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Georgina Lee

Oriental Press Group, publisher of Chinese newspaper Oriental Daily News, saw full-year net profit plunge 58 per cent to $126.58 million after its smaller daily, The Sun, cut its cover price.

Net income slumped to $126.6 million for the  year  to March from $302.2 million a year  earlier, while turnover fell 5.9 per cent to $1.9 billion from $2.02 billion.

The company halved The Sun's cover price to $3  in October last year but it  was  raised to $4 in May this year.

The price cut, which  went with a  marketing campaign  in November in which it gave free vouchers that could be redeemed for food and  consumer goods,  increased circulation to about 350,000 from 100,000 a day, analysts said.

The group's circulation number is not audited by the independent Hong Kong Audit Bureau of Circulations, which verifies and reports circulation of various publications.

'As the group had [a higher] net profit of $181.4 million for the first half alone, its price-cut strategy had probably led the business into a loss for the second half, resulting in the full-year net profit decline,' said Tommy Ho, an analyst at UOB Kay Hian.

Mr Ho, citing an independent market survey, said that Oriental Daily had a circulation of 1.8 million a day, or about 35 per cent share of the city's total readers aged above 12.

Oriental Press proposed cutting  the final dividend to  two cents from  seven cents a share a year ago. However, it declared a special dividend of 0.5  cent per share. Adding to the interim dividend of 2.5  cents, shareholders would receive  five cents for the full year.

Macquarie Equities analyst Ramiz Chelat said the group's  lower earnings were a result of its price-cut strategy for The Sun, weak advertising sales growth of just 2 per cent and increased marketing expenses from the free vouchers campaign.

'Even though it has raised the price to $4,  it's still a loss-making paper. They'd do better by shutting the newspaper than buying circulation, it's not [a] sustainable [strategy],' said Mr Chelat.

Mr Chelat estimated that the free vouchers had  increased its marketing costs by 20 per cent to $30 million last year.

Macquarie had an 'underperform' rating on the stock with a target price at $1.35. The shares closed down 6.49 per cent to $1.44 yesterday.



Oriental Press profit slumps after price cut and freebies