Image source: SingPost Media
Singapore Post has announced that its revenue for the first quarter (Q1) increased 6.2% to S$354.1m, due to growth in the postal and logistics segments, but its profits were down.
The net profit attributable to equity holders dropped 13.6% to S$31.0m, while underlying net profit fell 24.7%.
In a statement issued Friday (4 August), SingPost said the drop in profits was “due mainly to lower domestic mail volumes, costs from planned investments, increased competition in the logistics segment, and associates that are investing for growth”.
Paul Coutts, Group Chief Executive Officer, said: “Our transformation into a leader in postal and eCommerce logistics is in progress to secure new revenues for SingPost. The investments we have made will take a number of years to contribute to profitability, but are necessary as our core domestic mail business faces structural decline.
“The priority is to integrate what we have acquired into a true network across markets, products and geographies, with a focus on driving synergy benefits.
“The transition is not without challenge but we have the right people, the right infrastructure and the right technology to succeed.”
The results told the familiar tale of digitalization: on the one hand e-substitution has continued to eat into domestic mail volumes; but, on the other hand, e-commerce has continued to drive parcel business. However, there was a twist, as SingPost has found the e-commerce sector a fiercely competitive arena.
According to SingPost: “Strong international mail growth drove postal revenue to a 9.3% increase, even as domestic mail revenue decreased with more organisations moving to electronic statements.
“Cross-border eCommerce-related deliveries rose, especially with increasing volumes from the Alibaba Group. But even as profits from such transhipment activities increased, they were insufficient to offset the decline in domestic mail earnings, resulting in postal operating profit decreasing 13.7%.
“Logistics revenue increased 6.1% as SP Parcels and CouriersPlease made more eCommerce-related deliveries, and as Famous Holdings saw higher contributions from its overseas operations.”
But it was not all plain sailing on the e-commerce front: SingPost said that Quantium Solutions was “impacted by intense competitive pressures in North Asia”, which “negated improvements in the utilisation of the Regional eCommerce Logistics Hub in Singapore”.
SingPost continued: “The challenges in North Asia, along with costs from planned investments to build out SingPost’s eCommerce logistics network, caused logistics operating profit to fall 39.3%. Moving forward, the focus will be to increase volumes and utilisation of the network to improve economies of scale and operating leverage.
“eCommerce revenue declined and operating losses rose from a year ago, due mainly to TradeGlobal, which has lost two of its largest customers as announced previously. Compared against the quarter ended 31 March 2017, eCommerce losses narrowed as a turnaround business plan is underway. Jagged Peak saw higher revenues and earnings as it added new customers and processed increased volumes.”
The company signed off its Q1 statement by noting that the retail mall at the new SingPost Centre is expected to open in October and it expects to see rental income progressively from the second half of FY2017/18 as “occupancy ramps up towards a steady state”.