Embattled Next Digital, owner of Hong Kong newspaper Apple Daily, to sell Taiwan property to relieve financial burdens

Hong Kong media giant Next Digital said it will reveal details of the sale of a property it owns in Taiwan after it suspended trading of its shares on Friday, in a probable sign of the financial distress faced by the struggling company.

Next Digital halted the trading of its shares at 3.27pm on Friday pending an announcement related to “a possible very substantial disposal of the company”, it said in a statement released by the Hong Kong stock exchange.

The company owns the Apple Daily, a newspaper published in Hong Kong and Taiwan known for its pro-democracy stance and lively reporting style. It also owns news and lifestyle magazine brands Next Megazine and Eat & Travel Weekly.

HK$500 million sale of Next Digital magazine business collapses

Chief executive Cheung Kim-hung told the Post the proceeds of the sale will be used as “general capital”, without providing further detail.

The sale may reflect the weight of the financial burdens on the loss-making company, as digital and social media continues to disrupt the traditional media industry in Asia.

“It’s very obvious that the property sale is driven by the company’s debt burdens,” said Kenny Tang Sing-hing, chief executive of Jun Yang Securities in Hong Kong.

Attempts by Next Digital to expand its online platform have only added to its capital expenditure and generated little return, he added.

“It has not found a business model that can turn things around,” said Tang.

Hong Kong newspaper Apple Daily considering paywall for online content, CEO says

The company recorded a net loss in the 2017-2018 financial year of HK$476 million (US$61 million), a third consecutive annual loss and wider by 21 per cent than the HK$394 million dropped a year earlier.

This was a result of “poor market sentiment and cautious advertisement spending” as well as “keen global competition of online programmatic advertising”, the company said in an annual report released in June.

A shift in readers’ interests towards digital platforms “has caused significant downturn in the traditional print media industry” in Hong Kong and Taiwan in recent years, the company said.

Total advertising expenditure in Taiwan declined 5 per cent for newspapers and 19 per cent for magazines during 2017, according to the report.

Next Digital’s gearing ratio, which measures how financially leveraged the company is, more than doubled to 18.7 per cent last year from 9.1 per cent two years ago.

It took out bank loans worth HK$485 million in 2018 that must be repaid over the next five years, up from the HK$461 million in 2017.

To cope with the mounting financial pressure, Next Digital has been mulling the idea of introducing a paywall and charging readers for its online content.

Shares of the company closed 0.9 per cent higher at HK$0.23 before the trading halt on Friday.

With additional reporting by Naomi Ng

This article was published by South China Morning Post. Click here to read the original.