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2 Trends Showing Why Singapore Press Holdings Limited’s Media Revenue Will Continue to Decline

The Motley Fool logo The Motley Fool 9/11/2018 Jeremy Chia

By now, we should know that no business is immune from disruption. Even Singapore Press Holdings Limited(SGX: T39), the dominant newspaper provider in Singapore, is no different. In recent years, SPH’s Media segment has seen year-on-year declines in revenue. This is a consequence of consumers going online to receive news instead of from traditional print newspapers, leading to SPH’s print advertising business (which is under the Media segment) being on a consistent downward trend.

In the financial year ended 31 August 2018 (FY2018), SPH’s Media segment experienced a 9.6% decline in revenue. Here are some reasons to believe the trend might continue.

Print ad decline still in double digits

Despite slightly slower declines than in FY2017, SPH’s print advertising revenues still fell by double digits in FY2018. The chart below illustrates the declines in Display, Classified, and Newspaper advertising revenues over SPH’s past four financial years:

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Source: SPH FY2018 earnings presentation

With the sale of advertisements making up 67.9% of SPH’s media revenue of S$655.8 million in FY2018, any double digit decline in print advertising revenue will have a large impact on the profitability of the media business going forward.

Digital revenue growing but still only a small contributor

SPH has made an effort to increase its digital circulation. It recently launched an all-digital subscription plan for its flagship paper, The Straits Times. The company is also using data analytics and artificial intelligence to enhance the readership experience.

And to an extent, SPH has made notable progress in its digital initiatives in recent years. Media digital revenue has increased by 17% per year from FY2013 to FY2018. However, despite the growth, digital revenue still only makes up less than 16% of SPH’s total Media segment revenue. It is still some time away before SPH’s digital revenue growth can make up for the loss of revenue from its traditional print advertising business.

The Foolish bottom line

SPH is Singapore's main news provider. However, its competitive advantage has been slightly derailed due to easy access for consumers to multiple news channels through the internet. SPH has done well to try to reposition itself digitally and to diversify its income streams into areas such as property, aged care facilities, and even childcare centres. But, its core Media segment still faces many challenges ahead and could continue to decline further in the next few years.

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