2 Key Takeaways from Singapore Post Limited’s First Quarter Results

Singapore Post Limited (SGX: S08) closed its fiscal year fiscal year ending 31 March 2017 (FY16/17) with minimal sales growth and a large decline in underlying profits.

In early August, the logistics provider posted its first quarter earnings. With that in mind, it is a good time to check in with Singapore Post’s results to gain more insight on its progress. I read went through its earnings presentation and earnings transcript and would like to share two key takeaways from the fiscal first quarter.

A mixed bag

As a brief background, Singapore Post’s business can be divided into three segments: postal, logistics and eCommerce.

Source: Singapore Post’s earnings briefing

Surprisingly, the traditional postal segment showed the highest sales growth, posting (pun intended) a 9.3% year-on-year increase compared to the same quarter a year ago. Logistics revenue was also up 6.1% during the same period. However, eCommerce sales slipped by around 1% year-on-year. Group chief financial officer Mervyn Lim provided insight on the performance of the three segments:

“In the Postal segment, revenue rose 9.3% with growth in International mail revenue driven by higher crossborder volumes.

Logistics revenue rose 6.1%, driven by higher contribution from SP Parcels, Couriers Please and Famous Holdings.

eCommerce revenue declined due mainly to TradeGlobal, which was impacted by the loss of revenue from two large customers as previously disclosed.”

In all, Singapore Post delivered (pun intended, again) a 6.2% increase in sales for the quarter.

But profit is lagging  

Source: Singapore Post’s earnings briefing

Unfortunately, operating profits declined 23.2% over the same period.

The logistics segment was hurt the most, posting a near-40% fall in profits. The postal segment operating profit also experienced a decline of 13.7% year-on-year while losses at the eCommerce business widened.

Lim was on hand to provide more insights as well:

“Postal operating profit declined 13.7% due to the drop in Domestic mail operating profit in line with lower letter mail volumes, partially mitigated by growth in International eCommerce deliveries.

Logistics operating profit declined 39.3%, reflecting costs from planned investments in the Logistics network such as the Regional eCommerce Logistics Hub, as well as pricing and competitive pressures in the eCommerce Logistics space.

In eCommerce, operating losses increase 18.6%, due largely to operating losses at TradeGlobal.

For Property and others, operating profit declined due to pre-opening expenses incurred for the SPC Retail mall and lower occupancy at SingPost’s investment properties.”

As it stands, there are some positive signs within Singapore Post’s latest results, but overall, it would be hard to say that there are clear signs of revival in its fortunes.

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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.