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.
READ: SPH restructuring will balance 'conflicting' expectations of public, shareholders: Lee Boon Yang
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.
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.
READ: SPH records first net loss of S$83.7 million for FY2020 as COVID-19 'severely disrupts' all business segments
"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."
PUBLIC COMPANY LIMITED BY GUARANTEE
SPH said it approached the Ministry of Communications and Information (MCI) with the restructuring proposal to put its media business on a long-term sustainable financial footing.
MCI, which regulates SPH under the Newspaper and Printing Presses Act, has indicated its support for the restructuring, said the company.
A CLG is usually formed to carry out non-profit making activities such as promoting the arts, according to the Accounting and Corporate Regulatory Authority (ACRA).
It is a company structure that has members instead of shareholders. These members agree to pay a fixed sum in case the company is wound up, according to ACRA's website.
One example of a CLG in Singapore is the Arts House, a not-for-profit organisation that manages arts venues.
SPH also cited the Guardian in the United Kingdom, controlled by the Scott Trust, and the Tampa Bay in the United States, owned by the non-profit Poynter Institute, as examples of news organisations operating under a similar model.
"With the resources that SPH is providing upfront and the prospects for public-private partnership funding going forward, we anticipate that SPH Media will have a more sustainable financial future," said Dr Lee Boon Yang, chairman of SPH.
"It will have the resources to focus on transformation efforts and quality journalism, as well as to invest in talent and new technology to strengthen its digital capabilities.
"This will ensure that the public will continue to benefit from quality information and credible news from trusted media titles and newsrooms, across different platforms and in vernacular languages."
The removal of Newspaper and Printing Presses Act restrictions will also give SPH "greater flexibility to tailor its capital and shareholding structure to seize strategic growth opportunities", he added.
Under the Newspaper and Printing Presses Act, no person is allowed to become a substantial shareholder of SPH or arrange with any other person to aggregate more than 5 per cent of the shares without the approval of the Minister for Communications and Information.
The transfer of SPH's media assets to the CLG is subject to SPH shareholders' approval at an extraordinary general meeting to be convened at a later date.
SPH reported in March that it had a net profit of S$97.9 million in the first half of the financial year.
The company's core media business has seen steady declines in revenue and profit over the past few years, but these have been offset by its property business.
SPH owns 66 per cent in SPH REIT whose portfolio includes The Paragon, The Clementi Mall and The Rail Mall.
In Australia, SPH REIT holds stakes in two shopping centres.
SPH also owns and operates The Seletar Mall and is developing an integrated development consisting of The Woodleigh Residences and The Woodleigh Mall.
It owns and runs student accommodation in the United Kingdom and Germany.
The company had called for a trading halt on Thursday morning prior to the announcement.
Its shares closed at S$1.79 on Wednesday.
Last August, SPH retrenched 140 employees, about 5 per cent of its media group headcount, as part of corporate restructuring to mitigate the impact of COVID-19.
The pandemic had a "significant adverse impact" across all business segments, with the economic downturn affecting advertising revenue, the company said then.
This followed a restructuring exercise in October 2019 that cut 5 per cent of jobs in SPH's media division, affecting about 130 employees, of whom about 70 were laid off.