Singapore Post Limited’s Financial Year in Review: Stumbles in eCommerce

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 eCommerce segment fared in FY16/17. The segment accounted for about 20% 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 eCommerce segment grew 171.4% to $267.1 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 eCommerce 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:

“eCommerce revenue rose with the inclusion of US acquisitions TradeGlobal and Jagged Peak. While SP eCommerce and Jagged Peak performed well, TradeGlobal faced continuing challenges with the loss of key customers and recorded higher operating losses.”

The big increase in revenue for the eCommerce segment was driven by its acquisitions of TradeGlobal and Jagged Peak. The acquisitions are part of Singapore Post’s effort to transform its business. In mid-2016, Singapore Post chairman Simon Israel sounded the urgent need for the company to find new avenues for sustainable growth.

Lim continued:

“Operating losses for the eCommerce segment rose to $33.8 million.”

Transforming the business will not come easy. Singapore Post took a $185 million write-down in the value of TradeGlobal as the business fell short of its $9.4 million profit target and recorded a loss of $25.8 million (for FY16/17) instead.

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.