S$232m fair value loss pushes SPH into the red for first time

Singapore

SINGAPORE Press Holdings (SPH) on Tuesday reported its first-ever net loss of S$83.7 million for the full year ended Aug 31, as Covid-19 "severely disrupted" all business segments including property, which has been a key revenue driver for the group as its media business remains challenged amid declines in advertising revenue.

The company, which publishes The Business Times (BT), took a hit from non-cash fair value losses of S$232 million - mostly on its malls and purpose-built student accommodation (PBSA) assets.

The valuation of its retail malls fell by S$196.5 million, while that of its PBSA assets slid by S$31.9 million.

These fair value losses were partially mitigated by S$68.5 million received from government schemes, including the Jobs Support Scheme.

The group, however, remains operationally profitable. For the full year, operating profit fell 41 per cent to S$110.2 million.

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SPH chief executive officer Ng Yat Chung said in a media briefing on Tuesday that the fair value adjustments on its assets as a result of the pandemic are "in line with the market".

He added: "So when things improve, we look forward to the assets being revalued upwards."

With the property business still bringing in the bulk of the group's operating profit, Mr Ng said that SPH will focus on improving recurring income from its existing assets and be on the lookout for good opportunities.

Operating revenue for the year declined 9.8 per cent to S$865.7 million as media advertisement revenue fell 31.4 per cent.

Total costs were 6.8 per cent higher at S$844.4 million in part due to the increased operational costs of running an expanded Reit (real estate investment trust) and PBSA portfolio, property tax rebates passed on to tenants, and retrenchment costs.

For the full year, revenue for the media business shrank 22.8 per cent to S$445.1 million due to a 32.9 per cent decline in newspaper print advertisement revenue. Circulation held steady due to the 52.5 per cent increase in daily average newspaper digital sales, which partially offset the 12.6 per cent drop in print copies.

Loss before taxation for the segment was S$11.4 million, compared with a profit of S$54.7 million for FY19, after taking into account retrenchment costs of S$16.6 million.

Revenue from the property business rose 10.3 per cent to S$327.2 million, boosted by the acquisition of the Westfield Marion mall and the Student Castle PBSA portfolio. However, rental waivers of S$33.8 million to tenants in Singapore eroded the gains from the retail sector. Meanwhile, revenue from the PBSA sector climbed 60.6 per cent.

Loss before taxation for the property segment was S$75.8 million, compared with a profit of S$263 million in FY19, due to the fair value losses.

Revenue from the Others segment grew 8.7 per cent to S$93.3 million, aided by higher sales of personal protective equipment from its aged care business. The segment posted a pre-tax profit of S$1.9 million partly due to the S$25.7 million divestment gain on the Media Centre.

A final dividend of one Singapore cent per share was declared, versus last year's 5.5 cents. SPH had also paid a special dividend of one cent for FY19. The dividend is payable on Dec 18. Together with the interim dividend of 1.5 cents, the total dividend payout for FY20 will be 2.5 cents.

Full-year loss per share was S$0.07, compared with earnings per share of S$0.13 in the last financial year. Net asset value per share was S$2.06 as at Aug 31, down from S$2.16 as at Aug 31 last year.

Asked if there are further cost control measures to be taken, Mr Ng said that such measures have already been taken to ensure losses are contained. SPH had in August shed about 140 jobs, or 5 per cent of the media group's headcount to restructure its media sales and magazine operations. Mr Ng said that the move had put the group in a "good position to deal with the decline in advertising".

He added that the media business will remain difficult until advertising revenue returns with the resumption of consumer spending.

However, the 9.4 per cent growth in circulation numbers from its News Tablet digital product and higher readership are encouraging for the company, said Mr Ng.

"We are intensifying our digitalisation efforts to transform the news content business in response to evolving demands from our audience," he noted. "We will continue to take a prudent and disciplined approach to liquidity and capital management to weather the Covid-19 crisis with all our stakeholders."

DBS analyst Alfie Yeo told BT that the group's core revenue fell within expectations but core operating profit fell short due to higher-than-expected operating costs.

Going forward, the property segment will continue to be SPH's "key earnings contributor", said Mr Yeo.

However, potential losses from the media business would drag contributions from the property segment, he noted, adding: "If SPH can make the media segment more profitable again, it would add to the property income and help to support the group's earnings."

SPH shares closed flat at S$1.05 on Tuesday before the results were released.