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Singapore Post Limited’s Latest Earnings: Sinking into A Loss While Dividend Is Halved

Last Friday, Singapore Post Limited (SGX: S08) reported its fourth quarter and full year earnings for its fiscal year ended 31 March 2017 (FY16/17).

As a quick background, Singapore Post is in the business of providing postal and logistics services. Most Singaporeans should be familiar with the company’s namesake mail service. The firm’s three business segments are postal, logistics, and eCommerce.

You can catch up with the results from the company’s previous quarter here.

Financial highlights

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

1. Revenue for the fourth quarter was up 2% year-on-year to $324 million. For FY16/17, Singapore Post’s revenue was $1.35 billion, up 17.1%.

2. Singapore Post sunk into a loss of $65.2 million in the reporting quarter, a stark contrast with the profit of $105 million made in FY15/16’s fourth quarter. For the full fiscal year, profit attributable to shareholders was $58.4 million, down almost 80% year-on-year.

3. Underlying profit (which adjusts for one-off items) for the fourth quarter of FY16/17 fell 32.1% year-on-year to $31.8 million. For FY16/17, underlying net profit was down 24.7% to $115.6 million.

4. Earnings per share (EPS) for the fourth quarter was a negative 3.03 cents, down from the 4.36 cents recorded a year ago. For the full fiscal year, EPS was 0.85 cents, a drastic decline from the 10.86 cents in FY15/16.

5. For the reporting quarter, cash flow from operations was $47.3 million and capital expenditure was $35.7 million. With that, the logistics outfit recorded free cash flow of $11.6 million. For the full fiscal year, Singapore Post recorded less than $300,000 in free cash flow. In the fourth quarter of FY15/16 and for the whole year, Singapore Post generated free cash flow of $9.67 million and a negative $148.3 million, respectively.

6. As of 31 March 2017, Singapore had $366.6 million in cash and equivalents and borrowings of about $364 million. This is an improvement from the $126.6 million in cash and equivalents and borrowings of about $280.3 million seen a year ago.

In all, Singapore Post suffered a harrowing quarter. Sales growth was tepid, and the company took an impairment charge of $208.6 million in the quarter, which sent its bottom-line into the red. Furthermore, the postal company barely generated any free cash flow for the year. On a brighter note, the company strengthened its balance sheet.

Singapore Post’s board of directors recommended a final dividend of 0.5 cents per share, down from 2.5 cents a year ago. For FY16/17, the company’s dividend is 3.5 cents per share, down by half compared to FY15/16’s dividend of 7.0 cents per share.

Operational highlights

eCommerce sales increased over 30.9% to $56.7 million in the reporting quarter. For the full fiscal year, eCommerce revenue was $267.1 million, up over 171%.  The higher revenue was due to the company’s new US acquisitions.

The logistics segment recorded a 7.7% decline in revenue to $154.7 million. For FY16/17, the logistics segment’s revenue was up 1.7% year-on-year to $636.8 million.

Meanwhile, the Mail segment had a 0.6% revenue increase to $136.8 million in the fourth quarter of FY16/17. For the full year, the Mail segment’s revenue was $544.1 million, 1.5% higher than a year ago.

As mentioned earlier, Singapore Post had suffered an impairment charge of $208.6 million during the reporting quarter. This was due to impairments to TradeGlobal ($185.0 million), Postea ($20.5 million), and a property in Toh Guan ($9.3 million). Back in Singapore Post’s FY16/17 third quarter earnings, the company announced that its TradeGlobal investment was at risk of significant impairment.

Mervyn Lim, Singapore Post’s Covering Chief Executive Officer, had some words to share on the company’s performance in the reporting quarter:

“As part of our ongoing transformation, we continue to build out our eCommerce logistics platform to create new revenue streams and embed sustainable growth. This is fundamental to our strategy. The journey will take time as our investments are for the long term and will not benefit the bottom line immediately.”

Singapore Post’s shares closed at $1.39 each last Friday, which gave a dividend yield of 2.5%.

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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.