The Star stable in challenging times

In an interview with StarBiz after the third-quarter results were released, Star Publications (M) Bhd executive deputy chairman Datuk Clement Hii speaks to JAGDEV SINGH SIDHU extensively on the company’s strong financial health and it's future direction and how it rises above the political challenges

StarBiz: You have finally agreed to grant your own paper an interview.

Datuk Clement Hii: The last time I did an interview with The Edge, you guys complained about being left out. The last few days several journalists have been hounding me for comments. I thought I may as well grant this interview to set the record straight.

Has the MCA crisis affected The Star as a business entity?

We have to be cognizant of the fact that Huaren Holdings, our largest shareholder, is the investment arm of the MCA. As major shareholders, they are naturally concerned about the progress of the company.

The primary goal of the management is of course to preserve and enhance shareholder value by ensuring a steady return. As a public-listed company, Star Publications has a proper governance structure and all decisions made by the board and top management will be done with maximising shareholder value in mind. This will continue to be the overriding factor in all decisions undertaken by the company.

Are you pleased with the latest company results?

The third-quarter results have just been released. Despite the challenging times, The Star has seen stability and performed comparatively better than its peers.

For instance, when I came in we had RM621mil in cash or cash equivalent. Now, we have about RM750mil in cash or cash equivalent. The company now has the highest cash reserves in its entire history. This comes about because of a new prudent purchasing policy, cost-cutting measures and careful utilisation of cash resources.

I wish the poison pen writers could spare time to read the company’s financial results.

How would you describe the last quarter’s financial performance?

The last quarter’s results compared to a year ago were naturally down as the economy, while recovering, still remains sluggish. The good news for us is that advertising revenue on a quarter-on-quarter basis is improving and the hope is that the trend will follow through into the final quarter of the year.

The final quarter has traditionally been the bumper period for the Star. There has also been some stability from the second quarter into the third quarter. The decline in profit seen in the first quarter of the year has been arrested and from here on that should improve given our active management of newsprint supply, the huge drop in global newsprint prices and our engagements with handling staff costs.

What does the company plan to do with its cash reserves?

The huge cash reserves must be managed carefully. Being primarily a publisher, the financial muscle has served us well in ensuring operations remain smooth. The extra cash also enables us to make acquisitions and undertake expansion to widen our future revenue and income base.

But such plans will be thoroughly examined and scrutinised; we will squeeze every drop of profit from every ringgit we invest. Our healthy cash position will also come in handy as it gives us the option of redeeming our bonds due next year should we decide not to rollover our debt obligation.

There’s also the option of bumping up dividends to reward our loyal shareholders but of course, that’s a decision for the board to evaluate.

How have the shareholders of the Star, including Huaren Holdings, benefited from the profits made by the Star?

For 2009, we have paid out a total of RM126mil in cash dividends, a substantial portion of which went to Huaren Holdings. Our dividend policy shall continue to be consistent in relation with our overall performance.

The revenue for the Star has grown but so has expenses. Are profits going to be hurt?

The world over, publishers have been badly bruised by the economic turmoil, which has significantly crimped adspend. In some cases that has led to closures or unprecedented cost cutting by long established newspapers in the Western world.

Here in Malaysia, we are relatively more fortunate as we have escaped the worst of the global recession but did not altogether dodge its consequences.

The industry, whether print or electronic, suffered in the first quarter but is now seeing an uptick as optimism returns and with that, consumer and business confidence.

Revenue is expected to grow as advertisers regain their composure from the recession. The signs are already there and has become more pronounced in recent months. While top-line growth is crucial, it has to be matched by cost containment. We are already tackling that in terms of newsprint and staff.

Newsprint prices have dramatically plunged since the start of the year and have only recently bounced off multi-year lows.

The lower cost of paper will alleviate cost pressures in the coming quarters. As for staff cost, a reduction in headcount plus other cost-cutting initiatives are helping but as the economy expands and as we roll out our expansion plans, that strategy will need to be reviewed.

As a result of these measures, plus a concerted effort to boost sales, market share and prudent cost management, we expect the group to achieve a satisfactory set of results this year, despite the economic challenges.

When you were appointed executive deputy chairman of the Star, there were a number of things you wanted to implement and change in the organisation. How is that progressing and what sort of productivity or profit gains have you seen?

Coming into any job during a recession is tough. I wish the MCA politicians and critics understand that. It’s tougher still when it involves an industry that is highly correlated to economic growth. But serious decisions had to be made, some of which were unpopular as it required a change in the mindset of the employees, such as the introduction of Key Performance Indicators. KPIs are crucial in efforts to raise the bar on future productivity.

Previously, staff incentives such as ex gratia were paid out across-the-board based on the company’s performance and not individual performance. We’ve changed that. We have undertaken a system that will reward and incentivise those who have performed well based on both the company and the individual’s performance. This will, in the long run, boost productivity. This should send a strong message that we will reward hard work and diligence. It is also a fairer system.

The Star has embarked on multimedia more aggressively this year. Have tangible benefits flowed in as a result?

The Star has benefited from the first mover advantage in the sphere of the Internet; we were the first English newspaper to have an online edition. The viewership online has grown over the years to an average 55 million page views a month.

Our online presence is significant; the Star is the third most visited Malaysian website in the country. Even with such accolades, there is still room for more work. Our number one priority is to monetise such huge online numbers.

We have also managed to get MSC status for three of our companies. These companies are involved in the development and management of various Internet portals and the MSC status will help in terms of achieving significant tax savings.

Our roll-out plan has already begun. The Daily Chilli is a representation of what we intend to accomplish and I must say that the portal is off to a great and exciting start. It has generated two million page views already since its debut just four weeks ago. We have also just launched a new property portal and a jobs portal is in the works.

How are the company’s other subsidiaries faring, namely, Cityneon Holdings in Singapore and the radio business?

Cityneon is a divergence from our bread-and-butter publishing operations and its scale of contribution to the company is not significant as yet. Having said that, its order-book has doubled to S$110mil of late.

The company has exciting plans of its own and we are waiting to see how the event management company steers its future.

The radio industry registered its strongest growth for the year in September as advertising revenue grew nearly 18% year-on-year. The strong growth of the radio business is not only a hedge for us in the publishing world but more realistically, a source of revenue as we diversify our media presence into the online world.

How’s the circulation and what is the company doing to ensure newspaper readership and sales remain stable?

Globally, English newspapers are grappling with sliding circulation figures. It is the same here in Malaysia. Our challenge is to keep a lid on the slide as much as we possibly can while working out strategies to complement our print business by widening the media platform, for example, by tapping the Internet space.

We are starting a Sarawak edition and, at a later stage, a Sabah edition. The circulation figures will increase with these initiatives.

It is also important to refresh our content whenever we deem it fit. We are currently in the midst of doing so. Exclusive stories plus our StarProbes that expose the underbelly of key issues have captured readers’ interest.

There is also enormous potential for cross-promotion and cross-selling between the online and print spheres. So rest assured that we will not leave any stones unturned as we wrestle with the global tide of change affecting the newspaper industry.

This has no doubt been a tough year for the company. What is the outlook for 2010?

We believe that in terms of the economy, 2010 will be a better year. Malaysia would have emerged from its recession and it is projected that the economy will grow 2% and 3% next year.

Higher economic growth will translate to higher adspend and as The Star commands a large share of the adex market, I expect that trend to continue given the improvements we have undertaken to make The Star a fresher and better read. Apart from rising advertising revenue, cost too will likely be reduced as newsprint prices come down.

But we are not stopping there. Our investments and expansion into the Internet will gather speed built on the momentum already established by the Daily Chilli and our various online portals.

But such investments will not be done on a piece-meal basis; more resources will be ploughed back to tap the synergistic benefits of these ventures. But we are mindful of the costs involved in building an impactful online presence.

Nonetheless, the Star is keen to monetise its online ventures by a greater degree, going forward, by tapping into its existing large database.

We are also acutely aware that the vernacular newspapers, especially the Malay papers, have made huge strides in circulation. In this light, we own a Malay newspaper licence and plan to gingerly test the market to see how best we can reap benefits from such a venture.

Our successful MStar is only the tip of our plans.

Related Stories: On politics and boardroom issues

STAR :  [Stock Watch]  [News]For latest Bursa Malaysia indices, charts and other information click here

For latest Bursa Malaysia indices, charts and other information click here

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Next In Business News

SC issues new guidelines, technical notes on investment advisory
Sapura Energy returns to black in 3Q, posts net profit of RM10.18mil
Mohammed Che Hussein to retire as Gamuda chairman
Mitrajaya wins RM265.87mil construction contract
Benjamin Teo, now substantial shareholder of Paramount
Ringgit ends slightly lower vs greenback ahead of FOMC meeting
Propel Global to acquire 51% stake in Best Wide Engineering for RM7.82mil
Bermaz Auto reports more than two-fold profit jump in 2Q
Sime Darby Motors appointed exclusive BYD EV distributor
FBM KLCI reverses gains, falls 0.95 points

Others Also Read