Singapore Post Limited’s Latest Earnings: What Investors Should Know

Singapore Post Limited (SGX: S08) reported its fiscal fourth-quarter earnings yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

As a quick introduction, the ever-present Singapore Post is primarily in the business of providing mail and logistics services in Singapore – most Singaporeans should be familiar with the company’s namesake mail service – and the Asia Pacific region. The company’s business can be organized into three major segments: Mail; Logistics; and Retail & eCommerce

You can read more about the company here.

Financial highlights

Here’s a rundown on Singapore Post’s latest financial figures:

  1. Overall revenue for the fourth quarter was $248 million, a nice 28.7% increase compared to the same quarter last year. For the full financial year ended 31 March 2015 (FY2014/15), Singapore Post ended up with revenue of $919.6 million, a good 12% higher than the last financial year’s revenue of $821 million.
  2. That said, quarterly profit for the firm was down a hefty 51.6% to $38.5 million when compared with last year’s quarter. For the whole of FY2014/15, profit came in at $159.6 million, down 17.6% from a year ago.
  3. Underlying profit (which adjusts for one-off items and gains and losses on sale or revaluation of investment, property, plant and equipment) for FY2014/15 was up 5.2% year over year to $157.2 million.
  4. Singapore Post’s earnings per share (EPS) for the fourth quarter sank by nearly 60% from 3.975 cents in the fourth quarter of FY2013/14 to 1.614 cents. FY2014/15’s annual EPS was 6.812 cents, which represented a 27% fall from the preceding financial year’s EPS of 9.293 cents.
  5. For the full year, cash flow from operations came in at $235 million with capital expenditures clocking in at $104.4 million. The lower capex gave the logistics outfit $130.6 million in positive free cash flow. In the previous year, Singapore Post had clocked $241.8 million in operating cash flow, $37.8 million in capital expenditures, and thus $204 million in free cash flow.
  6. As of 31 March 2015, the company had $584.1 million in cash and equivalents and borrowings of $238.3 million. This is a nice improvement over a year ago when Singapore Post had (figures are restated) $404 million in cash and equivalents and $234.1 million in total debt.

In short, Singapore Post ended FY2014/15 with a nice uptick in revenue for the reporting quarter. The company was also free cash flow positive for the year and maintains a solid balance sheet with more cash than debt.

That said, the gain in its underlying profit was more modest when compared to its revenue increase.

As my colleague Stanley Lim noted before, Singapore Post has not been able to grow its underlying profits at the same rate as its revenue. This trend certainly bears watching as the company navigates through the potential disruption of its mail business.

A final dividend of 2.5 cents per share was also recommended by the company’s board of directors, unchanged from the previous year. This adds up to an annual dividend payout of 6.25 cents per share for FY2014/15, also unchanged from a year ago.

Operational highlights

The majority of Singapore Post’s revenue gain for FY2014/15 came from its logistics business segment. The logistics segment ended the year with $387.8million in revenue, up 26.1% compared to the previous financial year. The Retail and eCommerce segment also saw a 6.2% uptick in revenue to $64.2 million. Finally, the mail segment had moved up at a snail’s pace (pun intended) with its revenue inching 2.6% higher to $467.6 million

The proceeds from AliBaba’s investment in Singapore Post is earmarked for capital expenditures such as the development of the eCommerce Logistics Hub, upgrade of information technology systems, and investments (including mergers and acquisitions). For FY2014/15, Singapore Post has made several acquisitions including Couriers Please Holdings, The Store House, F.S. Mackenzie, and Famous Pacific Shipping (NZ) Limited.

Dr. Wolfgang Baier, Singapore Post’s Chief Executive Officer, commented in the firm’s earnings release:

“These results demonstrate how our efforts to transform ourselves into an eCommerce logistics leader is progressing. Our logistics business has grown 26.1 per cent year-on-year and such healthy rates of growth will cushion our declining mail revenues. We are going to keep up our investments to build our regional network and eCommerce capability and by doing this, we are reinventing ourselves. Our roots in mail and parcels give us the advantage of being able to sustain high service standards. This puts us where we can serve the needs of tomorrow’s customers in the fast moving world of eCommerce and online transactions.

The pace of innovation driven by global ecommerce mega-trends will only intensify. By building our international network and transforming the mindset of everyone at SingPost is how we will create long-term value for our customers and our shareholders.”

Foolish take away

At its closing price yesterday of $1.91, Singapore Post traded at around 28 times trailing earnings with a historical dividend yield of 3.3% (based on its 6.25 cents per share dividend for FY2014/15).

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.