SPH incurs first ever full-year loss of S$83.7m as Covid-19 ‘severely disrupts’ major business segments

• SPH recorded a net loss of S$83.7 million for the full year, the first in its 36-year history
• The lion’s share of the loss arose from fair value losses in its property investments
• SPH earned a S$110.2 million operational profit, 41 per cent less than its 2019 financial year
• The owner of national dailies The Straits Times and Lianhe Zaobao saw its media business slip into the red, partly owing to S$16.6 million in retrenchment costs

SINGAPORE — Singapore Press Holdings (SPH) booked its first-ever full-year loss of S$83.7 million on Tuesday (Oct 13) since its formation in 1984, as its property investments in retail and European student accommodation fell in value amid the Covid-19 pandemic.

The loss meant the media conglomerate, which owns national dailies The Straits Times and Lianhe Zaobao among other publications, reversed from profits of S$213.2 million for its previous financial year ending Aug 31, 2019.

Around S$232 million in fair value losses arose its investment properties, which included a reduction of S$196.5 million in the valuation of its retail malls, and a S$31.9 million fall in value for its purpose-built student accommodation investments in Britain and Germany.

But the group remained operationally profitable. It turned a S$110.2 million profit from its operations — a steep 41 per cent drop from 2019, when it earned S$186.9 million.

Mr Ng Yat Chung, SPH chief executive officer, said: “All our major business segments were severely disrupted by Covid-19. Our media business is badly affected by the collapse in advertising.

“However, the 9.4 per cent growth in circulation numbers from the success of our News Tablet digital product and higher readership is a bright spot,” he added.

MEDIA BUSINESS IN THE RED

Its media business, however, continued to decline by around 23 per cent and ended in the red, with a pre-tax loss of S$11.4 million, reversing the S$54.7 million profit it recorded for its 2019 financial year.

Part of this loss came from S$16.6 million in retrenchment costs that it realised in the 2020 financial year. The group had retrenched 5 per cent of its staff — or 140 employees — during the pandemic in August, in the third round of layoffs since 2017.

The Jobs Support Scheme and other government grants, amounting to S$68.5 million, cushioned the Covid-19 impact.

On Tuesday, the group said in a presentation for investors that it had taken a “disciplined approach to cost control” for the media business, and had conducted two restructuring exercises to “realign” its marketing division and magazines business.

As of Aug 31, the group had a staff headcount of 3,808, 6.8 per cent fewer than the 4,085 in 2019. Staff costs fell by only 1.5 per cent to S$328.4 million from S$333.3 million in 2019.

Advertisement revenue also declined by 31.4 per cent, or S$122.5 million, which was attributed to the disruption caused by Covid-19 as advertisers pulled back on marketing budgets, and Government ads were unable to replace the fall in consumer goods and property advertising.

Said the group: “Given the headwinds in the economy and soft advertising market, SPH has continued a disciplined approach to cost management, while continuing to invest in important areas such as data analytics and personalised content recommendations for subscribers.”

FALL IN PROPERTY BUSINESS

The group also owns local retail malls Paragon and The Clementi Mall, Westfield Marion shopping mall in Australia, the Woodleigh Residences condominium, and is an owner-operator of two student accommodation brands in Britain and Germany.

Its property revenue rose by 10.3 per cent to S$327.2 million in 2020, owing to the acquisition of Westfield Marion and British PBSA Student Castle.

However, rental waivers to Singapore tenants amid the pandemic amounting to S$33.8 million eroded these gains.

A pre-tax S$228.6 million fair valuation loss for its investment properties contributed to a net pre-tax S$75.8 million loss for SPH’s property segment.

OTHER BUSINESSES

SPH also owns businesses in aged care, such as Orange Valley nursing home in Singapore, and five aged care assets in Japan.

Revenues for its aged care segment grew by 8.7 per cent to S$93.3 million in 2020 due to higher sales of personal protective equipment.

In June, SPH had announced plans to develop and operate data centre facilities at its former Media Centre premises at Genting Lane, which it is developing over the next few years with two Keppel Corporation subsidiaries as its joint venture partners.

The S$25.7 million divestment of its Media Centre contributed to a S$1.9 million pre-tax profit for its businesses in the “others” segment in 2020.

“The move is in line with SPH’s strategy to grow its recurring income base through the recycling of capital into higher-yielding assets in defensive sectors,” said SPH.

SPH declared a final dividend of 1 Singapore cent per share, down from 5.5 cents last year. Adding the 1.5 cents interim dividend announced in April, the total dividend payout for 2020 is 2.5 cents per share.

SPH’s share price closed at S$1.05 per share on Tuesday before the group released its financial results.

SPH PERFORMED ‘UNDER EXPECTATIONS’

DBS Vickers Securities analyst Alfie Yeo told TODAY that SPH’s core operating profit fell short of his brokerage’s expectations, as the costs of its premises had been higher than he had forecast.

Even without the large one-off losses, such as the losses from investment properties, SPH would have earned a dismal profit.

“Excluding (the fall in value of the investment properties), pre-tax losses would have been profitable at S$160.3 million, but still falling short of our expectations, dragged by the media segment which performed below (par),” said Mr Yeo.

Asked about SPH’s outlook, he added: “Going forward, property will be a key earnings contributor. The rest will depend on how the media segment performs… If SPH can make the media segment profitable again, it would add to the property income and help support group earnings.”