SingPost “cautiously optimistic” after 3Q results

Singapore Post Limited (SingPost) announced a growth in group revenue of 12.7% to S$139.6m in its unaudited results for the third quarter, ending 31 December 2009. The revenue was boosted by inclusion of revenue from Quantium Solutions (formerly known as G3 Worldwide Aspac group of companies). Group revenue would have registered a marginal decline of 0.6% without the consolidation of Quantium Solutions, on a comparable basis with the same quarter last year when Quantium Solutions was a joint venture.

Mail revenue declined by 1.2% to S$94.4m as a result of lower domestic mail and philatelic contributions. Logistics revenue, which includes revenue from Quantium Solutions, grew 166% to S$49.2m. Without the consolidation of revenue from Quantium Solutions, Logistics revenue showed a decline compared to the same quarter of last year. In Retail, revenue improved by 4.1% to S$16.9m on the back of higher contributions from financial services.

Higher rentals from Singapore Post Centre and the leasing of space at the repurposed post office buildings contributed to a 22.2% increase in rental and property-related income at S$10.2m. Miscellaneous income increased as a result of the amortisation of deferred gains on intellectual property rights relating to the collaboration with Postea, Inc.

Total expenses for the Group increased 12.2% to S$100.2m, due mainly to additional costs with the consolidation of Quantium Solutions. Excluding Quantium Solutions, total expenses would have declined 2.4%. As a result of the Group’s larger staff base, labour and related expenses increased, offsetting the benefits from the Jobs Credit Scheme.

Volume related expenses rose as higher costs of sales offset the decline in traffic expenses.

Finance expenses declined as a result of lower interest rates. For the third quarter, the Group’s net profit grew 20.6% to S$44.1m while its underlying net profit rose 6.3% to S$38.9m.

Ng Hin Lee, deputy group CEO of SingPost, said: “In tandem with the turnaround in the economy and with the benefits of the government’s relief measures, we have seen some recovery in the operating performance of the business. This, coupled with the consolidation of our regional outfit, Quantium Solutions, enabled us to achieve a healthy set of results.”

With the Universal Postal Union reclassification of Singapore as a New Target Country from the category of Developing Country, operating costs for SingPost have risen due to the increase in its net terminal dues payments for international mailing.

Terminal dues refer to settlements for the processing and delivery of international mail between countries. The annualised impact is estimated to be around 5% of underlying net profit.

The Group has taken and will continue to take active measures to mitigate the effect.

Ng said: “We are cautiously optimistic about the business outlook, given the modest recovery expected in the global economy. However, SingPost continues to face various challenges including e-substitution, margin pressures and increased competition. In addition to these existing challenges, our operating costs have scaled up quite significantly due to the change in the terminal dues structure.”

He added: “It is imperative that we continue to be disciplined in reviewing our operations to improve efficiency and productivity even as we stay vigilant on costs. On the revenue-front, we will focus on optimising our resources such as our retail network, to achieve better yields.”

The Group maintains its focus on expanding Quantium Solutions’ business beyond cross border mail and extending its core competencies in Asia Pacific.

It remains alert to new growth opportunities and will explore acquisition opportunities as and when they arise.

Net cash from operating activities amounted to S$137.4m in the nine-month period, compared to S$133.8m in the same period last year.

SingPost’s Board of Directors has declared an interim dividend of 1.25 cents per ordinary share (tax exempt one-tier), to be paid on 26 February 2010.

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