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Singapore Press Holdings Limited’s Second Quarter Earnings: What Investors Should Know

Singapore Press Holdings Limited (SGX: T39) is Asia’s leading media organisation with three main operating segments – Media, Property, and Treasury and Investment.

On Tuesday, Singapore Press Holdings (SPH) announced its financial results for the second quarter ended 28 February 2019 (2Q FY19).

Financial highlights

Operating revenue for the reporting quarter tumbled 4.4% year-on-year to S$223.3 million. The fall in revenue was mainly due to lower print advertisement and circulation revenues, which were partially offset by rental revenues from the UK student accommodation portfolio and Australia’s Figtree Grove Shopping Centre. SPH owns 70% of SPH REIT (SGX: SK6U), which in turn has an 85% stake in the shopping centre.

The following shows the breakdown of operating revenue for 2Q FY19:

Source: Singapore Press Holdings earnings presentation

Operating profit, which represents the recurring earnings of the media, property and other businesses, tumbled 8.9% to S$46.5 million. The fall was on the back of “lower revenue as well as higher premises costs and finance costs partly related to the UK student accommodation portfolio”. Meanwhile, net profit attributable to shareholders plunged 25.7% to S$29.7 million.

SPH’s balance sheet weakened for the reporting quarter. As of 28 February 2019, SPH had S$343.4 million in cash and cash equivalents, and S$2.05 billion in total debt. This translates to a net debt position of S$1.71 billion. In comparison, at the end of August 2018, the group had S$1.25 billion in net debt.

For 2Q FY19, SPH used S$76.2 million for operating activities. This is an improvement, though, from the outflow of S$115.0 million seen a year ago.

An interim dividend of 5.5 Singapore cents per share was declared for the reporting quarter, down from 6.0 Singapore cents paid out a year ago.

SPH’s chief executive, Ng Yat Chung, commented on the latest financial performance:

“We continue to make progress with our digital transformation strategy. Although the Media business continues to experience headwinds, revenue from the digital side of the business is showing growth. We also see improved recurring income from the Property segment which has expanded its portfolio following recent acquisitions.”

Looking ahead

The buyout offer for M1 Ltd (SGX: B2F) successfully closed last month. With the completion of the deal, SPH said that it “looks forward to the next step of being part of M1’s transformational journey”, working together with Keppel Corporation Limited (SGX: BN4).

SPH’s aged care business is “on the lookout for expansion opportunities as it seeks to build operational capabilities in Singapore and enhance the range of services on offer”. SPH owns Orange Valley, Singapore’s largest private nursing home operator.

The Foolish takeaway

SPH’s core media business is facing digital disruption, forcing the company to diversify its business to other segments. Although the diversification seems like a sound strategy, only time will tell if the strategy plays out well. At SPH’s current share price of S$2.47, it has a trailing price-to-earnings ratio of around 14 and a dividend yield of 3.4% (excluding any special dividend).

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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 Sudhan P doesn’t own shares in any companies mentioned.