SPH Q2 Profit Dips 6.3% To $99.6m

Source : The Business Times, April 15, 2008

Recurring earnings surge 36% but investment income down 83.7%

SINGAPORE Press Holdings (SPH) turned in strong second-quarter recurring earnings for its media and property businesses. But a fall in investment income resulted in a 6.3 per cent dip in net profit to $99.6 million, from $106.3 million a year earlier.

Mr Chan: Recurring earnings for the current year will be satisfactory

The decline in net profit for the three months ended Feb 29 was due to an 83.7 per cent fall in investment income to $5.1 million from $31.6 million a year ago.

Stripping out investment income, profit jumped 36 per cent to $111.8 million from $82.2 million a year ago. This was backed by the strong performance of its newspaper and magazine operations and contribution from its Sky@eleven property development.

The drop in investment income was due mainly to higher profit on sale of investments last year. Also, this year's fair valuation of investments was hit by the continued volatility in global financial markets. SPH restated its Q2 2007 results to take into account the retrospective adjustments relating to investment property under FRS (Financial Reporting Standard) 40.

Q2 earnings per share dropped to six cents from seven cents.

Operating revenue for the quarter grew 18.9 per cent to $298.1 million. Revenue from core newspaper and magazine operations rose 8.4 per cent to $236.4 million, with print advertisement revenue jumping 11.3 per cent to $179.8 million.

The property segment's revenue almost doubled to $54.3 million from $27.3 million, with a $24.2 million contribution from Sky@eleven and a 10.6 per cent or $2.9 million increase in income from rental and related services from Paragon.

Total operating expenses went up by 10.8 per cent to $190 million. Property development costs for Sky@eleven amounted to $6.9 million while staff costs were up 9.7 per cent or $7.1 million, mainly due to increased headcount and annual salary increments. Headcount at end-February reached 3,814, up from 3,628 a year ago, mainly because of staffing for its new media businesses and increased operational needs for the magazine business.

Other operating expenses increased by 11.1 per cent or $4.2 million in tandem with the increase in business activity.

For the half-year ended Feb 29, 2008, net profit, including investment income, dropped 2.4 per cent from a year ago to $211.5 million. Excluding investment income, profit was up 26.9 per cent at $238.3 million.

First-half investment income was lower by 75.5 per cent or $46.3 million due largely to higher profit on sale of investments last year and this year's lower fair valuation. H1 earnings per share fell to 13 cents from 14 cents last year.

SPH declared an interim dividend of eight cents a share, up from seven cents a year ago.

Chief executive Alan Chan said that recurring earnings for the current financial year are expected to be satisfactory. 'Advertisement revenue will continue to be driven by the Singapore economy which is expected to grow at a more moderate pace in 2008. Profits from Sky@eleven will continue to provide an added boost to the group's performance.'

He said that, in view of rising business costs amid the current inflationary climate, efforts will be focused on sustaining operating profit margins.

SPH shares fell eight cents to close at $4.43 yesterday, on volume of 3.9 million shares.