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

Yesterday evening, Singapore Post Limited (SGX: S08) reported its earnings for the quarter and fiscal year ending 31 March 2016 (FY15/16).

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 services. 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 some of Singapore Post’s latest financial figures:

  1. Overall revenue for the fourth-quarter soared 27.7% year-on-year to $317.6 million. For FY15/16, Singapore Post’s revenue was $1.15 billion, up 25.2% from a year ago.
  2. Profit attributable to shareholders came in at $105.4 million, almost tripling the S$35.6 million seen in the same quarter a year ago. For the full fiscal year, profit attributable to shareholders was $249 million, up 58% year-on-year.
  3. Underlying profit (which adjusts for one-off items) for the fourth-quarter of FY15/16 fell by 20.1% to $31.8 million. For FY15/16, underlying net profit was down 4% to $153 million.
  4. Diluted earnings per share (EPS) for the fourth-quarter was 4.35 cents, up significantly from the 1.48 cents recorded a year ago. For the full fiscal year, diluted EPS was 10.83 cents, a 59% jump from FY14/15.
  5. For the reporting quarter, cash flow from operations came in at $59.4 million with capital expenditure weighing in at $49.8 million. The combination meant that the logistics and mail outfit recorded positive free cash flow of $9.6 million, which is a significant decline from the free cash flow of $87.7 million seen a year ago ($121.1 million in cash flow from operations and $33.4 million in capex). For the full year, Singapore Post recorded $141 million in negative free cash flow – this is again a big drop from the positive $130.6 million logged in the previous fiscal year.
  6. As of 31 March 2016, Singapore Post had $126.6 million in cash and equivalents and borrowings of about $280.3 million. This is a deterioration from the end of FY14/15 when the company had $584.1 million in cash and equivalents and borrowings of $238.3 million.

To sum it up, Singapore Post’s top-line growth continues to be strong. Unfortunately, its underlying profit did not increase alongside its revenue. The postal company did generate positive free cash flow for the quarter, but it was free cash flow negative over the full fiscal year. As an additional negative sign, Singapore Post also slipped into a net debt position over the past year.

The board of directors had recommended a final dividend of 2.5 cents per share, unchanged from a year ago. This adds up to a full year dividend of 7 cents per share for FY15/16, again unchanged from FY14/15.

Operational highlights

The Retail and eCommerce segment led the way for the reporting quarter, with revenue increasing over 140% to $58 million. For the full fiscal year, revenue was up almost 75% year-on-year to $160.7 million. The stupendous gain in sales was largely due to the consolidation of a new acquisition, TradeGlobal.

The Logistics segment also recorded good gains for the reporting quarter. The segment pitched in with $167.6 million in revenue, up 23% year-on-year. For FY15/16, the Logistics segment revenue was up almost 35% year-on-year to $626 million.

The Mail segment also held its own, dishing out a 3.3% revenue increase over the corresponding quarter last year. Revenue for the Mail segment came in at $127.5 million. For the full fiscal year, the Mail segment sales was almost $500 million.

In terms of operating profit, the Logistics segment was the standout performer. The segment registered an operating profit growth of 75% year-on-year to $11.6 million for FY15/16. Operating profit for the Retail and eCommerce segment lagged, falling nearly 77% year on year to just $2.2 million.

The bulk of operating profit still comes from the traditional Mail segment. The segment’s operating profit held up well, logging in a 2.6% increase to $148 million for the fiscal year.

Mervyn Lim, Singapore Post’s deputy chief executive, had the following comments for the reportingquarter:

“SingPost embarked on a transformation journey more than ten years ago to future-proof our business and we are seeing results. SingPost’s solid postal foundation paved the way for the company to pioneer eCommerce logistics in this part of the world and we successfully pivoted into the US with the completion of the Trade Global and Jagged Peak acquisitions in November 2015 and March 2016 respectively.

As a result of our transformation strategy, Group revenue crossed a significant S$1 billion milestone and our overseas revenue grew to 43.9 per cent.”

Foolish investors should note that there have been questions raised about the corporate governance standards at Singapore Post. The fog of uncertainty may linger for a while, but ultimately it is the business performance that matters.

At its closing price yesterday of $1.59, Singapore Post traded at under 15 times trailing earnings with a trailing dividend yield of 4.4%.

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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.