Singapore Post Limited’s Latest Earnings

Singapore Post Limited (SGX: S08) reported its fiscal third-quarter earnings for the year ending 31 March 2016 (FY15/16) yesterday. The reporting period was for 1 October 2015 to 31 December 2015.

As a quick introduction, Singapore Post is primarily in the business of providing mail and logistics services. Most Singaporeans should be familiar with the company’s namesake mail service. Its business is currently organized into three major segments: Mail, Logistics, and Retail & eCommerce.

You can read more about the company in here or catch up with the results from its previous quarter here.

Financial highlights

The following’s a quick take on Singapore Post’s latest financial figures:

  1. Overall revenue for the third-quarter soared 32% year-on-year to $316.2 million.
  2. Profit attributable to shareholders came in at $43.5 million, barely changed compared to the same quarter a year ago.
  3. Underlying profit (which adjusts for one-off items) for the third-quarter of FY15/16 rose 0.7% year on on year to $43.9 million.
  4. Earnings per share (EPS) for the reporting quarter was 1.84 cents, unchanged from the same quarter a year ago.
  5. For the reporting quarter, cash flow from operations came in at $50 million with capital expenditures weighing in at $59.2 million. Unfortunately, the higher capex sent the logistics outfit into negative free cash flow territory to the tune of $9.2 million. This is similar to the same quarter a year ago when free cash flow was a negative $3.7 million (cash flow from operations of $41.7 million and capex of $45.4 million).
  6. As of 31 December 2015, Singapore Post had $185.1 million in cash and equivalents and borrowings of about $361.1 million. This is a deterioration from the $534.1 million in cash and equivalents and borrowings of about $235.5 million seen a year ago.

Singapore Post’s top-line growth has been stupendous again. But its underlying profit did not increase alongside its sales growth. Furthermore, the postal company generated negative free cash flow and had slipped into a net debt position. It’s worth noting that Singapore Post was still in a net cash position as of 30 September 2015.

Nonetheless, the company’s board of directors had recommended an interim dividend of 1.5 cents per share for the quarter, a 20% increase from a year ago. The previous two quarters in the current fiscal year have also seen Singapore Post dish out an interim dividend of 1.5 cents per share each. Singapore Post has projected a full year dividend of 7 cents per share for FY15/16.

Operational highlights

The Logistics segment led the way again in revenue gain for the reporting quarter. The segment recorded $162.2 million in revenue, soaring 32.9% year-on-year.

The Retail & eCommerce segment was no slouch either, with revenue more than doubling from $22.9 million a year ago to $54.5 million in the reporting quarter. The stupendous gain in sales was largely due to the consolidation of a new acquisition, TradeGlobal (acquired in November 2015).

The Mail segment did all right this time around, eking out a 0.4% revenue increase over the corresponding quarter last year. Revenue for the Mail segment came in at $130.6 million.

In terms of operating profit, the Logistics and Retail & eCommerce segments were the standout performers. The former registered an operating profit growth of 74.7% year-on-year while the latter registered a solid 138.9% jump. The Mail segment was the laggard, logging in a 2.5% increase in operating profit.

Mervyn Lim, Singapore Post’s Deputy Chief Executive Officer (as a reminder Wolfgang Baier had resigned as the company’s chief executive in December 2015 and is currently supporting a transition period up till June 2016), had the following comments for the recent quarter:

“We are realising the potential of our transformation into the global eCommerce logistics space with more scale and synergies from integration. Our transformation is showing in our financial results, which reflect how SingPost is on a new growth trajectory. The investments we made in the last few years are driving up both top and bottom line growth, with Group revenue up 24 per cent and net profit, 18 per cent.

With the integration of these acquisitions into existing operations, we can expect further synergies and expansion of our eCommerce business as we provide retail brands with easy one-stop access to eCommerce markets in the US, Europe, China and the rest of the Asia Pacific region.”

Foolish investors should note that there have been questions raised about the corporate governance standards at Singapore Post. So, the fog of uncertainty may linger for a while.

Foolish take-away

At its closing price yesterday of $1.35, Singapore Post traded at 17 times trailing earnings and has a trailing dividend yield of 5.2%.

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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.