Despite challenging landscape, SPH says media business remains core

Singapore Press Holdings' annual general meeting on Nov 29 was attended by some 400 shareholders.
Singapore Press Holdings' annual general meeting on Nov 29 was attended by some 400 shareholders.ST PHOTO: JASON QUAH

SINGAPORE - Singapore Press Holdings' media business that is faced with slides in print advertisement and circulation revenue took centre stage at Friday's shareholders' meeting as investors grilled its chief executive on whether that ought to prompt a strategic rethink of its core activity.

His response, at SPH's annual general meeting that lasted over two hours and was attended by some 400 shareholders, was to assert that the media business remains the company's core.

"The media business is core to us. Of course it is being challenged and we have to maintain a disciplined cost structure during this time. We will pursue innovation and strengthen management bench in advertising and sales and also the journalistic core," said SPH chief executive Ng Yat Chung.

Some shareholders asked if SPH should cut back its investments in the media business and focus instead on its more promising income-generating sources, such as property. One shareholder pressed the point, arguing that if SPH was in the media space out of "national service", then it should do so while keeping cost to the minimum.

But one long-time shareholder remarked that the company should invest "heavily" to produce better content and "hire great reporters and editors" for its core media asset to attract young Singaporeans back to newspapers, be it print or digital.

"Are we investing in journalism? Yes... it's in our heart," said Mr Ng.

On a suggestion that the company should be investing resources into its newsrooms to ensure a better product for millennials, SPH chairman Lee Boon Yang replied: "Let me assure all shareholders that the board is always watching this matter. We see media as a core business and will certainly continue to invest the appropriate resources to ensure that it continues to produce high quality products that appeal to a broad range of readers - millennials or the not-so- young readers."

"(But) It's not going to be easy," he added.

In financial year ended August 2019, revenue from the media segment fell 12 per cent to S$577 million as revenue from total print advertisement and circulation dipped 15 per cent and 7 per cent respectively from a year ago.

For the year, SPH's net profit fell 23 per cent to S$213 million on the back of a 2.4 per cent drop in operating revenue to S$959 million from a year ago.

Mr Ng, who earlier acknowledged the unhappiness voiced by shareholders over the weakness in the media business, assured investors that the group has a plan in place to "fix" the decline in that segment. Innovative products such as the news tablet has led to a healthy uptick in the digital side of the business, while cost is being kept under control.

The media business remains profitable and made pre-tax profit of S$55 million in FY19 - down 45 per cent from a year ago.

Mr Ng added, however, that the outcome was still uncertain as the advertising market in Singapore amid a weak macro economic environment was a "big wild card".

For that reason too, he said the group was "spending a lot of time to grow the non-media" business. The upside of that has been evident with property income in FY19 at a record high, more than offsetting media decline. The property division - SPH's largest profit segment - posted a 39 per cent jump in pre-tax profit to S$263 million in FY19.

Under this segment, SPH has grown its "cash-yielding" purpose-built student accommodation (PBSA) portfolio from scratch in September 2018 to 5,059 beds across 20 assets in 10 cities in the UK. It is now looking to build its capabilities to operate all the assets on its own for better yields, said Mr Ng.

Last week, it disclosed a purchase of a new PBSA asset in Germany for S$23 million which will expand total beds in this portfolio to 5,343.

Aged care is another area the group is keen to grow, said Mr Ng, although he pointed out that as it stands now, it was small. It owns Orange Valley, one of Singapore's largest private nursing home operator and recently set up a joint-venture fund to invest in such assets in Japan where there is rising demand for eldercare facilities.

"Aged care and student accommodation are defensive sectors. Demand (in these sectors) is strong even in a challenging macro environment as now. We will continue to look for opportunities," Mr Ng added.

Dr Lee said: "We want to assure shareholders that in trying to develop new growth areas, we are not taking an adventurous and speculative approach but taking a cautious and prudent approach whether it's retail assets or PBSA."

He added: "We have had many, many offers but we are highly selective on which ones to accept."