"The year 2005 was a success," says Nancy Valiente, Managing Director of South China Morning Post Publishers Limited. "The Group’s flagship publication, the South China Morning Post, demonstrated that publishing is very much alive and well. In a year marked by aggressive pricing and circulation wars among local newspapers, SCMP advertising revenue experienced strong growth and circulation showed a modest gain."
Turnover rose 10% to $1.1 billion. Net profit attributable to shareholders reached $246.4 million, compared with $317.1 million in 2004. The 2005 result includes a revaluation surplus of $50.4 million and a provision for asset impairment of $35.7 million. The 2004 result included a one-time gain on the sale of the retailing business of $76.8 million and a revaluation surplus of $18.1 million. The Group declared a final dividend of 10 cents per share for a full year dividend of 15 cents per share.
Core Business Expansion
Boosted by a recovery in consumer spending and solid GDP growth, display advertising revenue rose 13% while classified advertising revenue grew 11%. Advertising rates improved across all products except for business notices, where rates remained on par with 2004. At the same time, weekday circulation showed a 4% and 2% gain in the first and second half, respectively, compared with the same periods in 2004.
Revenue at the magazine publishing division rose 19%, despite a most competitive environment for advertising sales and circulation. The SCMP’s three women’s titles fared well with Cosmopolitan marking a record year in advertising pages sold.
Operating costs and expenses from continuing operations rose 9% to $833.1 million. Staff costs increased 8% and average newsprint cost rose 18% from US$476 to US$563 per metric ton. Staff and newsprint costs made up about half of total expenses.
In November 2005, SCMP increased colour printing capacity with the commissioning of four new full colour printing presses at a cost of $99 million. The additional capacity will meet demand for high yield colour advertising during peak seasons. During the year, SCMP promoted executives and editors into key leadership roles to form a new corporate and editorial strategy. Print and online innovations were delivered. Creative advertising executions provided advertisers with new solutions. SCMP used the strength of its brand to introduce new digital products and services, including podcasting, vidcasting and 3G content syndication.
A leader in product innovation, SCMP.com was the first Asian news website to offer interactive dialogue. Columnists and reporters now interact with readers through "On the Spot" sessions. In addition, SCMP was the first publisher to launch podcasts on MP3 players in Hong Kong.
"The outlook for 2006 seems positive," concludes Valiente. "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."
Valiente points out that the future is not without challenges: "Circulation is under pressure. Readers and advertisers have more choices than ever before. Advertising revenues from business notices are at risk from a pending change in listing rules. Cost pressures from rising newsprint prices, salaries and rent remain a concern. New business development must be pursued with adequate risk management."
SCMP is responding to a changing industry by building an editorial team committed to the highest standards of excellence, enhancing print and online platforms, creating products to provide advertisers with more options to reach an affluent and influential audience and integrating the print and online editorial and advertising sales effort.
About SCMP Group Limited
SCMP Group Limited (SEHK: 583) is the holding company of South China Morning Post Publishers Limited and other subsidiaries engaged mainly in newspaper and magazine publishing. Its flagship publication, South China Morning Post, is the leading English language newspaper in Hong Kong with the 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!, Maxim and Automobile magazines.
To learn more about the SCMP Group, go to scmpgroup.com.
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SCMP Group Limited