Media restructuring will let SPH maximise returns: Chairman Lee Boon Yang

SINGAPORE - The plan to restructure Singapore Press Holdings' (SPH) media business into a not-for-profit entity will give the company greater financial flexibility to maximise returns for shareholders, said SPH chairman Lee Boon Yang.

It will also remove uncertainty for shareholders given that losses for SPH's media business are expected to widen amid ongoing challenges faced by the industry.

SPH said on Thursday (May 6) that it intends to transfer the group's entire media-related businesses, including relevant subsidiaries, employees, intellectual property, information technology assets, two properties and stakes in four digital assets, to a newly incorporated wholly owned subsidiary called SPH Media Holdings (SPH Media).

SPH Media will then be transferred to a not-for-profit entity for a nominal sum and become a newly formed public company limited by guarantee, or CLG. A CLG is an entity that does not have share capital or shareholders but, instead, has members who act as guarantors of the company's liabilities.

The group will provide SPH Media with a cash injection of $80 million, as well as about 23.4 million of SPH Reit units valued at $20 million and about 6.9 million SPH shares valued at $10 million.

This is to enable SPH Media "to have a reasonable runway to take off into its new chapter under the not-for-profit CLG", said Dr Lee.

The value of the SPH contribution to the new entity stands at $252.3 million, assuming that the key leases were to be valued at net asset value as at end-February.

With this transfer, SPH will no longer be subject to shareholder and other restrictions under the Newspaper and Printing Presses Act (NPPA), noted Dr Lee.

For example, the Act bars any person from owning 5 per cent or more of a newspaper company without the approval of the Minister for Communications and Information.

Dr Lee said: "Without the encumbrances of the NPPA, SPH will have greater financial flexibility to tailor its capital and shareholding structure to seize strategic growth opportunities across the other businesses in order to maximise returns for shareholders."

 The proposed restructuring will see SPH’s profit after tax and minority interest increase 11.4 per cent to $94.8 million on a pro forma basis for the first half of FY2021, while net asset value will decrease 6.6 per cent to $3.364 billion. Earnings per share will go up from 4 cents to 5 cents. 

SPH earlier reported a 26.1 per cent rise in net profit for the first half of the financial year ended on Feb 28. The media segment saw a 70.9 per cent drop in profit before tax to $3.1 million compared with the same period last year, and if not for grants from the Jobs Support Scheme, it would have incurred a pre-tax loss of $9.7 million.

Dr Lee noted that SPH has invested significantly in digital capabilities, including spending an average of more than $20 million a year over the past five years to build up its digital platforms and products.

As a result of its digital transformation efforts, the average monthly unique audience across all SPH titles has nearly doubled to 28 million, he said.

However, advertising revenue is expected to continue to decline at a similar pace to the last five years, and is unlikely to rebound post Covid-19, Dr Lee added.

The growth in digital advertising revenue will not make up for the drop in print advertising, he said. As a result, the losses for SPH Media are likely to continue and widen.

Dr Lee said that having SPH Media continue as part of the listed company would therefore result in an adverse impact on the group's financial performance because both revenue and profit from the media business are expected to decline further.

"For the shareholders of SPH, this restructuring... is a way for them to reduce the drag and the burden on the listed company," he explained.

"And hopefully, over time, the remaining company, the listco, will be able to explore new opportunities, new investments and create better value for shareholders, and also unlock values for shareholders to benefit this way."

Dr Lee said that SPH "will consider, if we are invited, to be a member of the CLG". 

On whether the listco might inject more funds into the new entity in the future, he said: "That is not the intention. This is a restructuring process whereby SPH Media would be transferred over to the CLG, and they will then strike out on their own with the capitalisation that we have provided."

The restructuring plan is subject to regulatory and shareholders' approval. An extraordinary general meeting for shareholders is expected to be convened in July.