SPH meets expectations with $494.7m net profit - Oct 12, 2005 (BT)

BackOct 12, 2005

The Straits Times / The Business Times News On SPH

SPH meets expectations with $494.7m net profit

Profit from operations rise 12.7%, revenue hits $1b for third time.

By Wong Wei Kong
Oct 12, 2005
The Business Times

MEDIA group Singapore Press Holdings (SPH) yesterday met market expectations with a net profit of $494.7 million for the financial year ended Aug 31, 2005, including gains from the sale of most of its shares in Singapore telco StarHub.

This is a 9.4 per cent fall from the $546.3 million it earned in FY04, which was boosted by gains from the disposal of its Times House property and its stake in European telco Belgacom last year.

The results were largely in line with market expectations, with Reuters estimates showing analysts forecasting an average net profit of $490.8 for SPH in FY05, including exceptionals.

Without the exceptional items, SPH said profit from operations rose 12.7 per cent to $380.8 million. Group operating revenue rose 3.9 per cent to $1 billion, while earnings per share, including exceptionals, were unchanged at 31 cents.

'We had a good year,' SPH chairman Lim Chin Beng said at the results briefing. 'This is the third time SPH group revenue hit the $1 billion mark.' The previous occasions were in FY2000 and FY2001.

SPH proposed a net final dividend of 15.8 cents per share for FY05, comprising a net normal dividend of 8 cents per share and a net special dividend of 7.8 cents per share. This will be paid on Dec 22, 2005. Together with the interim dividend, net dividends for FY2005 total 22.8 cents. SPH said it is also reviewing the possibility of paying quarterly dividends.

SPH chief executive Alan Chan said profit from operations in FY2006 is expected to be comparable to FY2005. 'The group's advertising revenue is expected to move in tandem with the economy. However, there are concerns over global economic factors such as the continued pressure on oil prices and interest rate hikes.'

Group turnover was boosted by the core newspaper and magazine operations which saw revenue grow 7 per cent to $891.8 million, while revenue from the property division rose 8.3 per cent to $89.4 million.

This was partially offset by lower revenue from broadcasting and multimedia, which fell 51.6 per cent to $26.3 million, as a result of the cessation of the group's broadcasting operations on Jan 1, 2005 following the merger of its free-to-air TV operations with those of MediaCorp.

Total operating expenses fell 1.2 per cent to $635.4 million, largely attributable to cost savings from ending broadcasting operations. This was partly offset by higher newspaper production costs, particularly newsprint cost which increased 14.4 per cent because of higher prices, as well as higher magazine production costs following the acquisition of Blu Inc media and publishing business and the expansion of the group's existing magazine business.

On the impact of oil prices on newsprint costs, SPH senior vice-president of finance Tony Mallek said suppliers have indicated that a dollar's rise in oil prices will raise their costs by US$1 million. Newsprint costs rose by US$100 per tonne in FY2005. SPH, however, has secured its newsprint supply until the first quarter of next year.

SPH said total staff costs were marginally lower by 0.2 per cent. Overall, the group's headcount fell to 3,443 at end of August 2005 from 3,591 a year ago.

Group investment income was $248.6 million against $258 million a year ago. Excluding a one-time gain from StarHub this year ($128.5 million) and Belgacom last year ($170.5 million), group investment income would have increased $32.5 million, due to higher profit from the sale of investments. SPH booked an exceptional loss of $38.5 million for FY2005, which included charges of $25.9 million associated with the media merger.

On the group's non-core assets, Mr Lim revealed that SPH has received interest from various parties for its Paragon shopping mall in Orchard Road. The mall has been valued at about $1.38 billion and currently gives a property yield of 4.8 per cent and an equity yield of over 10 per cent. He said SPH was still evaluating options and was open to all possibilities including a real estate investment trust (Reit).

'The Paragon is not on the top of our list. We have other non-core assets that are giving less returns,' said Mr Lim.

SPH CEO Mr Chan added: 'At the end of the day, whether it is core or non-core depends on whether it is giving us a good profit.'