SPH restructuring will balance 'conflicting' expectations of public, shareholders: Lee Boon Yang

SINGAPORE: The decision to divest Singapore Press Holdings' (SPH) of its media business will balance the "conflicting expectations" of the public who reads its news products, as well as its shareholders and business partners, said chairman Lee Boon Yang on Thursday (May 6).

Dr Lee announced on Thursday that SPH will transfer its media business to a not-for-profit entity amid the challenge of falling advertising revenue, exacerbated by disruptions caused by the COVID-19 pandemic.

The new entity, SPH Media, will be under a new company limited by guarantee and the transfer is expected to take place three to six months after a shareholders' meeting in July or August to approve the move.

READ: SPH to restructure media business into not-for-profit entity amid falling revenue

Dr Lee told reporters at a media briefing that it was "no longer tenable" for SPH's media business to be part of a publicly listed company.

"A new funding model is needed for SPH Media to remain financially sound and functionally robust in the long run," he said. 

And while a listed company would normally consider winding down a loss-making business segment, this was not possible with SPH Media.

"SPH has a critical mission of serving several key stakeholders in Singapore - the public who read our news products, our shareholders, our staff as well as our business partners," he said.

Dr Lee said that SPH provides credible news and information to the public, including in the vernacular languages to serve Singapore's multi-ethnic communities.

"We cannot allow a functioning, trusted and respected media organisation to be whittled down over time by market pressure and commercial constraint," he said.

"LITTLE SCOPE" FOR COST CUTS

Dr Lee said that the media business is expected to remain loss-making, even though SPH has gone through several cost management exercises. 

The earlier retrenchments were adjustments to the industry conditions, Dr Lee said, and with these the company "freed up resources" to reinvest in other areas like technology, digital talent and new content creation capability. 

But there "remains little scope for further cost cuts without impairing the ability to maintain quality journalism", he said.

"So we have to balance sometimes conflicting expectations among stakeholders. This outcome that we are proposing is ... the most appropriate and balanced result for everybody."

SPH publishes national broadsheet The Straits Times as well as dailies in Chinese, Malay and Tamil, along with other print and digital products.

READ: About 140 employees from Singapore Press Holdings to be 'affected' by retrenchment exercise

The transfer of SPH Media to a not-for-profit entity will help to preserve a diverse and competitive media landscape in Singapore, he said. This consideration to preserve diversity was also a factor in not merging with other media entities, Dr Lee added later.

"SPH Media will then be freed from the expectations of shareholders for a fair financial return and regular dividends. Its operating revenue can be reinvested in the media operations instead," said Dr Lee.

It can also seek funding from public and private parties that have an interest in supporting quality journalism and credible information in the public interest, Dr Lee added.

He promised that SPH Media will produce "responsible, objective and accurate journalism" under the new structure.

"These values are deeply embedded, you can say it's the DNA of SPH Media," he said. "They will obviously receive public-private funding in the process, but they will not stray from the mission to maintain the credibility, trustworthiness and respect of the media by the Singapore public."

READ: SPH undergoing strategic review 'to consider options for its various businesses'

HOW SHAREHOLDERS MAY BENEFIT

The move will also benefit shareholders of the listed SPH company, which will no longer be held to restrictions on shareholding and other constraints under the Newspaper and Printing Presses Act (NPPA).

"SPH will have greater financial flexibility to tailor its capital and shareholding structure to pursue strategic growth opportunities across its other businesses and maximise returns for shareholders," he said. 

He added that for shareholders, this restructuring will reduce the "drag" the media business may have on the firm in the future.

SPH will provide the initial resources and funding for SPH Media with start-up funds including a cash injection of S$80 million, S$30 million worth of SPH shares and SPH REIT units. But there are no plans for future injection of funds.

Addressing a reporter's question on the funds pumped into SPH Media, Dr Lee said that shareholders should also understand the assets of the group came about from the media operations over the last decades. 

"It is only in recent years that media has suffered .... most of its 37 years, media was the main contributor. So it's not wrong to ensure ... that media should receive start-up grants from the parent company to ensure that it can take off in the future."

In his remarks to the media, Dr Lee recalled former Prime Minister Lee Kuan Yew's words to former President S R Nathan when he was appointed the executive chairman of the Straits Times Press, a few years before the formation of SPH in 1984.

Then, Mr Lee Kuan Yew had called The Straits Times a "bowl of china" and told Mr Nathan: "If you break it, I can piece it together. But it will never be the same. Try not to destroy it."

Dr Lee said on Thursday that in addition to the Straits Times, the future of all of SPH's publications are now at stake.

"We are creating a new home for this fine china bowl. We are confident that in this new home, our media which has served our society over the decades will continue to enjoy the care, nourishment and support they need from our society if they are to thrive."