Singapore Post Limited’s Latest Earnings: 9 Things Investors Should Learn From Management

Singapore Post Limited (SGX: S08) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations.

In early November this year, Singapore Post released its second quarter earnings for its fiscal year ending 31 March 2017 (FY16/17). I had spent time going through the webcast for the earnings presentation and noted down nine useful things.

Singapore Post should need no introduction given that it runs postal services here in Singapore. But beyond that, the company also provides logistics and eCommerce-related services.

With that, here are my notes:

  1. Singapore Post’s covering chief executive and chief financial officer, Mervyn Lim, highlighted a few key points for the quarter in his opening speech. He said that revenue rose 22.3% year-on-year, but net profit fell by 41.2%. The main reason for the lower profit were one-off divestment gains recorded last year.
  2. However, underlying profit – a measure of recurring earnings – was also down by almost 28%. Lim said this happened for a few reasons, including higher costs in the eCommerce business, costs related to the completion of the company’s new Regional eCommerce Logistics Hub, loss of rental income from the SPC Mall due to its redevelopment, and lower domestic letter mail volumes.
  3. For the Postal segment, revenue rose 0.8% due to growth in international mail. Lim said that domestic mail had declined, offsetting some of the international gains. The segment’s operating profit was down more than 10% due to the domestic mail volume decline and the deconsolidation of subsidiaries due to divestments.
  4. The Logistics segment’s revenue declined 1.2% due to lower revenue amidst the global economic slowdown. Operating profit was down almost 36% due to the completion of the Regional eCommerce Logistics Hub and pricing pressures.
  5. Elsewhere, the eCommerce segment’s sales are up due to the TradeGlobal and Jagged Peak acquisitions. However, operating losses widened due to tight competition for season fulfillment labour.
  6. For the first half of FY16/17, Singapore Post’s operating cash flow improved to S$105 million, but the cash used for investing activities rose in tandem. Borrowings also increased to S$406.4 million. Lim added that Singapore Post’s interest coverage ratio was 26.6 times and its net debt to equity ratio sat at 21% as of 30 September 2016.
  7. Singapore Post also shared information on its revenue split between eCommerce revenue and non-eCommerce revenue. For the first half of the fiscal year, the firm recorded S$319.5 million in eCommerce-related revenue, which is nearly 49% of Singapore Post’s total revenue.
  8. From the S$319.5 million in eCommerce revenue recorded in the first half of FY16/17, the Mail segment accounted for 30% of the pie. The Logistics segment made up 29%, while the eCommerce segment contributed 40%.
  9. From a geographical standpoint, overseas revenue made up 50.8% of Singapore Post’s total sales in the first half of FY16/17. US revenue, powered by Jagged Peak and TradeGlobal, was 34% of overseas sales. Australia came in second place with 28% of overseas sales. This was mainly from Couriers Please. Within the overseas pie, Asia accounted for 27% while Europe put up 11%.

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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.