See why SingPost net profit slipped 2% to S$37.3m

Higher transformation expenses, lower domestic mail.

Despite Group revenue growing by 6.5%, Singapore Post registered a net profit amounting to S$37.3 million, a decline of 2.0%, in its unaudited results for the first quarter ended 30 June 2013. Excluding one-off items, underlying net profit remained stable at S$36.2 million.

Including contributions from these subsidiaries, Group revenue grew by 32.8% to S$201.3 million in the first quarter of FY2013/14.

Mail revenue was up 13.7% to S$114.7 million, benefiting from the growth in international e-commerce packages, and the full consolidation of Novation Solutions. However, domestic letter-mail volume continued to slide for the 7th consecutive quarter.

In Logistics, revenue stood at S$93.8 million with the full consolidation of new subsidiaries, Lock+Store and Famous Holdings and the increase in regional e-fulfilment business.

Revenue for the Retail & e-Commerce segment was flat at S$20.8 million. Front-end e-Commerce business comprising vPOST, Clout Shoppe and SP e-Commerce services grew while contributions from retail and financial services slowed.

Rental and property-related income rose 8.7% to S$11.2 million with growth in rental income from SingPost Centre.

Total expenses increased to S$165.8 million ie 6.6% points more than revenue growth. The increase in expenses was attributed to costs relating to integration of new subsidiaries, growth in the Group’s businesses, investments to enhance service and productivity, as well as other cost increases.

Dr Wolfgang Baier, SingPost’s Group Chief Executive Officer said: “Domestic mail volume continued to shrink, making this the 7th consecutive quarter of decline. Revenue contributions from new subsidiaries as well as the 6.5% organic growth across the Group helped to lift overall business performance for Q1. Logistics contributed 39.5% of total revenue, with full quarter consolidation of Famous Holdings and Lock+Store. ”

He added: “Although revenue growth for the quarter was good, profit was impacted by higher expenses from the integration of new subsidiaries, developmental costs for new businesses and also trade-related foreign exchange fluctuations as we grow our regional business.”

“Cost management remains a key focus as we implement measures across the Group, leveraging on economies of scale and synergies among businesses e.g. vPOST leveraging Famous Holdings for its freight requirements. We will continue to drive revenue growth to accelerate our transformation but at the same time, we are spending only on strategic areas that contribute directly to revenue growth”, said Dr Baier.

Another area of focus for SingPost is to accelerate its productivity drive. It is investing more than S$100 million over the next few years into inclusivity, productivity and service upgrade.

One of these major investments is the S$45 million integrated sorting infrastructure to handle the changing profile of mail which is seeing rapid growth in packages. The new machines which are expected to be commissioned towards the third quarter of next year, will increase productivity significantly. They are able to sort 95% of letters compared to the current 85% and more than 90% publications from the current 58%. For packages, more than 90% will machine-sorted compared to 85% by the current machines. Throughput for the new integrated sorting machines will also increase by 21% per hour.

SingPost is also replacing its fleet of scooters with three-wheelers which provide better safety for the postmen and are able to carry about 40% more mail including packages than the two-wheelers. About half of SingPost’s fleet will make up of three-wheelers over the next few years.

SingPost will continue to invest in its people, processes and technology to enhance productivity and serve its customers better. This includes simpler booking processes such as the ezy2ship automated web-booking tool.

“Staff are also given productivity training which includes the Lean Six Sigma training which will have more than 100 successfully completing it by the end of the year,” said Dr Baier.

In addition to increasing productivity, these investments will help SingPost deliver an even more efficient service and to uphold its public service obligation including the Next Day Delivery (NDD) standard.

Said Dr Baier: “Earlier this year, we launched five POPStations on a pilot basis. These 24/7 self-collection kiosks increase productivity not only for SingPost but also for the customers who need no longer wait for the parcels at home. The parcels will now wait for them. They can choose to collect their parcels at a time convenient to them. We will be accelerating the roll-out of the POPStations and expect up to 100 POPStations to serve Singapore next year.”