SPH – BT

SPH net profit dips 15.6% in Q3; recurring earnings up 26%

Net investment income falls 66% amid volatility in financial markets

SINGAPORE Press Holdings (SPH) turned in a 26.2 per cent year-on-year jump in recurring earnings to $135.1 million for the third quarter ended May 31, but a drop in investment income resulted in a 15.6 per cent fall in net profit to $133.4 million.

The rise in profit before investment – which represents recurring earnings from the media and property businesses, including profits from the Sky@eleven development – came on the back of higher revenue contribution from the newspaper and magazine segment and the Sky@eleven project.

Volatility in the financial markets continued to exact its toll on investments, resulting in a 65.9 per cent decline in net investment income to $25.7 million. The drop in investment income was due mainly to higher profit on sale of investments last year. In addition, last year included income from the capital reduction exercise undertaken by an investee company, Mobile One.

The media group’s operating revenue rose 19.5 per cent to $344.4 million for the quarter. Revenue from its core newspaper and magazine operations rose 5.1 per cent to $268.9 million, with print advertisement revenue remaining the growth driver, jumping 6.3 per cent to $207.9 million.

In the property segment, revenue more than doubled to $67.3 million from $26 million a year earlier – with a $38.1 million contribution from Sky@eleven and a $3.1 million increase in income from rental and related services from Paragon. Property yield from Paragon is expected to be maintained at above 4 per cent based on an upward revaluation of the shopping centre, at $2 billion.

Total operating expenses went up by 15.6 per cent to $212.7 million. Property development costs for Sky@eleven accounted for $10.8 million, while staff costs were up $10.6 million or 13.8 per cent mainly due to increased headcount, annual salary increment and higher variable bonus provision. Headcount at end-May reached 3,874, up from 3,684 a year ago, as the group intensified its efforts to expand into new media and magazine businesses.

Other operating expenses increased $6.4 million or 15 per cent in tandem with the increase in business activity and inflationary pressures.

On a nine-month basis, net profit came to $344.9 million, a drop of 8 per cent from a year ago, while operating revenue was 17.7 per cent higher at $954.5 million. Profit before investment income, or recurring earnings, climbed 26.6 per cent to $373.4 million.

Q3 earnings per share (EPS) came in at eight cents, down from 10 cents, while EPS for the nine months fell to 22 cents from 24 cents.

Commenting on the outlook for the next 12 months, chief executive officer Alan Chan said: ‘The Singapore economy is forecast to grow at a more moderate pace in 2008. Advertising revenue, which has registered commendable growth and remained resilient so far, is expected to perform in tandem with the economy. Newsprint prices, which have seen sharp increases, are poised to rise further due to escalating production costs as well as supply and demand imbalances.’

He also said that the performance of the property segment continues to be underpinned by profit contribution from Sky@eleven and strong rental income growth from Paragon.

‘Barring unforeseen circumstances, the directors expect the recurring earnings for the current financial year to be better than the previous financial year.’

Shares of SPH ended one cent lower at $4.18 yesterday.

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