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 take some responsibilities for failing to transform the ailing business and revive the fortune of SPH.
Thus, the more sensible approach is to increase the share-based portion of the management salaries and decrease their base salaries to 10%. In doing so, it would at least make the SPH retrenchment more palatable.
Indeed, share price of SPH had plunged from $4.00 in 2014 to $2.70 in 2017. By increasing the link of management salaries to share performance, it would jolt the management and make them more motivated to deliver better results for the company. Of course, many people would argue that such approach would not resolve the problem. After all, the former CEO had already collected nearly $9 million of salaries for the past three years. With such good remuneration, he is probably laughing all the way to the bank and could afford to retire in lavish style. But the same cannot be said for the rank-and-file workers in SPH.
For the rest of SPH staff, they are just humble workers struggling to make both ends meet in Singapore. They don’t draw multiple million salaries like the top management. Furthermore, the prospect is very bleak for those facing the axes. SPH staff who got retrenched would realize it is whole new world out there, with fierce competition from cheap foreign talents. It would take them months, or even years, to find a job. Even if they did manage to secure a job, the salary might not be what they are drawing now. This is sad reality for Singapore employees.
For SPH, at least there are retrenchment benefits for the affected staff. Nonetheless, in today’s context, I am not sure whether the pay-outs are sufficient for the staff to last until they found a new job. For the old-timers who had served SPH for 20 years, the retrenchment compensation would have been substantial and they could take their own sweet time to secure another job. But for those newcomers who got retrenched, the road ahead would be gloomy. It may probably take them at least 2 to 3 months to secure another job given the stiff competition from foreign talents in the market.
The sobering lesson learned from this SPH retrenchment is that you are never too far away from being made redundant. In the midst of your daily work routine, do make an effort to assess your market value and understand whether your skillsets are in demand. The problem with many Singapore employees is that we are too focused in making money for the companies we work in that we tend to forget investing in ourselves. Even though many organizations are reluctant to spend in staff training, it does not mean we should not use our own monies to acquire new knowledge. Very often, employees only realize that their experiences are obsolete when they are being made redundant.
Apart from unlearning and relearning, always make the effort to expand your network. In times of difficulty, you would realize that you are able to find jobs through your network. Many people dismiss network is a myth and that it is virtually impossible to find jobs through network referrals. Based on my experience, this is not true because I have previously found a job through my network when I resigned from my ex-company a decade ago. My wife had also secured a job through networking last year. Thus, never underestimate the power of networking. In this society, words of mouth and your reputation often precede your abilities.
In conclusion, the SPH retrenchments only vindicate that the media giant has not figured out how to address the sticky issue of technology disruptions. In the good old days, SPH can seduce advertisers by bragging about the printed media subscription. But in today’s context, with internet, such approach would not be feasible. Just picture this: beyond Singapore, how many print copies of The Straits Times can you find in overseas? With digital, you can access online content anywhere in the world and at any time. Obviously, most companies would prefer digital advertising because of the speed and global reach.
In addition, the old model of advertising in newspapers is also becoming obsolete. Just imagine yourself as a homeowner selling your house. If you advertised in the Classified section of The Straits Times, what do you think of the chances of prospective buyers seeing your tiny little advertisment column? With so many property digital platforms, there are various ways to target your advertisements and for you to track and manage your advertisements. Thus, with online technologies, advertisers can more effectively target their marketing efforts to reach out to the right audience. With newspaper, the marketing effectiveness is limited. And advertisement revenue is the bread and butter for media company like SPH.
Previously, I wrote that SPH would become a dinosaur in due course. Many readers dismissed my article. My stance remains the same because SPH management has not proved to me that the company can re-invent itself in today’s digital world. Furthermore, I cannot accept the fact that the management continued to reward themselves with multi-million dollars salaries even when they produced declining business results over the years. In view of this, I would not be investing in nor monitoring this counter for the next five years. Enjoy the ride.
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- SPH to retrench staff
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