SPH net profit falls by hefty 25 per cent as advertising and circulation revenue declines

Singapore Press Holdings (SPH) announced yesterday that it suffered a 25 per cent decline in net profit for the second quarter of this fiscal year, as compared to the same period last year. Net profits for the three months that ended 28 Feb came in at $40.2 million – $13.3 million less than the $53.5 million it collected in the second quarter of the last fiscal year.

The group revealed the sizeable decline in net profit nearly three weeks after investment banking firm UOB Kay Hian reported that the advertisement page count of the SPH’s flagship newspaper, The Straits Times, had fallen by 12.7 per cent year-on-year. UOB Kay Hian analyst Foo Zhi Wei had asserted then that SPH “…continues to see flat circulation revenue in spite of increased digital subscribers amid a backdrop of a continued decline in advertising revenue.”

Yesterday, SPH revealed that advertisement and circulation revenue slid 9.3 per cent and 7.5 per cent respectively, leading to a collective 7.5 per cent decline in revenue for its media segment, to S$155.6 million.

SPH’s group operating revenue also declined by 1.8 per cent year-on-year to S$233.7 million while revenue for the property segment dropped by 2.4 per cent to S$60.5 million. The decline in revenue for the property segment has been attributed to lower rental income from retail assets.

SPH’s revenue decline comes while the group is in the middle of a massive job cut exercise, as the firm continues retrenching employees and relocating staff to new newsdesks as it seeks to cut hundreds of jobs. Last month, SPH magazines axed 13 employees to reportedly prepare for a “digitally driven future”.

Yesterday, the group reiterated its focus on a digitally driven future and said that it will be concentrating on building a digital blueprint for the future, including new all-digital subscription plans.

SPH CEO LG (NS) Ng Yat Chung added that the group is counting on property investments to contribute to revenue growth in the future: “Our upcoming joint venture project The Woodleigh Residences and The Woodleigh Mall will contribute to our growth in the next few years. We are also exploring further growth in aged care and other property asset management sectors for the longer term.”

LG Ng has been leading SPH for about half a year since he took over from former chief executive Alan Chan who retired last September.

LG Ng was formerly the CEO of NOL. Under his charge, NOL lost more than $1.5 billion and finally, to stop the hemorrhaging, Temasek was forced to sell NOL away to the French group CMA CGM in June last year.

In an interview with ST, he blamed the demise of NOL on its high cost structure: “We have made good progress in that aspect, and every year we’ve managed to reduce our losses. Unfortunately, we haven’t been able to cut costs fast enough to offset the collapse in freight rates.”

He further noted that NOL’s past successes were built on being a premium service line with “significantly higher” costs than its competitors. However, he did acknowledge that the company had been “a bit slow and reluctant to change”.

With regards to selling away NOL, he had commented: “Personally, it would be strange not to feel a little bit of regret, a tinge of this ‘sayang’ feeling.”

LG Ng earned at least $16 million from NOL

Despite the mounting losses incurred by NOL, it was found that LG Ng continued to earn insanely high salaries of at least US$2 million a year from the company.

• 2011 – Between US$2,150,000 to US$2,299,999
• 2012 – Between US$2,500,000 to US$2,699,999
• 2013 – Between US$2,500,000 to US$2,699,999
• 2014 – Between US$2,300,000 to US$2,499,999
• 2015 – Between US$2,300,000 to US$2,499,999

In all, he earned at least S$16 million since he took over as NOL CEO in 2011. This is just a conservative estimate. In fact, he could be making as high as S$20 million if his other share incentives are included.

NOL making profits now without LG Ng

In any case, it is interesting to note that NOL, under the new French leadership is making profits in less than a year after acquiring NOL from Temasek. Reuters reported:

“Container shipping line CMA CGM posted higher first-quarter profits, helped by a turnaround at recently acquired NOL, and gave an upbeat assessment for the current quarter in another sign that the shipping industry is emerging from a slump.
“The French-based group reported on Friday a first-quarter net profit, including Singapore-based NOL which it consolidated in June last year, of $86 million compared with a $100 million loss in the same period of 2016.”