SPH retrenchments

Festive season is only two months away but for many SPH staff, there is nothing to look forward to nor cheer about this year. Within a month of taking over as the new CEO, Ng Yat Chung announced the shocking decision to accelerate the culling of 10% of its workforce. Originally, the 2016 plan was to carry out the lay-offs over two years. Now, the decision is to bite the bullet and complete the SPH retrenchments by end of this year.

The SPH retrenchments come at a time when the media giant is struggling big time to adapt to the disruptions brought forth by technology. In the latest full year financial report, SPH reported net profit of $350.1 million, 32% higher than last year. But upon delving deeper into the financial results, the performance of the core business (the media segment) was not so rosy after all.

Operating revenue declined 8.2% year-on-year to $1.03 billion. But of more alarm was that the media segment clocked in the worst performance among the business divisions for the operating revenue – a drop of 13%. In terms of profit, the media segment also registered a decrease of a whopping 42% to $114 million due to lower income from the advertisements. If not for the fair value gain on the investment properties and the divestment gain of a joint venture, the full year financial performance would have been devastating. Probably because of this, the new CEO was prompted to take actions to rein in staff cost. And retrenchment often offers the best route to cost saving for a company.

According to reports, about 130 SPH staff were retrenched last week and 100 would be retrenched by end of this year. The SPH retrenchment exercise is expected to incur costs of about $13 million for the current quarter. From the perspective of an investor, I have no issue with companies retrenching staff to save costs. But what I find it unacceptable is that the top management continued to receive top dollar in recent years despite producing consistently dismal performance.

For FY2014, former CEO Alan Chan received almost $3 million salary and annual aggregate remuneration paid to the top five key management personnel (excluding the CEO) for FY 2014 was $5,445,000.  In FY2015, Alan Chan continued to receive fat salary of $2.92 million while annual aggregate remuneration paid to the top five key management personnel (excluding the CE0) for FY2015 was S$5,310,000. Then in FY2016, Alan Chan continued to collect huge salary of $2.91 million while annual aggregate remuneration paid to the top five key management personnel (excluding the CEO) for FY2016 was S$5,329,000.

In my point of view, there is simply no justification for the decision to reward top management with such high salaries in spite of declining business results. Since 2014, SPH net readership has been dropping like flies and total revenue had decreased from $1.23 billion in FY2014 to $1.03 billion in FY2017. With such terrible results, it is inexplicable to me that the management continued to draw such fat salaries. To a large extent, the management ought to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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