SPH's profits plunged 25% to $431m

Blame it on higher operating costs.

According to OCBC Investment Research, SPH reported FY13 (ending 31 Aug) PATMI of S$431.0m – down 25.0% – mainly due to a lower fair value gain on investment properties and a S$40.4m increase in the “other operating expenses” item.

Here's more:

This increase comprises S$26.0m of non-recurring charges, including an impartment of an overseas magazine subsidiary, and a S$8.0m hike in promotion costs for its online businesses.

Accounting for one-time items, core PATMI is estimated at S$348.9m, which constitutes 96.5% of our FY13 forecast and is judged to be mostly in line.

In terms of the topline, newspaper and magazine revenue for FY13 was S$991.2m, decreasing 3.9% YoY due to declines in both advertisement and circulation. A final dividend of 15.0 S-cents per share was announced.

Initiatives to generate S$19m cost savings per annum

SPH’s traditional newspaper and magazines business continue to face headwinds in the form of declining advertisement (down 4.0%) and circulation revenues (down 3.6%).

On the cost-side of the equation, however, we saw staff cost decreasing 2.9% as variable bonuses were reduced. Newsprint prices also held steady at US$607 over 4QFY13.

In addition, management has began cost-saving intitatives that are expected to generate savings of S$19m per annum.

Over FY13, property rental income increased 3.5% due to higher rental rates from Paragon while income from Clementi Mall remained stable. Seletar Mall remains on track and we expect  completion by Dec 14.