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Profits Dip 6.6% At Singapore Press Holdings Limited

Newspaper publisher and property developer Singapore Press Holdings Limited (SGX: T39) released its first quarter results on Tuesday evening which saw a slight uptick in quarterly revenue while profits slipped.

The company operates under three segments: Newspaper and Magazine, where its numerous nation-wide publications such as The Straits Times and The Business Times falls under; Property, which consists of its 72% holding in retail and commercial building real estate investment trust SPH REIT (SGX: SK6U) and the upcoming The Seletar Mall; and lastly, Others, which holds the company’s business interests in online classifieds, organising of events and exhibitions, book publishing and distribution, radio and television broadcasting, and financial portal services, among others.

Some basic numbers

For the three months ended 30 November 2013, SPH’s revenue increased by 2% year-on-year to S$328.5m while profits actually came in 6.6% lower at S$88.8m.

Here’s a breakdown of how the company’s top-line had changed for each individual segment:

Segment

Revenue for the Quarter

Year-on-Year % change

Newspaper and Magazine

S$255.9m

-2.9%

Property

S$50.8m

5.4%

Others

S$21.8m

111%

Source: Singapore Press Holdings earnings release for first quarter of financial year 2014

From the table above, it’s easy to spot how the Others segment was the main driver for the company’s overall revenue growth. On that front, the “increase came mainly from the exhibitions business due to new shows and certain shows being held on different dates in the comparative period…  [The] radio and online classifieds businesses further contributed to the revenue growth,”

The Property segment also saw top-line growth as Paragon and The Clementi Mall – the only two properties that are currently owned by SPH REIT – saw higher rental income. It should also be noted that the REIT’s latest financials came in better than expected on a number of fronts, including its net property income and distributions.

Meanwhile, the Newspaper and Magazine segment, by far the largest segment for SPH, saw a decrease in advertisement and circulation revenue by S$5.8m and S$2.3m, respectively, from a year ago.

SPH’s profits had fallen by 6.6% to S$88.8m mainly due to a 738% year-on-year jump to S$8.9m in the share of post-tax profits that the company’s minority interests are entitled to. In terms of overall costs, the company had kept things pretty much in control, with the exception of finance costs, which went up 35.4% year-on-year to S$8.85m.

The increase in finance costs were related to the increase in the company’s borrowings due to the spin-off of SPH REIT last July.

SPH’s operating cash flow for the quarter came in at S$136.5m, some 18.8% lower compared to the previous year.

Operating highlights and the balance sheet

Advertising is a very important part of SPH’s business so it’s perhaps not a welcome sight for investors to see that total advertising revenue for the company’s newspapers during the quarter had declined by 2.9% year-on-year. The declining ad revenue trend has been going on since the financial year ended August 2012.

On the other hand, there’s some good news as the total circulation (print as well as digital copies) for the company’s flagship paper, The Straits Times/The Sunday Times, came very close to 450,000 copies for the quarter, up from around 370,000 copies in the previous year.

The company’s balance sheet has taken a step forward compared to a year ago as its total debt has increased by a smaller quantum – from S$1.29b to S$1.75b – as compared to the increase of its cash, cash equivalents, and short-term investments from S$925.6m to S$1.65b. This translates into a decrease in its net-debt position (total debt minus cash, cash equivalents, and short-term investments) from S$364m to S$100m.

What’s next for Singapore Press Holdings

Investors in SPH can look forward to its newest property development, The Seletar Mall. It is on track to be completed by December this year and it “will be the largest suburban lifestyle hub in the North-East” of Singapore.

Alan Chan, chief executive of SPH, commented on his outlook for the rest of the financial year: “The near-term global and domestic economic outlook remains modest with persisting uncertainties. Against the backdrop of an evolving media landscape and changing consumer behavior, [SPH] continues to evaluate and pursue new growth opportunities whilst striving to revitalize its core media business.”

Regarding the revitalization of SPH’s core media business, the company had revealed in its full-year earnings release last October that it has hired a strategy consultant for that very purpose.

Valuation

The company’s shares are worth some S$4.00 apiece. At that price, it is valued at 14.8 times trailing earnings and carry a dividend yield of 10% based on its dividends of S$0.40 per share for its last completed financial year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.