SCMP Group first-half earnings rise 19pc on advertising growth

PUBLISHED : Friday, 14 September, 2007, 12:00am
UPDATED : Friday, 14 September, 2007, 12:00am

SCMP Group, publisher of the city's leading English-language newspaper, said its first-half profit rose 19 per cent as a buoyant economy and strong investment market lifted advertising sales.

But analysts predict a harder finish to the year, amid a fall in corporate notices and rising market volatility.

Net profit for the six months ended June increased to HK$175 million, while sales gained 9 per cent to HK$632.86 million.

That topped a Goldman Sachs earnings estimate of HK$161 million and sales of HK$622 million.

Notice advertising grew 31 per cent, display advertising increased 7 per cent and recruitment advertising rose 4.5 per cent.

The unaudited circulation of the company's flagship South China Morning Post and the Sunday Morning Post grew slightly to 105,000 and 80,600 respectively, from 104,000 and 80,000 a year earlier.

The magazines division reported a 68 per cent increase in net profit on the back of a strong performance by Cosmopolitan and Harper's Bazaar. According to Nielsen Media research, SCMP advertising revenue in the first half climbed 12 per cent from a year earlier, driven by strong luxury brand display advertising. increased page views by 10 per cent from a year earlier after a revamp in April, the company said. However, subscribers to dropped to 18,300 from 20,000 a year earlier.

Analysts said it would be a tougher second half, given that from June 25 it was no longer mandatory for companies to publish their financial results and announcements in newspapers. That move was largely behind the decision of SCMP's English-language competitor Standard to become a free newspaper this month.

Catherine Leung, an analyst at Citigroup, estimated notice revenue could drop 30 per cent year on year in the second half.

According to Nielsen Media, revenue from company notices across the newspaper industry declined 44 per cent from a year earlier to HK$35 million in July and by a similar percentage in June to HK$63 million.

Goldman Sachs analyst James Mitchell said stock market volatility might also hurt SCMP's strong sales of initial public offering announcements, which accounted for about 9 per cent of its total revenue.

The company's recruitment revenue had been underperforming and it faced risks of rising staff and newsprint costs, Ms Leung added.

Mr Mitchell said competition from the free Standard was also expected to hurt SCMP's circulation and advertising revenue.