Singapore Press Holdings' eroding print margins worrisome

Newspaper and Magazine still biggest money spinner at 76% of profits but 4Q12 weakness a concern, says Nomura.

SPH reported a 12% y-y decline in 4Q12 PATMI of SGD84mn, on sluggish revenue growth (down 2% vs 4Q11) and higher operating costs, up 9% during the quarter.

Due to a weaker fourth quarter, full-year (YE August FY12) PATMI came in at SGD366mn, down 6% y-y and 4.5%
below our estimate of S$383mn.

For the 12 months ended August, the group’s core newspaper and magazine business posted an 8% y-y decline in pre-tax profit to S$335mn, while treasury and investment income declined a sharp 25% y-y to S$31mn.

However, property PBT grew 32% to S$100mn on higher rentals at Paragon and a full-year contribution from Clementi Mall. 

Here's from Nomura

While FY12 group EBIT was down to SGD 435mn, FY12 EBIT margins remained relatively steady at 34% vs 35% in FY11, helped primarily by the growing property division.

Strong revenue growth at property and other businesses was offset by higher operating costs, up 5% y-y and lower investment income (-35% y-y). The rise in operating costs was attributable to increased distribution costs, up 23.4% due to newspaper subscription drives, while staff costs came in higher, up 3.4% due to salary increments and higher headcount from recently acquired ACP Magazines Pte Ltd.

Management has maintained total year-end dividends at 17 cents per share, 9 cents final and 8 cents in special, which brings total dividends for the year to 24 cents per share (FY11: 24cents) despite the earnings decline.

Revenue for SPH's core newspaper and magazine business was marginally lower at SGD1bn for the year, while PBT was down 8% y-y to SGD335mn. For 4Q12, newspaper and magazine PBT came in at SGD 72mn, down 17% y-y and below SGD 92mn recorded for 3Q12. 

Though print advertisement revenue came in flat at SGD 769.4mn, circulation revenue was down 2.1% to SGD 202.9mn. Property up on full-year contribution from Clementi, higher Paragon rentals . roperty PBT was up 32% y-y for FY12 on revenue growth of 14%,attributable to full-year contribution from Clementi Mall and higher rental rates at Paragon. Rental income contribution from Clementi Mall was up SGD18.6mn or 100% due to full years’ operations.

Investment income for the year came in at a lower SGD32.5mn, down from SGD50.3mn in FY11 mainly due to mark to market losses arising from volatility in forex markets.