On Friday, Singapore Press Holdings Limited (SGX: T39) will release its quarterly update for the three month period ended 31 May 2019. The publisher of The Straits Times has been facing declining print ad revenue as advertisers shift their marketing dollars away from traditional print.
Here are the key things investors should be looking out for when SPH releases its earnings at the end of the week.
Print advertising trends
Print advertising revenue has been on a downward spiral since the proliferation of online news and other advertising platforms. In the six months ended 28 February, classified print advert revenue fell 19.6%. Worryingly, that represents an acceleration from both 2018 and 2017.
Display and newspaper ad also fell by 6.6% and 10.5% respectively. The chart below shows the print ad revenue trend over the past three years:
Source: SPH FY18/19H1 Earnings Presentation
On top of that, the number of print newspapers in circulation in the first half of its financial year declined around 72,000 from a year ago to 500,890.
As a result, despite higher digital newspaper circulation and rising digital ad revenue, total media operating revenue still fell by 10.1%.
SPH has been diversifying extensively into properties to increase its reliable recurring income. In the first half of FY18/19, the property segment contributed around 30% of the group’s overall revenue and 66% of total profits.
SPH has also announced that, through its subsidiary — Times Properties, it will be a cornerstone investor in Prime US REIT. On top of that, Times Properties has purchased a call option to acquire a 20% stake in the manager of the soon-to-be-listed US office REIT. Shareholders may get an update on the overall impact of the purchase.
Shareholders should also keep an eye on the group’s balance sheet. SPH has been a highly profitable and cash generative business over the years. However, it has been aggressively using debt to buy investment properties, which has weakened its balance sheet.
Investors will need to see how the latest acquisition of the stake in Prime US REIT will affect its debt, gearing, and, consequently, its ability to make more debt-funded acquisitions in the future.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Jeremy Chia does not own shares in any of the companies mentioned.