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Singapore Post Full Year Results: Mailman’s Here with Higher Sales but Lower Profit

Ser Jing - Singapore Post Full Year Results, Mailman's Here with Higher Sales but Lower Profit (pic)Singapore Post (SGX: S08) released its full year results earlier this morning and here are some of the headline numbers: annual net profit had declined by 4% from $142.0m last year to $136.5m even as revenue surged by 14% from $578.5m to $658.8m. If one-off items were stripped away from the company’s income statements for both last and this year, underlying net profit would have stepped up by 4% from $135.4m to $141m.

Revenue growth for the company was propelled by newly acquired subsidiaries, Novation Solutions (a digital document production firm), General Storage (provider of self-storage facilities) and Famous Holdings (sea-freight consolidator).

But, rising costs outpaced the growth in top-line for SingPost. Total annual expenses for the company rose 19% year-on-year from $459.3m to $546.9m due to inflationary cost increases in Singapore and continued investments to ‘enhance service quality and productivity and growth and consolidation of new businesses”.

Rising costs have been a familiar theme for investors in SingPost as the company’s annual sales have grown a total of 25% from March 2010’s $525.5m to $658.8m now, but profits have actually declined by 17% from $165.0m to $136.5m.

Some notable difficulties in SingPost’s business segments appeared in the Mail division. The company saw six consecutive quarters of declining domestic mail volume which culminated in its first ever annual decrease (by 2.6%) in letter mail volumes. The company’s Chief Executive Officer, Dr Wolfgang Baier commented that the ‘global postal industry is under tremendous pressure. SingPost is also facing a rapidly changing and challenging postal landscape amid rising costs”.

Regarding some future outlook, SingPost had announced a $100m investment over the next few years to improve ‘inclusivity, productivity and service upgrade”. The company will also spend an additional $45m to upgrade its mail-sorting infrastructure to handle the changing mail landscape which has seen growth in packages and declines in letters.

Dr Baier believes that the upgrade in postal infrastructure “will give SingPost capacity to process mail items faster, enchancing service quality and productivity in the process. This investment will also prepare us for a new economy with fewer letters and more packages.”

Regarding the company’s spending on investments and transformation efforts to prepare for a digital generation, Dr Baier added that SingPost ‘have been prudent in spending only in areas that contribute directly to either service improvement or revenue growth’ and that “despite the industry challenges, SingPost’s transformation is aimed at ensuring that we continue to stay ahead and serve Singapore well.”

SingPost has recommended a final dividend of 2.5 cents per share which will bring the full-year payout to 6.25 cents per share. Last year’s annual payout was the same at 6.25 cents. The company’s shares opened the day’s trading session at $1.29, unchanged from last Friday’s close. At that price, shares of SingPost are selling for 20 times earnings and have a dividend yield of 4.8%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.