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3 Slides From Singapore Post Limited’s Management On The State Of The Company’s Business

Singapore Post Limited (SGX: S08) may be best known as the provider of postal services in Singapore, but it has more to its business. The company organizes its business into three major segments, namely, Postal, Logistics, and eCommerce.

In mid-May, the company reported its full year results for its fiscal year ended 31 March 2017 (FY16/17) and held an earnings presentation. Here are three slides from the presentation that give investors an idea of how the company’s different businesses are performing.

Postal

The table below shows the revenues and operating profits for the Postal segment in FY16/17 and FY15/16. It also breaks down the revenue contribution from the Postal segment’s various sub-segments.


Source: Singapore Post FY16/17 full year earnings presentation (numbers in S$, millions)

In FY16/17, the Domestic mail sub-segment experienced a 5.4% revenue decline due to “more companies implementing e-statements.” But, a 17.4% jump in International mail revenue helped to pick up the slack. The sub-segment’s growth was driven mainly by cross-border eCommerce-related deliveries from Chinese eCommerce giant, Alibaba Group.

The much smaller Post office products & services sub-segment experienced an 18.3% decline in revenue as customers shifted to alternative online payments options.

Logistics

Here’s a table on the revenues and operating profits for the Logistics segment in FY16/17 and FY15/16. It also breaks down the revenue contribution from each of the Logistics segment’s many sub-segments.


Source: Singapore Post FY16/17 full year earnings presentation (numbers in S$, millions)

The 14.6% revenue increase at the Couriers Please sub-segment was what drove the slight overall improvement in revenue for the Logistics segment.

But, the Logistics segment’s operating profit fell hard during the year. This was due to a decline in operating profit on the back of costs from planned investments to build out the company’s eCommerce logistics network. Intense competitive pressures, and depressed industry freight rates and volumes in the freight forwarding industry, also played a role.

E-commerce

The table below shows the same information for the eCommerce segment as the two tables above did for the Postal and Logistics segments.


Source: Singapore Post FY16/17 full year earnings presentation (numbers in S$, millions)

eCommerce had a great year in terms of revenue growth. This was the result of Singapore Post including the results from its relatively recent US acquisitions, TradeGlobal and Jagged Peak.

But while the top-line performance for the eCommerce segment was impressive, the operating profit was disappointing – the losses widened from S$7.3 million a year ago to S$33.8 million. Higher operating losses at TradeGlobal was the culprit, as it more than offset growth at Jagged Peak and SP eCommerce.

TradeGlobal’s woes is set to continue as it is not expected to be profitable even in FY17/18. The woes at the US business has caused Singapore Post to write down S$185 million of its value during FY16/17.

A Foolish conclusion

In all, we can see that the despite the Postal segment’s lower operating profit in FY16/17, it was still the main operating profit contributor to Singapore Post during the year.

It will be critical for Singapore Post to accelerate an improvement in its business execution to grow the operating profit at the other two segments in order to compensate for any plausible future declines in the Postal segment.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.