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SPH's H1 net profit down 9.3%, management warns of further disruption due to Covid-19

SINGAPORE Press Holdings (SPH) reported a 9.3 per cent fall in net profit to S$77.6 million for the half-year ended Feb 29, 2020 as newspaper print advertisement revenue took a hit.

The decline in the group's media segment was cushioned by higher revenue from the expanded student accommodation portfolio in the UK and SPH Reit.

Operating profit fell 15.3 per cent to S$102.7 million as operating revenue fell 1.3 per cent to S$471.4 million.

Revenue for the media segment decreased 14.3 per cent to S$253.9 million. Newspaper print advertisement revenue was down 20.4 per cent, though SPH noted that its share of the overall market has been increasing.

Profit before tax for the media segment declined 75.4 per cent to S$10.3 million due mainly to lower revenue and retrenchment costs of S$7.2 million.

But results were lifted by the property segment, which recorded a 26.2 per cent rise in revenue to S$177.1 million. Profit before tax climbed 31.4 per cent to S$104.9 million, as the group saw a price adjustment of S$10.5 million to an asset in the student accommodation portfolio.

Total costs rose 3.4 per cent to S$377.6 million on the back of higher operational costs from the enlarged student accommodation portfolio and SPH reit.

Materials, production and distribution costs shrank 12.8 per cent to S$58.3 million in line with the lower revenue of the media business. 

Other operating expenses rose 7.9 per cent to S$60.4 million due to retrenchment costs of S$7.2 million, relating to a rationalisation exercise involving the media sales and content teams in October 2019. 

Excluding the retrenchment costs, underlying operating profit would have been 9.4 per cent or S$11.4 million lower at S$109.9 million, said SPH.

Daily average newspaper digital sales increased by 110,355 copies or 50.2 per cent, outpacing the drop in daily average newspaper print sales of 53,109 copies or 10.7 per cent. Circulation revenue fell 5.4 per cent or S$3.7 million.

SPH, which publishes The Business Times, said the H1 2020 results reflects the initial impact of the Covid-19 outbreak on the group's business segments. Advertising was affected across most sectors, with the exception of government spending.

The group also flagged disruption in the property segment, as tenants in the retail malls in Singapore and Australia have been hit by lower footfall due to strict social distancing measures. The purpose-built student accommodation business has also been affected by UK university closures and students returning home.

SPH said its priority now is to conserve cash and continue with the digital transformation of the media segment. Other investment activities have been put on hold, and the group recently terminated a proposal to buy five aged care assets in Canada for C$232.9 million (S$244.5 million).

"SPH will continue to provide reliable reporting on the Covid-19 situation and to progress our digital transformation initiatives. With the uncertainty over the depth and duration of the Covid-19 pandemic, we will need to adopt a prudent approach in managing our cashflows and our investment activities," said SPH chief executive Ng Yat Chung.

In view of the uncertainty of the Covid-19 impact on the group's businesses, the board has decided to reduce the interim dividend payable to shareholders. It has declared an interim dividend of 1.5 Singapore cents per share, to be paid on May 22, down from 5.5 Singapore cents per share the year before.

For the 2QFY20, the group reported a 5.5 per cent rise in net profit to S$31.3 million. Operating profit was 5 per cent higher at S$48.8 million as operating revenue rose 1.8 per cent to S$227.5 million.

SPH ended trading on Tuesday at S$1.60, up S$0.05 or 3.23 per cent.

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