|HONG KONG, March 31, 2008 – SCMP Group Limited (SEHK: 583) ("the Group") reported a record year with net profit of $548.1 million and recurring operating profit of $397.7 million for the fiscal year ended December 31, 2007, the highest level in the past 7 years. Group businesses benefited from strong economic growth in Hong Kong, the mainland and Macau. Also, a single-minded focus on strengthening the core publishing business and managing costs over the last few years has enabled the Group to take full advantage of the buoyant economy to deliver this year’s strong performance.
"Although the market environment was challenging in 2007," says Kuok Hui Kwong, Executive Director of SCMP Group Limited. "We managed to expand by revamping our major business websites and newspaper design. The positive response from readers and advertisers to these changes reinforced the SCMP brand."
Group revenue increased 3% to $1.25 billion, compared with $1.21 billion in 2006. Net profit attributable to shareholders reached $548.1 million, 62% higher than $338.6 million in 2006.
Newspaper publishing revenues grew 3% and accounted for 84% of Group revenue. Operating profit from principal activities rose 4% to $357.3 million. Boosted by strong consumer spending, a rising stock market and business expansion across most industries, display advertising revenue grew 10%, outperforming the 7% growth in newspaper ad spending in Hong Kong (source: Admango). Recruitment advertising revenue grew 7%, mainly driven by ad volume growth. The recruitment market for junior to middle levels has been very active this year, driving up Jiu Jik and online recruitment advertising revenues by 27% and 35%, respectively. Online advertising revenue rose 79%.
Despite a growth of 7% in the first half, results announcements and other corporate notices revenue dropped 60% following the abolition of mandatory newspaper announcements in the second half of the year. IPO advertising remained strong in 2007 with the Group’s market share increasing from 87% in 2006 to 94% in 2007 and advertising volume was 7% lower than 2006.
The circulation of South China Morning Post and Sunday Morning Post showed a moderate increase of 2% and 1% respectively, with growth in subscriptions, hotel sales and China market most noticeable.
Operating profit at the magazine publishing division rose 30% on revenue growth of 6%. Cosmopolitan and Harper’s Bazaar continued to lead the market despite intense competition for advertising dollars and circulation sales. Operating results of the video film business improved following a restructuring and suspension of operations in Guangzhou. Provisions for asset impairment were made in book publishing resulting in a net loss position. Part of the book publishing operation was suspended in early 2008.
Operating costs before depreciation and amortization increased 3%. Staff costs rose 4% while average newsprint cost rose 1% from US$613 per metric ton in 2006 to US$616 in 2007. Rent and utilities were up 20% or $7.2 million, reflecting the full year impact of the renewal of the office space lease in November 2006.
The Group expects 2008 to be a year with both challenges and opportunities. The sub prime crisis, concerns about an economic recession in the US and its potential impact on the world economy and volatility in the financial markets all give rise to a cautiously optimistic outlook for the year.
The full year impact of the listing rule change and the trend towards eIPO will put pressure on notices advertising revenue in 2008. In view of these changes, the Group plans to increase its online revenues by enhancing its investor relations website SCMPIR.com to drive more page views and advertisers. The Group also seeks to attract more companies’ brand and investor relations advertising by creating more relevant content within the business pages of the newspaper.
"We are glad to have maintained solid revenue and profitability levels in an intensely competitive climate," concludes Kuok. "We expect this trend to continue into the foreseeable future as we continuously adapt to new challenges, just as we have done for many decades."
About SCMP Group Limited
SCMP Group Limited (SEHK: 583) is a leading newspaper and magazine publisher in Asia. Its flagship publication, South China Morning Post, is the leading English language newspaper in Hong Kong and has the city’s most affluent and influential readership. Other publication titles of the group include the Sunday Morning Post, the Chinese editions of Cosmopolitan, Harper’s Bazaar, CosmoGirl! and Automobile magazines.
To learn more about the SCMP Group, go to scmpgroup.com.
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