Singapore Press Holdings (SPH), on May 6, announced that it will be transferring its media business into a not-for-profit entity.
The move, which was made as part of SPH’s strategic review that was announced on March 30, came about amid the ongoing challenge of declining advertising revenue.
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SPH’s media business has since fallen into the red as its operating revenue has halved in the past five years due to a fall in print advertising and print subscription revenue.
The group recorded its first-ever loss of $11.4 million for the FY2020 ended August.
This means the entire media-related businesses of SPH, including the News Centre and Print Centre, will be transferred to a newly incorporated wholly-owned subsidiary, SPH Media Holdings.
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SPH and SPH Media Holdings, on May 6, entered into a business restructuring deed to transfer SPH's media holdings into the latter.
The initial funding and resources for the new subsidiary will come from SPH, who will inject cash of $80 million, $30 million worth of SPH shares and units in SPH REIT, as well as 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. The not-for-profit entity will be a newly formed public company limited by guarantee.
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Following the transfer of SPH Media to the company limited by guarantee, SPH will no longer be subjected to shareholder and other restrictions under the Newspaper and Printing Presses Act (NPPA).
“SPH has undertaken strict cost management measures in recent years to mitigate the effect of the declining advertising revenue. However, there is little scope for further cost cuts without impairing its ability to maintain quality journalism,” says the group via a May 6 statement.
“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. Given this public role, winding up the media business or selling it off are not feasible options.”
“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. 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,” it adds.
The group elaborated that it has approached the Ministry of Communications and Information (MCI) with a restructuring proposal to put the media business on a long-term sustainable financial footing.
MCI has since indicated its support for the restructuring, and has also given its in-principle approval for the shareholding and other relevant restrictions under the NPPA provisions to be lifted from SPH.
The model is similar to publications such as The Guardian in the UK, according to SPH.
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The move is the biggest restructuring in the industry since Aug 4, 1984, when SPH was formed through a merger of The Straits Times Press group, the Singapore News and Publications Limited and Times Publishing Berhad. Times Publishing was later de-merged from SPH in 1988.
“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. 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,” says SPH chairman Dr Lee Boon Yang.
“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,” he adds. “The exercise will give SPH greater financial flexibility to tailor its capital and shareholding structure to seize strategic growth opportunities across the other businesses in order to maximise returns for shareholders.”
Credit Suisse (Singapore) is the appointed financial adviser for the review.
Shares in SPH closed flat at $1.79 on May 5, before its trading halt on the morning of May 6.
