Singapore Post: revenues up, but profits down
Singapore Post (SingPost) has reported that its revenue for the third quarter (Q3) was up by 16.8% on last year, but its underlying net profit was down 28.5% to S$31.4m due to “operating losses in the US eCommerce business, Regional eCommerce Logistics Hub costs, and a decline in domestic mail volumes”. Mervyn Lim, Covering Group Chief Executive Officer, commented: “We are building out our capabilities, broadening and deepening our eCommerce logistics network, to secure the future of SingPost. There are challenges along the journey and it is going to take a number of years for our investments to contribute.”
In a statement issued on Friday (10 February), SingPost indicated that decisions will have to be made: “Due to the poor performance of TradeGlobal, the Board of SingPost is of the view that there is a risk of significant impairment to TradeGlobal’s carrying value. The Board will also be conducting a review of all the investments of SingPost. Impairments, if any, will be assessed based on the results of the full financial year ending 31 March 2017 and future plans for the businesses.”
Focusing on the business areas, SingPost reported that its although its postal revenue increased by 2.9%, the operating profit for this business fell by 6.6%.
“Domestic business letter volumes fell as financial institutions pushed their customers to switch to electronic statements,” said SingPost. “Operating margins continued to slide as the postal revenue mix shifts towards international mail.”
SingPost’s acquisition of US-based e-commerce specialists seems to have yielded mixed results recently.
“Consolidation of US subsidiaries TradeGlobal and Jagged Peak saw eCommerce revenue more than double to S$81.1 million. Jagged Peak saw good growth in revenue and operating profit, winning new customers and exceeding targets,” said SingPost.
However, on a less positive note, the company added: “Cincinnati-based TradeGlobal posted an operating loss as higher labour costs were incurred due to worker shortage in the city, and productivity impacted by delays in warehouse automation and the rollout of services for new customers. Developments at two of its top customers also affected TradeGlobal’s performance: One customer has filed for bankruptcy, while the other has decided to in-source its eCommerce freight operations.
“For the nine months of the financial year, TradeGlobal has not achieved the underlying profit assumptions of the business plan which supported the investment. TradeGlobal incurred a significant loss instead of a projected profit in the third quarter peak season. It is expected to make a loss for the full year. The business is being restructured to improve its performance.”