MENU

3 Things Investors Should Know About Singapore Post Limited’s FY2018 Earnings

Singapore Post Limited (SGX: S08) will be no stranger to Singaporeans. With a history stretching back 150 years, the company currently offers eCommerce logistics, as well as mail and logistics solutions in Singapore and around the world.

In May, Singapore Post announced its financial results for the full year ended 31 March 2018 (FY17/18). Let’s look at three main aspects of the announcement here.

Show me the money

Revenue for FY17/18 rose 8.6% year-on-year to S$1.46 billion due to growth in eCommerce-related activities across the Postal and Logistics segments.

Postal revenue rose 15% to S$544.1 million on the back of increased cross-border eCommerce deliveries. Logistics revenue increased 4.3% due to higher last mile eCommerce delivery volumes in Singapore and Australia, as well as increased freight forwarding volumes.

Operating profits for the eCommerce and Property segments increased, but operating profits for the Logistics and Postal segments fell. The Property segment’s operating profit improved 16.8% to S$36.3 million due to maiden rental contribution from SingPost Centre retail mall, which opened in October 2017. As at 31 March 2018, SingPost Centre retail mall had a healthy occupancy rate of 95.6%.

Net profit for FY17/18 surged 278.4% to S$126.4 million, primarily due to the absence of one-off impairment charges seen last year. However, underlying net profit, which excludes one-time items, fell 9.2% to S$105.0 million.

Singapore Post’s balance sheet strengthened over the year. As at 31 March 2018, the firm had S$314.1 million in cash and cash equivalents, and total debt of S$244.0 million. This translates to a net cash position of S$70.1 million. In comparison, at the end of March 2017, it had just S$2.6 million in net cash. Interest coverage ratio for FY17/18 improved to 25.2 times from 13.3 times one year prior.

Cash flow from operations for the year inched down by 0.9% to S$198.2 million. With capital expenditure of S$62.1 million in FY17/18, free cash flow came in at S$136.1 million. This is a vast improvement from the previous year’s free cash flow of a mere S$0.3 million. The lower capital expenditure in FY17/18 was attributed to the completion of SingPost Centre retail mall and Regional eCommerce Logistics Hub.

Ka-ching!

The board proposed a final dividend of 2.0 Singapore cents per share. Together with the interim dividend of 1.5 Singapore cents already paid out, the total dividend for FY17/18 would be 3.5 Singapore cents per share, same as the previous year. The latest total dividend represents a payout ratio of 76% of underlying net profit.

Singapore Post has a dividend policy to pay out 60% to 80% of underlying net profit for each financial year as dividend.

What the future holds?

Looking ahead, Singapore Post said:

“The Group is well-positioned to benefit from the strong growth in global eCommerce and last-mile deliveries.

The Group expects to further benefit from the integration of its eCommerce businesses.

Domestic mail volumes are expected to trend downwards while International mail is expected to grow on the strength of eCommerce. Blended margin is expected to decline with the change in mix.

The Group is undergoing structural cost transformation to optimise its cost base.”

There were more positives than negatives in Singapore Post’s latest financial results. It would be interesting to see if the postal outfit can sustain its momentum in the years ahead.

Worried about the overall state of the market? Do you know the 1 thing you should never do in the stock market? The Motley Fool Singapore's new e-book lays out a plan to handle market crashes, details the greatest advantage you have as an investor, and looks at decades worth of market data to bring you the smartest insights on investing. You can download the full e-book FREE of charge--Simply click here now to claim your copy

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.