1 Reason to be Optimistic for Singapore Press Holdings Limited

Singapore Press Holdings Limited (SGX: T39), a newspaper publisher and property developer, has had a dour year so far.

The company’s revenue had declined by 3.1% in the financial year ended 31 August 2015 (FY2015). Profit attributable to shareholders suffered more, with a drop of 20.4%.

On top of that, the company’s dividend in FY2015 was also reduced from 21 cents per share a year ago to 20 cents. The less-than-stellar performance may have led to shares of SPH falling by around 7% since the start of 2015.

Is SPH’s lower share price an opportunity for investors? Thing is, there is at least one more thing to worry about for the company beyond its falling revenue, profit, and dividends and that is, its weakening balance sheet. The good news is there is also one positive sign.

Free cash flow has improved

Despite the fall in its top- and bottom-line, SPH’s free cash flow in FY2015 has moved up since a year ago. The company recorded $26 million in free cash flow for the year, a nice improvement from the negative free cash flow seen in FY2014.

SPH’s operating cash flow, capital expenditures, and free cash flow over its past eight quarters are summarised in the graph below:

SPH operating cash flow, capital expenditures, and free cash flow
Source: SPH’s earnings announcements

To be sure, the operating cash flow shown above includes dividends which SPH had paid out. This becomes clearer in the graph below which shows SPH’s operating cash flow before working capital changes (which does not include the quarterly dividend payout) and the amount of dividends paid out per quarter.

SPH OCF Dividend
Source: SPH’s earnings announcements

You can see in the second chart that the operating cash flow before working capital changes tend to fall within a steady range while the dividend payouts occured in the second and third fiscal quarters. This causes the operating cash flow in the first chart to turn negative in said quarters.

Foolish summary

SPH is in the process of transitioning its traditional print business to digital formats, so the tough operating environment may continue for the foreseeable future.

Meanwhile, Foolish investors may want to keep a close eye on SPH’s balance sheet and improving free cash flow.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.