 2006 (ST)

BackApr 13, 2006

The Straits Times / The Business Times News On SPH

Fall in investment gains cuts SPH second-quarter earnings by 12%

Media group posts $84.6m net profits; it expects satisfactory core results in the second half.

By Lee Su Shyan
Apr 13, 2006
The Straits Times

SINGAPORE Press Holdings (SPH) posted net profits of $84.6 million for the second quarter, down 11.9 per cent, owing to lower investment income.

Nonetheless, this exceeded the forecasts of two analysts polled by Reuters.

And despite hig her costs, such as newsprint, earnings before investment income actually rose 0.7 per cent to $83.1 million.

Investment income for the three months ended Feb 28 had been $19.5 million, well down from $45.3 million for the same period last year.

A weaker US dollar hit some externally-managed investments. Last year's second-quarter investment income had also been boosted by income from a capital reduction at an investee company, M1.

SPH turned in a sustained operating performance in the second quarter as it benefited from economic growth momentum.

Total operating revenue rose 2.1 per cent to $239.9 million.

Revenue from the newspaper and magazine segment was up 3.2 per cent to $209.7 million.

Within this, print advertising revenue rose 4.3 per cent to $154.5 million and ci rculation revenue rose 1.2 per cent.

Circulation of its flagship newspaper, The Straits Times, in the first six months rose by 1.1 per cent over the same period last year, while The Business Times grew by 2.2 per cent. The Sunday Times enjoyed the biggest gain, at 2.5 per cent.

Revenue from another key segment - property - rose 11.5 per cent to $25 million.

The absence of revenue from SPH M ediaWorks due to its closure last year accounted for the lower overall operating revenue figure.

While operating expenses edged up by 2.8 per cent to $158.6 million, margins were well-managed.

Newsprint cost was higher by 10.7 per cent.

Staff costs were also up a marginal 0.6 per cent with the head count at the end of February at 3,472 compared with 3,461 a year ago.

Other expenses rose from increased activity.

But cost savings after the closure of MediaWorks helped offset some of the increases.

Operating margins were maintained at about 37 per cent for the first half this year, up from 34 per cent previously.

For the first half this year, SPH notched up a net profit of $183 million against the previous year's $316.7 million.

Last year's figure included the sale of a StarHub stake.

There were no exceptional items for the second quarter unlike last year, which included one-off charges relating to the merger of some of SPH's newspaper and television operations with that of MediaCorp.

SPH's chief executive Alan Chan said that the group's 'advertising revenue is expected to maintain its growth momentum on the back of continued optimism in the economy '.

However, he warned of potential downside risks, such as oil prices, terrorism threats and a possible avian flu outbreak, all of which would hurt consume r and business sentiments.

The board expects 'recurring earnings for the second half of the financial year to be satisfactory'.

Recent initiatives at SPH include a forthcoming free Chinese morning newspaper designed to appeal to the 20-40 age group.

A job website called ST701 was launched last month.

As well, SPH is taking a 35 per cent stake in the billboard subsidiary of TOM Group, a publishing, advertising and Internet company controlled by Hong Kong billionaire Li Ka Shing.

Earnings per share for the quarter was five cents, down from a restated six cents. Net asset value per share was $1.21 compared with a restated $1.02 at Aug 31 last year.

The corresponding figures last year were restated due to new accounting standards on stock options and investments.

An interim dividend of seven cents per share (tax-exempt) was declared. Last year, an interim dividend of 3.75 cents per share and a special interim dividend of five cents per share, both less tax of 20 per cent, were declared.

SPH shares ended four cents up yesterday at $4.52 even as the broader market declined, with The Straits Times Index falling 8.4 points.