SPH's FY2020 Earnings: Total Dividend Slashed by 79% on the Back of First Net Loss
Sudhan P●
Singapore Press Holdings Limited (SGX: T39) (SPH) is Asia’s leading media organisation with three business segments — media, property and others.
It is the publisher of well-known daily newspapers such as The Straits Times and The Business Times.
The company just released its earnings for the full year ended 31 August 2020 (FY2020). The media business is still struggling, with COVID-19 making matters worse.
Let’s dive in further.
TL;DR: SPH’s Dividend Slashed; Net Loss for FY2020
- Operating revenue fell 9.8% year-on-year to S$865.7 million while operating profit plunged 41%.
- SPH saw a net loss of S$83.7 million in FY2020, compared to a net profit of S$213.2 million a year ago.
- Total dividend for FY2020 at 2.5 Singapore cents per share, down from 12 cents in FY2019.
Show Me The Moolah
The following shows how SPH’s different business segments performed in terms of revenue for FY2019 and FY2020:
| Revenue | FY2020 (S$'000) | FY2019 (S$'000) | % Change |
|---|---|---|---|
| Media | 445.2 | 576.9 | (22.8) |
| Property | 327.2 | 296.5 | 10.3 |
| Others (Incl. Aged Care) | 93.3 | 85.9 | 8.7 |
| Total | 865.7 | 959.3 | (9.8) |
Source: Singapore Press Holdings FY2020 earnings presentation
As you can see, the media segment’s revenue fell by around 23% to S$445.2 million, as compared to a year ago.
Housed in this segment are the advertisements that you see in the papers, both in physical and digital forms.
The decline in revenue for the media segment was due to 1) lower overall print advertisement revenue, and 2) lower advertisement revenue from the magazine and radio businesses. SPH said that COVID-19 “intensified the structural decline in the advertising sector”.
However, SPH’s property business, in which SPH REIT (SGX: SK6U) is a part of, saw its revenue go up by 10.3%.
The higher revenue was due to SPH REIT’s acquisition of Westfield Marion in December 2019 and acquisitions made during the year under SPH’s Purpose-Built Student Accommodation (PBSA) portfolio. SPH REIT’s gross revenue for FY2020 grew 5.6% year-on-year to S$241.5 million.
Revenue for SPH’s Others segment grew by 8.7% due to higher sales of personal protective equipment at its Aged Care business.
Overall, operating revenue for FY2020 tumbled 9.8% to S$865.7 million while operating profit dived 41% to S$110.2 million.
Largely due to fair value losses from investment properties, SPH posted a first net loss of S$83.7 million for FY2020, reversing a net profit of S$213.2 million last year.
To add on to its woes, SPH’s balance sheet weakened for the year.
As of 30 August 2020, total debt stood at $3.41 billion and cash balance was at S$864.7 million, giving a net debt position of S$2.54 billion. Exactly a year ago, SPH had a lower net debt of S$1.50 billion.
That Media Business
SPH’s main revenue driver is its media segment, which contributed to 51% of FY2020 revenue. Therefore, it’s worth taking a closer look at this segment.
For FY2020, total print advertisement revenue fell even further. In particular, newspaper print ad declined by 32.9% year-on-year.
Ad sales have been on a steady decline for the past couple of years, and it’s not hard to see why.
With readers reading news increasingly from the Internet, consumer focus is shifting from physical newspapers to social media platforms and search engines such as Facebook and Google.
The structural decline in SPH’s ad business explains its diversification strategy away from media and into other asset classes such as aged care, student accommodations, and even data centres.
As for the digital ad business, it too saw a revenue fall, to the tune of 6.2%.
This part of the media business had been growing steadily since FY2017 but fell in FY2020 as advertisers pulled back on ad spend globally amid the COVID-19 pandemic.
Show Me the Dividends
SPH declared a final dividend of 1.0 Singapore cent per share.
Including the interim dividend of 1.5 cents already dished out, the total dividend for FY2020 would be just 2.5 cents per share.
In comparison, for FY2019, SPH paid out a total dividend of 12.0 Singapore cents per share (including a special dividend of 1.0 cent).
SPH’s total dividends (including special dividends) have been on a downtrend for some time. In FY2014, it paid out 21.0 cents per share in dividends, but that slipped to 13.0 cents in FY2018.
And even further in the latest financial year.
From The Horse’s Mouth
Ng Yat Chung, chief executive of SPH, commented the following on his company’s latest performance:
“All our major business segments were severely disrupted by Covid-19. Our Media business is badly affected by the collapse in advertising. However, the 9.4% growth in circulation numbers from the success of our News Tablet digital product and higher readership is a bright spot. We are intensifying our digitalisation efforts to transform the news content business in response to evolving demands from our audience. We will continue to take a prudent and disciplined approach to liquidity and capital management to weather the Covid-19 crisis with all our stakeholders.”
Looking ahead, it remains to be seen how much SPH’s digitalisation and diversification efforts would help to arrest the overall decline in its business.
At SPH’s current share price of S$1.05, it has a dividend yield of 2.4%, which doesn’t look enticing to me given the struggles that the group faces.
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