SPH to restructure media business into not-for-profit entity amid falling revenue
A view of the Singapore Press Holdings (SPH) building in Toa Payoh. (File photo: TODAY/Najeer Yusof)
SINGAPORE: Singapore Press Holdings (SPH) will transfer its media business into a not-for-profit entity amid the ongoing challenge of falling advertising revenue, the company announced on Thursday (May 6).
The restructuring exercise involves transferring the entire media-related business of SPH to a newly incorporated wholly owned subsidiary, SPH Media Holdings.
The transfer involves relevant subsidiaries and employees, the News Centre and Print Centre and their respective leaseholds, as well as related intellectual property and information technology assets.
SPH will provide the initial resources and funding to capitalise SPH Media with a cash injection of S$80 million, S$30 million of SPH shares and SPH REIT units, and SPH's stakes in four of its digital media investments.
SPH Media will eventually be transferred to a not-for-profit entity for a nominal sum. This entity will be a newly formed public company limited by guarantee (CLG).
After the transfer of SPH Media to the CLG, SPH will no longer be subject to shareholder and other relevant restrictions under the Newspaper and Printing Presses Act, said the company.
"UNPRECEDENTED DISRUPTION"
The media industry has faced "unprecedented disruption" in recent years, SPH said in explaining the rationale for the move.
The company's operating revenue has halved in the past five years due largely to a decline in print advertising and print subscription revenue, it said.
SPH's media business has since fallen into the red, recording its first-ever loss of S$11.4 million for the financial year ended Aug 31, 2020.
If not for the Government's Job's Support Scheme (JSS), the loss would have been a deeper S$39.5 million, said SPH.
For the six months ended Feb 28, 2021, pre-tax profit fell 71 per cent to S$3.1 million compared to the same period a year ago. SPH would have incurred a pre-tax loss of S$9.7 million if not for the JSS grant, said the company.
Even with the resumption of business activities after Singapore's reopening from a COVID-19 "circuit breaker", decline in advertising revenue is expected to continue at a similar pace to the last five years, it said.
SPH's digital circulation now surpasses its print circulation, with digital transformation efforts nearly doubling the average monthly unique audience across all its titles to a record 28 million over the past two years.
But digital subscription and digital advertising have been unable to offset the decline in print advertising and print circulation revenues, said SPH.
The company has undertaken strict cost management measures in recent years to mitigate this.
"However, there is little scope for further cost cuts without impairing its ability to maintain quality journalism," said SPH.
"SPH's media business plays a critical function in Singapore with the provision of quality news and information to the public, in particular in the vernacular languages," said the company.
Given this, winding up the media business or selling it off were not feasible options, it said.
"However, remaining part of a publicly listed company where it is subject to expectations from shareholders of profitability and regular dividends is no longer a sustainable business model," said SPH.
"Hence, a not-for-profit structure that allows SPH Media to seek funding from a range of public and private sources with a shared interest in supporting quality journalism and credible information is the optimal solution."
Full story at Channel News Asia
SPH media restructuring: Privatisation, sale options considered but not viable
Speaking at a virtual dialogue organised by Sias, or the Securities Investors Association (Singapore) to address shareholder queries on Thursday evening, he said that options such as privatisation or selling the media business had indeed been considered.
However, any party that takes over the media business will be subject to the same challenges the company is facing in the media landscape, particularly the secular decline in print advertising revenue. Being in a commercial company whose shareholders expect a fair return was therefore not viable for the media business, said Mr Ng.
Transferring the entire media-related business to a company limited by guarantee, or CLG, will allow profits to be reinvested in the company rather than being distributed to shareholders.
"So this is how we came to a solution that requires us to find a sustainable future for the media business," he said. He added that the CLG model will present more opportunities for the business to raise funds.
SPH, which publishes The Business Times, had announced in May that it will transfer its entire media-related business to a CLG. The move was the result of a strategic review announced in March, amid structural changes that had severely disrupted the traditional business model, which had relied on print advertising revenue.
With the loss-making media business hived off, SPH is expected to benefit from its non-media assets, prompting queries as to why a "profitable business" should be handed over to Keppel Corporation.
Keppel had made a S$2.2 billion bid to privatise SPH's non-media business. The deal, which values SPH at S$3.4 billion, will take place through a scheme of arrangement, subject to SPH shareholders first approving its media restructuring plan.
Under the scheme, SPH shareholders will receive a total consideration of S$2.099 for each SPH share they own. This will consist of cash of S$0.668, 0.596 Keppel real estate investment trust (Reit) unit (valued at S$0.715) and 0.782 SPH Reit unit (valued at S$0.716).
Mr Ng said that while there is a plan to grow the non-media business on its own, the company had gone through the process of evaluating over 20 offers for its non-media business in order to get the best value for shareholders.
Addressing queries on Keppel's offer, Mr Ng said that while he understands that an all-cash offer may be favoured, none of the offerors had proposed such a deal.
SPH had said that the offer price of $2.099 per share represents a premium of about 40 per cent based on the last trading price before the announcement of SPH's strategic review on March 30.
Shareholders will also get to benefit from steady dividend yields in the 4 per cent range, based on the historical averages, for SPH Reit and Keppel Reit.
SPH will hold a virtual extraordinary general meeting at 2.30 pm on Sept 10 to seek shareholders' approval on its proposed restructuring and formation of a new constitution.
Shares of SPH ended Thursday at S$1.95, up S$0.02 or 1 per cent.
https://www.businesstimes.com.sg/companies-markets/sph-media-restructuring-privatisation-sale-options-considered-but-not-viable