Singapore Post Limited’s Latest Earnings: An Overview Of The eCommerce Business

In early August, Singapore Post Limited (SGX: S08) released its earnings for the first quarter of its fiscal year ending 31 March 2018 (FY17/18). The reporting period is from 1 April 2017 to 30 June 2017.

Singapore Post organises its business into three operational segments: Postal, Logistics, and eCommerce. I thought it would be useful to have a look at the performance of the individual segments.

In a previous article, I studied the results of the Logistics segment. In here, let’s run through the eCommerce segment.

Editor’s note: An article on the performance of the Postal segment has been published. It can be found here.

The financial performance

The table below shows the revenue, operating profit, and operating margin for the segment for the first quarters of FY17/18 and FY16/17. It also shows the revenue breakdown for the segment according to its different businesses:

Source: Singapore Post’s FY1718 first quarter earnings presentation

We can see that both revenue and operating profit for the eCommerce business fell in the reporting quarter compared to a year ago.

This is what Singapore Post has to say about the segment’s performance:

“eCommerce revenue declined and operating losses rose from a year ago, due mainly to TradeGlobal, which has lost two of its largest customers as announced previously.

Compared against the quarter ended 31 March 2017, eCommerce losses narrowed as a turnaround business plan is underway. Jagged Peak saw higher revenues and earnings as it added new customers and processed increased volumes.”

What lies ahead

As investors, we rely on many tools, including management’s forecasts, to help us gain insight on what to expect for the near- to long-term performance of our investments’ businesses.

With regard to Singapore Post, this is what the company said about the future of its eCommerce segment in its earnings release:

“TradeGlobal and Jagged Peak have a good portfolio of both US and global customers and brands which brings with it opportunities for synergy and growth.

While Jagged Peak is doing well, TradeGlobal faces operational and structural challenges. Management is executing on a turnaround business plan. It will take time for these measures to deliver results.

While business and cost initiatives are being put in place to improve performance, TradeGlobal is not expected to be profitable for the financial year ending 31 March 2018.”

It’s worth noting that Singapore Post’s management has its work cut out for it, given that it needs to turnaround the situation at TradeGlobal.

Going forward, investors may want to closely watch Singapore Post’s ability to execute on its eCommerce strategy.

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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.