Singapore Post Limited’s Financial Year in Review: Can Logistics Be the Future?

Credit: Axisadman

Earlier this month, Singapore Post Limited (SGX: S08) reported its full year earnings for its financial year ended 31 March 2017 (FY16/17).

Singapore Post has three business segments: Postal, Logistics, and eCommerce. In this article, we will be taking a look at how its Logistics segment fared in FY16/17. The segment accounted for about 47% of Singapore Post’s total revenue (excluding inter-segment eliminations) for the fiscal year.

Source: Singapore Post’s earnings presentation

For FY16/17, revenue from the Logistics segment grew 1.7% to $636.8 million. Singapore Post’s deputy chief executive officer and chief financial officer, Mervyn Lim, gave insight into the different sub-segments that make up the logistics business during the company’s FY16/17 fourth quarter earnings briefing. He referred to the following slide in his comments:

Source: Singapore Post’s earnings presentation

Lim said:

“In the Logistics segment, revenue rose 1.7% for the year, driven by increased eCommerce deliveries at Couriers Please, partially offset by a decline in Quantium Solutions due to competitive pressures.”

In mid-2016, Singapore Post chairman Simon Israel sounded the urgent need for the company to transform its business and find new avenues for sustainable growth. Logistics has grown into the largest segment for Singapore Post, but as Lim noted, there are competitive pressures within the segment.

Lim continued:

“Operating profit declined 39.2%, reflecting costs of planned investments such as the new Regional eCommerce Logistics Hub, as well as pricing and competitive pressures in the eCommerce Logistics space.”

Singapore Post is investing in a new regional logistics hub, causing its operating profit to decline in a big way. It would appear that Singapore Post is still in investment mode for the Logistics segment. It remains to be seen if the segment can eventually replace Singapore Post’s legacy snail mail business in terms of revenue as well as profit.

Investors will have to observe how Singapore Post’s business evolves in 2017 and beyond.

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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.