Investing in future, embracing change (BT)

BackAug 04, 2009

SPH has in 25 years become one of the largest, most profitable media companies in the region. CHEW XIANG traces its roots

"THE not so bright go into political science and sociology. When they cannot get a good job, they go on to journalism." That comment, made by then-prime minister Lee Kuan Yew at an election rally in August 1972, summed up the challenges facing the press 40 years ago – general disdain coupled with little recognition and poor prospects for journalists.

They "felt they hardly belonged to the company", according to "Dateline Singapore", Mary Turnbull's history of The Straits Times. Journalists were even obliged to buy their own typewriters, albeit with company loans. In September 1966, 60 reporters, sub-editors, photographers and artists went on strike; there was another in 1971 and an unofficial "go-slow" protest by printers in September 1976. That wasn't the last industrial action – more than a hundred journalists protested against the merger that formed Singapore Press Holdings 25 years ago.

It was a less than auspicious start for a company formed in July 1984 through the merger of Singapore News and Publications Ltd (SNPL), Straits Times Press and Times Publishing to form Singapore Press Holdings. SNPL, as it was known, was formed just two years earlier, in April 1982 through the merger of two Chinese newspapers – the Nanyang Siang Pau and Sin Chew Jit Poh – to form Lianhe Zaobao. It also published the Singapore Monitor, an English language broadsheet.

But business realities forced the Singapore Monitor to close just two years later and SNPL was merged with Straits Times Press. The logic was to cooperate to avoid battling for scarce resources; there was official fear at the time that the Chinese newspapers would not survive on their own and needed the financial backing of the larger English publishers.

For some years the merged group was still unwieldy and inefficient. In the years post-merger it was taking in over $700 million a year in revenue, but profits were just above 10 per cent.

Three years later, Lien Ying Chow, then chairman, was able to report to shareholders that "SPH was formed in 1984 to avoid duplicating capital and operating costs and to realise long term economies of scale. I am pleased to note that these objectives have largely been met." But, as Lim Kim San, who was appointed executive chairman in 1988, noted, the company's disparate roots were still holding it back. SPH was "a carriage drawn by five different horses going in different directions … I've never come across an organisation that is so loosely run without a policy," he said.

Mr Lim was a former politician, but he was also an astute businessman. The publishing arm Times Publishing was quickly de-merged by March the following year. He started focusing on the bottom line and insisted journalists should be more cost-conscious. He also focused on editorial quality and "proved generous with editorial salaries", Ms Turnbull wrote. "Editorial excellence is a sine qua non for a good publisher, therefore upgrading of editorial content and quality is an ongoing process," he said in 1988.

While sales halved after the de-merger, profit margins more than doubled, despite troubles brewing in the Middle East. In 1990, the first full year post-demerger, profits went up almost 30 per cent, and with Mr Lim still at the helm continued their meteoric increase until the Asian financial crisis in 1997. By then, sales had almost doubled from 1989; profits were three-and-a-half times as much. That year, the company, for the first time, distributed over $100 million in ordinary dividends.

From the mid-90s onwards, the company turned its attention – and considerable firepower – to new media opportunities: broadcasting, Internet and television. SPH took substantial stakes in Singapore Cable Vision, a cable TV operator, Cyberway, an Internet service provider, and telco MobileOne. Its property arm also bought, in 1996, what would prove a shrewd investment – stakes in Paragon and Promenade, two prime shopping malls along the busy Orchard stretch. Both were subsequently amalgamated and redeveloped into Paragon which now provides regular and substantial contributions to the company's bottom line.

The company's broadcast arm, SPH MediaWorks, didn't fare as well. It chalked up losses of $44.5 million in 2004 and was finally merged with rival MediaCorp. In return, SPH would own 40 per cent of Today, a rival free newspaper. "The continuing losses, especially from the TV operation, were not sustainable. SPH believes rationalisation is in the best interest of the company, as it would immediately stem the losses and enhance shareholder value, while allowing the company to hold significant stakes in the TV and free newspaper businesses," said Alan Chan, who had been appointed CEO in 2002.

Meanwhile, Mr Lim was able to look back on his time at the helm with great satisfaction. When he took over in 1988, shareholders' funds totalled just over $343.1 million and the group yielded net profits of $73.7 million, he noted. As at Aug 31, 2002, shareholders' funds have risen six-and-a-half times to $2.2 billion, and profits up four-fold to $307.4 million. "I have thoroughly enjoyed my years with SPH. It has not always been smooth sailing. But the overall results have been satisfying," he said in his final message as chairman.

By 2004, Mr Chan was able to report "a year of achievements". The company returned nearly $1.1 billion in cash in late June 2004, following a 5-for-1 share split and a major capital reduction exercise, and achieved record profits of $546 million on sales of just under $1 billion – net margin was a phenomenal 56 per cent, at a time when most newspaper companies were struggling with plunging circulations and advertising revenue.

In 2007, the company ventured into property development and made an instant success – Sky@eleven, a luxury condominium built on the site of the former Times Industrial building, was sold out within hours of launch, and continues to contribute substantial profits to the company's bottom line.

 The company's present chairman Dr Tony Tan said SPH is now a "multi-media organisation with different media platforms ranging from print, online, outdoor to broadcast." And its non-media businesses range from properties to search engines to events management, he said, even while, "for our traditional print products, we have constantly revamped and rejuvenated them to reflect the latest trends and be relevant to our readers' ever changing needs."

While profits have eased in the recession of the past year or so, the company continues to power ahead. It has continued its investments in online media and is also part of the consortium which won the bid to build Singapore's "next generation" national broadband network.

And the battle for talent is still ongoing but the company is now fighting it from a position of strength. "We are in search of talents with a passion to establish a long-term career in the media business," said Mr Chan in a recent interview. "To achieve this, SPH has in place a comprehensive career package that is competitive with the rest of the market, both within and outside of the media industry." He pointed out that the company was this year recognised at the Singapore HR Awards in July.

What's next for South-east Asia's largest media company? "We have every intention to continue to excel in our core media business and other adjacent businesses. We intend to do as well for our online media as we did for our print and publications," said Mr Tan. The focus now is to invest in the future and embrace changes as they come, he said.

Mr Chan said that even while most newspaper companies are facing falling profits and readership, the SPH group of newspapers should still prosper. "I always tell people that our flagship newspapers are the most cost effective news filter in Singapore. For less than a dollar a day, one can get access to the latest happenings and the most trusted opinions on affairs of the world," he said.

SPH has in 25 years become one of the largest, most profitable media companies in the region; its products are read daily by millions; it has become a national institution. And all those worries expressed so trenchantly over 30 years ago? Attitudes now have shifted considerably. Chinese premier Wen Jiabao is reportedly a "faithful" reader of the Lianhe Zaobao. And closer to home, "if you read something in The Straits Times or on (ChannelnewsAsia), you must know that it's real," said Prime Minister Lee Hsien Loong in 2006. "Inform, educate, entertain but play a constructive role in a new way in Singapore."