SingPost revenue increases 16.8 percent, net profit falls 27.9 percent

Feb 15, 2017: Revenue for the third quarter of Singapore Post (SingPost) has rose 16.8 percent to S$369.4 million, with the inclusion of SingPost’s US e-commerce subsidiaries.

Net profit attributable to equity holders decreased 27.9 percent to S$31.4 million, while underlying net profit was down 28.5 per cent. The declines were due to operating losses in the US e-commerce business, costs related to the new Regional e-commerce Logistics Hub, and a fall in domestic mail volumes.

“We are building out our capabilities, broadening and deepening our e-commerce logistics network, to secure the future of SingPost. There are challenges along the journey and it is going to take a number of years for our investments to contribute,” said Mervyn Lim, Covering Group Chief Executive Officer.

Due to the poor performance of TradeGlobal, the Board of SingPost is of the view that there is a risk of significant impairment to TradeGlobal’s carrying value. The Board will also be conducting a review of all the investments of SingPost. Impairments, if any, will be assessed based on the results of the full financial year ending 31 March 2017 and future plans for the businesses.

Postal revenue increased 2.9 percent but operating profit decreased 6.6 percent. Crossborder e-commerce-related deliveries continued to rise, helped by higher volumes from the Alibaba Group. But domestic business letter volumes fell as financial institutions pushed their customers to switch to electronic statements. Operating margins continued to slide as the postal revenue mix shifts towards international mail. Logistics revenue rose 5.6 percent to S$171.3 million, driven by higher e-commerce-related activities at Couriers Please and Quantium Solutions.

Costs related to the Regional e-commerce Logistics Hub and pricing pressures in the e-commerce logistics space, however, caused operating profit to fall from S$12.7 million to S$8.8 million. While the segment is expected to benefit from growing e-commerce trends, the industry faces tight operating margins. As SingPost focuses on increasing volumes on the network, it will take time to derive cost synergies. Consolidation of US subsidiaries TradeGlobal and Jagged Peak saw e-commerce revenue more than double to S$81.1 million. Jagged Peak saw good growth in revenue and operating profit, winning new customers and exceeding targets.

Cincinnati-based TradeGlobal posted an operating loss as higher labour costs were incurred due to worker shortage in the city, and productivity impacted by delays in warehouse automation and the rollout of services for new customers.

Developments at two of its top customers also affected TradeGlobal’s performance: One customer has filed for bankruptcy, while the other has decided to in-source its e-commerce freight operations. TradeGlobal incurred a significant loss instead of a projected profit in the third quarter peak season. It is expected to make a loss for the full year. The business is being restructured to improve its performance. Total expenses of the Group increased 23.3 percent as new subsidiaries were consolidated, resulting in a change in business mix.

For the nine months ended 31 December 2016, revenue rose 22.8 percent to S$1.02 billion, while underlying net profit was down 22.6 percent. e-commerce-related revenues from across the Postal, Logistics and e-commerce segments increased from S$278.1 million to S$515.7 million, making up 50.3 percent of Group revenue in the first nine months of the year. Overseas revenues grew in tandem to make up 51.4 percent of Group revenue, up from 41.9 percent in the same period last year.

For the third quarter of FY 2016/2017, the Board of Directors has declared an interim dividend of 0.5 cent per ordinary share (tax exempt one-tier) to be paid on 9 March 2017.