E-commerce drives growth as SingPost contends with postal decline
SingPost recorded creditable financial results for the first quarter of the year as e-commerce shipping pushed revenue up 4.8% year-on-year and helped profits grow 5.1%. But the company said the results were boosted by one-off affects, with the underlying net profit virtually unchanged from the S$36.2m in last year’s first quarter.
While the national postal service of Singapore has been making considerable gains in e-commerce shipping, it said it is continuing to grapple with the declining domestic mail business.
Revenue in the quarter reached S$210.9m while net profit grew to S$39.2m.
During the quarter, domestic mail volume was helped by a one-off mailing related to businesses complying with new data protection regulations that came into effect in July. Nevertheless domestic mail revenue fell slightly in the quarter.
The mail division as a whole saw its revenue growing 7.4% thanks to e-commerce, but operating profit fell 4.8% on the back of higher labour costs.
E-commerce also helped SingPost’s Logistics division, which saw revenue grow 4.1% to S$97.6m. SingPost’s eCommerce services and financial services countered declines in the traditional retail and agency services in the Retail & eCommerce division, which grew its revenue by 9.7% to S$22.8m.
SingPost’s property business saw its revenue drop 3.6% in the quarter, to S$10.8m.
The quarter’s expenses swelled by 8.4% in the quarter, to S$179.7m, as the company continued its investment in service improvements, and the transformation of the company into a more diversified Group. Rising staff wages also added significantly to the cost increase.
Primary focus
Wolfgang Baier, the SingPost chief executive, said it was “crucial” for the company to invest in the quality of its services to focus on its primary role as a postal operator, despite the rising costs.
“There is tremendous cost pressure,” he conceded.
“The higher operating costs were mainly attributed to increased manpower costs in Singapore from additional postman hires and higher overtime costs, to enhance service quality.”
Frontline staff at SingPost have seen their annual wages increase by nearly 10% in the past two years, including the impact of the SingPost Inclusivity Fund, which helps lower-income staff cope with the rising cost of living in Singapore. The firm has also hired 70 additional postmen to boost operations.
SingPost has also been investing in new sorting technology to improve mail services, as well as in new features for e-commerce shipping, including Saturday deliveries, a new 24-hour call centre and improved customer access at post offices. New sorting equipment — representing S$45m of investment — will be commissioned towards the end of this year, sufficient to sort 95% of letters, compared to the existing 85% rate at SingPost.
Baier said mail volume declines in Singapore were similar to global trends, with domestic mail volume per address declining 13% over the past five years.
“To survive, postal operators need to invest to increase productivity and customer service as well as diversify to sustain the revenue growth,” he said.
E-commerce
SingPost has been expanding its end-to-end e-commerce logistics network to build on online shopping growth in the Asia Pacific region, with wholly-owned subsidiary Quantium Solutions expanding operations to more cities in the Philippines and Thailand.
Last month the company attracted major investment from Chinese e-commerce giant Alibaba Group, which acquired a 10.32% stake in SingPost.
SingPost has also boosted its growth strategy by acquiring UK-based freight forwarding and customs clearance firm FS Mackenzie and Hong Kong self storage business The Store House.
“To capitalise on the growing ecommerce trends, we need to scale up our investments in logistics infrastructure in Singapore and in the region. As for our core mail business, we are investing S$100 million over three years from FY2013/14 to upgrade the postal infrastructure and improve service
quality and productivity in Singapore,” said Baier.
