Announcing the move on Thursday (May 6), SPH chairman Lee Boon Yang said the transfer will enable the media business to focus on quality journalism and invest in talent and new technology to strengthen its digital capabilities.
The restructuring entails transferring all the media-related businesses including relevant subsidiaries, employees, News Centre and Print Centre along with their respective leaseholds, all related intellectual property and information technology assets to a newly incorporated wholly-owned subsidiary, SPH Media Holdings Pte Ltd (“SPH Media”).
SPH will provide the initial resources and funding by capitalising SPH Media with a cash injection of $80 million, $30 million worth of SPH shares and SPH REIT units, and SPH’s stakes in four of its digital media investments.
Under the restructuring proposal, SPH Media will eventually be transferred to a not-for-profit entity for a nominal sum. This will be a newly formed public company limited by guarantee, or CLG. More information on the CLG will be announced in due course, said SPH in a press statement on Thursday.
A not-for-profit structure will allow SPH Media to seek funding from public and private sources with a shared interest in supporting quality journalism.
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.
The transfer of the media assets to the CLG is subject to SPH shareholders’ approval at an extraordinary general meeting to be convened at a later date.
Credit Suisse (Singapore) is the appointed financial adviser for the review.
Tackling unprecedented industry disruption
The move is the most major restructuring in the industry since 1984, when SPH was formed through a merger of three organisations – the Straits Times Press group, the Singapore News and Publications Limited and Times Publishing Berhad.
That merger consolidated the flagship newspapers in different languages under one roof.
Explaining the rationale for the move, SPH said the media industry has faced “unprecedented disruption” in recent years, with SPH’s operating revenue halving in the past five years largely due to a decline in print advertising and print subscription revenue.
SPH’s media business recorded its first-ever loss of $11.4 million for the financial year which ended Aug 31, 2020.
“If not for the Jobs Support Scheme, the loss would have been a deeper $39.5 million,” it said.
Even with the resumption of activities after the circuit breaker last year, the decline in advertising revenue is expected to continue at a similar pace to the last five years.
Due to digital transformation efforts, SPH’s average monthly unique audience across all its titles over the past two years has nearly doubled to a record 28 million, and digital circulation has surpassed print circulation.
But digital subscriptions and digital advertising have been unable to offset the decline in print advertising and print circulation revenues.
“As a result, the losses of the media business are likely to continue and widen,” it said.
It added that with the critical function that the media business plays in providing quality news and information to the public, particularly in the vernacular languages, 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 said that it had approached the Ministry of Communications and Information with a restructuring proposal to put the media business on a long-term sustainable financial footing. The ministry, which regulates SPH under the NPAA, has indicated its support for the restructuring. It has also given its in-principle approval for the shareholding and other relevant restrictions under the NPPA to be lifted from SPH upon the closing of the proposed restructuring.
While such a model may be “unfamiliar” in Singapore, SPH noted that many news organisations overseas operate under similar funding structures, including the Guardian in Britain which is controlled by the Scott Trust; and the Tampa Bay Times in the US which is owned by the non-profit Poynter Institute.
Dr Lee said the fundamental issue that needs to be addressed is the long term viability of SPH Media in its present structure, subjected to market pressures.
“SPH shareholders are not likely to tolerate the continued negative impact that the media business has on the company’s financial prospects. On the other hand, we cannot allow a functioning, trusted and respected media organisation to be whittled down over time by market pressure and commercial constraints.
“In the context of Singapore’s multi-racial society, SPH serves a crucial function by providing news and information in vernacular languages to serve Singapore’s diverse ethnic communities.”
Considering these important roles, he said, winding up or selling off the media business are not options for the group, as it will affect access to quality news and undermine media diversity and competition in Singapore. Both options would also require regulatory approval.
Shares of SPH, which publishes The Straits Times, closed down two cents or 1.1 per cent at $1.79 on Wednesday.
SPH had posted a net profit of $97.9 million for the first half of the financial year that ended on Feb 28 – 26.1 per cent rise. The company remains operationally profitable at $119.8 million.
The media segment posted a profit of $3.1 million, down 70.9 per cent year on year. Excluding grants from the Jobs Support Scheme, it recognised a pre-tax loss of $9.7 million.
SPH’s core business is in the publishing of newspapers, magazines and books, in both print and digital editions, including The Straits Times. The company also owns about 66 per cent in SPH Reit.
SPH owns and operates The Seletar Mall, and is developing an integrated development consisting of The Woodleigh Residences and The Woodleigh Mall. In addition, it owns purpose-built student accommodation in Britain and Germany.
The company also owns Orange Valley, one of Singapore’s largest nursing homes, and has investments in motoring portal sgCarMart, job platform FastJobs, telco M1 and South Korean e-commerce giant Coupang.
