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

Singapore Post Limited (SGX: S08) reported its second-quarter earnings for its fiscal year ending 31 March 2017 (FY16/17) last Friday. The reporting period was for 1 July 2016 to 30 September 2016.

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: Postal, Logistics, and eCommerce.

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

Financial highlights

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

  1. Overall revenue for the second-quarter leapt 22.3% year-on-year to $321.7 million.
  2. Profit attributable to shareholders came in at $31.4 million, down 41.2% compared to the same quarter a year ago. The profit decrease was partly due to tougher comparisons with the previous fiscal year’s second-quarter which had one-off gains.
  3. Underlying profit (which adjusts for one-off items) for the second-quarter of FY16/17 was down 28% year-on-year to $27.1 million.
  4. Diluted earnings per share (EPS) for the reporting quarter saw a 44.3% drop from 2.30 cents in FY15/16’s second-quarter to 1.28 cents.
  5. For FY16/17’s second-quarter, cash flow from operations came in at $21.3 million with capital expenditure weighing in at $46.5 million. The hefty capex meant that the logistics outfit turned in $25.2 million in negative free cash flow. But, this is still an improvement from a year ago when free cash flow was a negative $132.4 million (cash flow from operations of a negative $37.3 million and capex of $95.1 million)
  6. As of 30 September 2016, Singapore Post has $158 million in cash and equivalents and borrowings of about $406.4 million. This compares with the $326.6 million in cash and equivalents and borrowings of about $238.8 million seen a year ago.

In all, it’s another quarter of top-line growth for Singapore Post. Unfortunately, its underlying profit did not increase alongside revenue. Singapore Post also posted negative free cash flow and saw its balance sheet go from a net cash position a year ago to a net debt position in the reporting quarter.

An interim dividend of $0.01 per share for the reporting quarter was also recommended by Singapore Post’s board of directors. This is a decline of 33% from a year ago when it paid out $0.015 per share.

The dividend cut reflected the change in the company’s dividend policy. Simon Isreal, Singapore Post’s Chairman, said:

“We said at our 2016 AGM [annual general meeting] in July that we would be reviewing our dividend policy. We have revised SingPost’s dividend policy from an absolute amount to one based on a pay-out ratio ranging between 60 per cent and 80 per cent of underlying net profit for each financial year.”

Operational highlights

The majority of Singapore Post’s revenue gain for the second-quarter of FY16/17 came from its eCommerce business segment. The segment recorded $64 million in revenue, up almost 788% year-on-year. This was due to the acquisitions of TradeGlobal and Jagged Peak.

The Logistics segment’s revenue stalled at $154.1 million, a dip of 1.2% year-on-year. The Postal segment held up a little better, recording a 0.8% increase in revenue to $126.9 million.

There wasn’t a lot of good news at the operating profit front as well.

The Logistics segment registered a 35.6% decline in operating profit compared to a year ago. Furthermore, the Postal segment also recorded a 10.6% decline in operating profit. Elsewhere, losses at the eCommerce segment widened from $2.1 million a year ago to $6.8 million in the reporting quarter. Operating profit under Property and Others was also down around 61% due to the redevelopment of the SPC Retail Mall.   

Mervyn Lim, Singapore Post’s covering chief executive, had the following comments for the recent quarter and the company’s future:

“We are taking a long term view as we build scale for future profitability. While financial benefits will not be immediate, initiatives such as the Regional eCommerce Logistics Hub that was opened on 1 November 2016, as well as our deepening collaboration with Alibaba, will strengthen our eCommerce logistics network for future growth.”

At its closing share price of $1.65 last Friday, Singapore Post traded at 17.7 times trailing earnings with a trailing dividend yield of 3.9%.

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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.