SCMP positive on ad income as economy booms

PUBLISHED : Friday, 07 April, 2006, 12:00am
UPDATED : Friday, 07 April, 2006, 12:00am

SCMP Group, publisher of the South China Morning Post and Sunday Morning Post, said yesterday economic growth in Hong Kong and the mainland would push up advertising rates and 'bolster performance' at its core newspaper business this year.

The group said net profit fell 22.32 per cent to $246.35 million last year from $317.14 million in the previous year, which included a one-time gain of $76.8 million from the sale of its retailing business.

Profit from operations grew 8.83 per cent to $313.2 million due to a 13 per cent rise in display advertising revenue and a 12 per cent increase in classified advertising.

Turnover jumped 9.5 per cent to $1.12 billion.

Shareholders will receive a final dividend of 10 cents per share, against seven cents a year earlier.

'The outlook for [this year] seems positive,' South China Morning Post Publishers managing director Nancy Valiente said in a statement.

'Stable economic growth is expected for Hong Kong and China and this will bolster performance. A strong Hong Kong economy bodes well for advertising and circulation and we expect advertising revenue for the newspaper division to benefit from higher rates in 2006.'

SCMP shares rose 6.14 per cent to $3.025 yesterday, well below the group's five-year high of $4.866 in April 2002.

Concerns about the competitive media sector and new regulations removing the requirement on listed firms to take out paid earnings announcements have weighed on investors' minds in recent months.

'Circulation is under pressure,' Ms Valiente said. 'Readers and advertisers have more choices than ever before ... advertising revenues from business notices are at risk from a pending change in listing rules [and] cost pressures from rising newsprint prices, salaries and rent remain a concern.'

Operating costs and expenses from continuing operations rose 9 per cent to $833.1 million. Staff costs increased 8 per cent and average newsprint cost grew 18 per cent to US$563 per tonne. Staff and newsprint costs made up about 50 per cent of expenses.

The South China Morning Post's unaudited circulation increased to 104,084 copies from 101,782 a year earlier, while the Sunday Morning Post's climbed to 82,108 copies from 81,099.