SingPost mail business “under tremendous pressure”, but profits up 7%

SingPost has seen a 7% growth in its net profit in the second quarter of the year, after consolidating recent acquisition Novation Solutions – but the underlying business remains fairly flat. Singapore’s Post released results for the first half of the 2012/13 fiscal year today, showing its revenues up 9.1% in the second quarter, to S$153.7m, and up 7.8% over the first half to S$305.3m.

Net profit for the second quarter was up 7.3% to S$32.9m, and for the half increased 1.6% to S$70.9m.

But, with a generally challenging economy, the company’s results were helped by one-off impacts including the addition of Novation Solutions.

The company said its underlying profitability fell 0.3% in the second quarter and 0.6% in the first half of the year.

While growth in operational expenses has slowed, the company’s costs are still outstripping the growth in revenues, increasing by 13.6% in the second quarter and 11.2% in the first half, compared to the same periods last year.

Under pressure

The core mail business also remains under pressure, with mail volumes declining 3.1%, but mail revenues have been increasing – by 12% in the second quarter, to S$105.5m, thanks to the Novation Solutions business, or by 5.7% to S$99.2m excluding the Novation impact.

Dr Wolfgang Baier, the Group chief executive at SingPost, said: “Our core business is under tremendous pressure – mail volumes continued to decline, a trend that has persisted in the past few quarters, with public mail volume registering a steep 10.2% drop in Q2.”

Baier said the decline in the mail business had been countered by the contribution of Novation Solutions business, the Hong Kong-based printing and transactional mail business acquired in January, along with the growth in international ecommerce.

SingPost said its logistics revenues grew 4.2% to S$55.3m during the second quarter, propelled by ecommerce fulfillment through its Speedpost services and Quantium Solutions, its international mail and freight unit in which it has been investing to build its ecommerce presence within the Asia-Pacific region.

Retail revenue grew 5% to S$17.9m with growth in financial services and the luxury ecommerce mall, Clout Shoppe.

Baier said one of the key issues at SingPost was the current growth in its operational costs.

“We have put in place many measures to mitigate the rising operating costs and we continue our investments into infrastructure and process redesigns to increase productivity. At the same time our investments into growth will continue.”

Investment strategy

The SingPost chief said his company’s investment strategy was looking to the future, and the changing mix of the mail market under the influence of booming ecommerce, as was happening all over the world.

The company installed a new multi-purpose sorting system this time last year, and is currently in the process of rolling out 24-hour self-service parcel collection and delivery terminals for a pilot set to begin in early 2013.

In the next few years the company is expecting to invest S450m to S$70m on its infrastructure, processes and people.

“SingPost will continue to accelerate investment and innovation to upgrade Singapore’s delivery backbone,” he said, “to ensure Singapore businesses and consumers have modern delivery options and can benefit from the growing digital economy not only within Singapore but also from and to Singapore and in the region,” said Baier.