Singapore Press Holdings Limited’s Latest Earnings: A Decline Continues

Newspaper publisher and property developer Singapore Press Holdings Limited (SGX: T39) released its fiscal second quarter earnings report yesterday. The reporting period was for the three months ended 28 February 2015.

After suffering a decline in both revenue and profit in its last fiscal year, would there be any bright spots in Singapore Press Holdings’ latest set of results?

The headline numbers

For the first half of FY2015 (fiscal year ending 31 August 2015), Singapore Press Holdings experienced a 4.9% slide in revenue from S$607 million a year ago to S$577.4 million.

Reduction in expenses had helped the company to keep its operating profit for the period at S$170.3 million, nearly the same as a year ago. But as we move down the income statement, Singapore Press Holdings had actually seen its profit for the first half of FY2015 decline by 18.3% year-on-year to S$139 million.

Despite the fall in profit, Singapore Press Holdings has declared an interim dividend of 7 cents per share for the quarter, unchanged from a year ago.

A deeper look

The dip in Singapore Press Holdings’ top-line can be attributed largely to a 7.2% decline in operating revenue to S$447 million from its Media segment; the Media segment can be further split into Advertisement and Circulation sub-segments and both had actually seen their revenues fall by more than 7% each.

Singapore Press Holdings’ advertising market continued to soften with its newspaper ad revenue falling 9% year-on-year in the second quarter of FY2015. For some perspective, Singapore Press Holdings’ newspaper ad revenue has been shrinking in each fiscal year since FY2012.

Although the company’s media business hasn’t been performing well, the property business managed to clock a healthy 9.3% year-on-year improvement in revenue to S$112.0 million.

This was the result of increasing rental income from Paragon and The Clementi Mall as well as a maiden revenue contribution from The Seletar Mall which opened in late 2014. Paragon and The Clementi Mall are owned by SPH REIT (SGX: SK6U), which is in turn managed and majority-owned by Singapore Press Holdings.

Financial strength and future opportunity

Singapore Press Holdings ended 28 February 2015 with total borrowings of S$1.93 billion. With cash & equivalents, short-term investments, and long-term investments (the latter two are mainly liquid financial instruments like equities and bonds) that are worth a collective S$2.03 billion as of 28 February 2015, Singapore Press Holdings is actually in a strong financial position.

Unfortunately, the fact remains that the company is facing a structural decline in its newspaper business (with the falling newspaper ad revenue being one strong sign) with no real growth-alternative in sight yet.

In its earnings release, Singapore Press Holdings also warned of slower global economic growth, further erosion of its newsprint business, and lower expected returns from its investments going forward. The only bright spot is that the opening of Seletar Mall can help “provide a recurrent income stream” for the company.

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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 Stanley Lim doesn't own shares in any company mentioned.