SingPost second quarter profit down 22.5% to S$30.6mn

The group recorded higher revenues but lower profits from higher operating costs and investments in growth.

SingPost Group revenue rose 2.4% to S$140.9 million in Q2 FY2011/12, on the back of improved performances in the Mail and Logistics segments.

Mail revenue increased 1.7% to S$93.8 million, on higher contributions from domestic mail, and international mail. In Logistics, revenue increased 10.8% to S$53.1 million, driven by growth in Quantium Solution’s regional e-fulfilment activities, transhipment and vPOST shipping activities. Retail revenue held steady at S$17.0 million, as higher contributions from retail products and online store Clout Shoppe offset the decline in agency services and financial services following the sale of the SpeedCash business in March 2011.

Rental and property-related income increased by 6.3% to S$11.0 million with higher rental income from Singapore Post Centre.

The Group’s total expenses in Q2 FY2011/12 amounted to S$111.8 million, an increase of 7.4%. Labour and related expenses were higher due to increases in salaries resulting from a tight labour market as well as investments in people, information technology and operations to drive growth, according to a Singapore Pist report.

The Group’s net profit declined 22.5% to S$30.6 million. Excluding one-off items, underlying net profit was S$32.8 million, a decrease of 10.1%.

Said Dr Wolfgang Baier, Group Chief Executive Officer of SingPost: “In spite of the mounting challenges in the postal industry, we managed to improve the performance in our core business of Mail and Logistics in the second quarter. Net profit for the Group was impacted by the higher cost of business including increased manpower costs due to the tight labour market, as well as investments to strengthen information technology, operations and capabilities to drive new business.”

Investing to transform SingPost

Dr Baier added: “The postal landscape is changing fast, and worldwide, many posts are struggling. It is just not enough to conduct business-as-usual. It is imperative that SingPost accelerates its transformation and diversification efforts to survive the changing postal landscape. We have to continue to invest in information technology and capabilities to support our growth plans.”

“This will enable us to continue to fulfil and even exceed our social obligations as Singapore’s Public Postal Licensee and enhance shareholder value in the longer term.”

“Structural changes in the postal industry, especially e-substitution, have resulted in challenges to the Group’s business. SingPost has embarked on initiatives in digital services such as digital mailbox and hybrid mail as well as e-commerce and e-fulfilment.”

“We have been building our logistics network in Asia Pacific with recent investments in a number of well-run logistics companies in the region, such as GD Express Carrier Berhad (GDEX) and Indo Trans Logistics Corporation (ITL), to strengthen our existing regional platform in Quantium Solutions.”

Quarterly interim dividend remains at 1.25 cents

Net cash from operating activities was lower at S$42.6 million, compared to S$46.3 million in the second quarter of last year.

The Board of Directors has declared an interim quarterly dividend of 1.25 cents per ordinary share (tax exempt one-tier) payable on 30 November 2011.

Review of First Half Performance

Group revenue rose 2.7% to S$283.2 million in the first half with higher contributions in all business segments. Mail revenue grew on the back of improvements in domestic mail and international mail. In Logistics, revenue growth was driven by Speedpost and e-fulfilment activities in Quantium Solutions, transhipment and vPOST shipping businesses. Retail revenue was higher as contributions from retail business and Clout Shoppe offset the drop in revenue from agency services and financial services.

Total expenses rose 6.7% to S$221.1 million in the first half of FY2011/12. The Group’s net profit was S$69.9 million, a decline of 12.9%. Excluding one-off items, underlying net profit amounted to S$69.7 million, a decline of 5.5%.