SingPost reviewing commercial sustainability of domestic postal business as FY2023 profit plunges 70.3%

NATIONAL postal service provider Singapore Post (SingPost) announced on Thursday (May 11) that it is evaluating the commercial sustainability of its domestic postal business as part of a strategic review of its portfolio, which comes as earnings have been weighed down by losses in the postal operations.

SingPost delivered 28 per cent lower earnings at S$34.6 million for the second half of financial year 2023 ended Mar 31, from S$48.1 million in the year-ago period. Earnings per share for H2 fell to S$0.013, from S$0.0186 in the corresponding period of FY2022.

The listed firm attributed the fall in its bottom line to losses from its post and parcel business as delivery volumes fell, while operational costs within the segment rose due to upward inflationary pressures. For the half-year, the post and parcel business recorded a S$3.8 million operating loss, compared to an operating profit of S$13.6 million previously.

Revenue for the group stood at S$913.4 million, falling 2.2 per cent from the S$934.2 million posted for the year-ago period.

In a media briefing after the release of the financial results, SingPost group chief executive Vincent Phang said that the strategic review recently initiated by the board is looking at issues that would impact the entire group and portfolio of businesses.

“It will encompass a review of the... domestic postal service. We will be looking at our commercial levers. We’ll be looking at the cost structures. We’ll be looking at how we can potentially offer a view to commercial sustainability of this business.“

When asked if SingPost might divest the domestic postal business or have the government pay it a fee to provide the service, Phang said the review has just started and it is still too early to make a decision. And the helmsman, who sounded more sombre at this briefing compared to half a year ago, declined to comment on whether SingPost has discussed the matter with the government.

He is also unable to say when the review would be completed.

While the firm has leveraged its accessibility to the postal network for e-commerce delivery and enjoyed the competitive advantage when the e-commerce volumes spiked at the height of the pandemic, the fixed cost of maintaining the network is now weighing down the business as online shopping slowed.

“What we’re flagging today is that, despite all the e-commerce revenues and volumes, (they have) not been adequate to cover the decline in postal letter mail.”

Consumers have been hitting physical shops more in the post-pandemic days and have also become cautious in expenditure amid an inflationary environment, Phang has observed.

The post and parcel business recorded its first-ever red ink for the full year in FY2023, swinging into an operating loss of S$15.9 million from an operating profit of S$24.9 million for FY2022.

SingPost expects that business to be in the red as well this financial year. As to the magnitude of the financial loss, Phang said it would depend on a myriad of factors, including costs, the extent of the continued decline in domestic postal demand as well as the level of e-commerce activity.

The board recommended a final dividend of S$0.004 per share, subject to approval from shareholders at its next annual general meeting to be convened. The date payable and record date for the final dividend will be announced at a later date.

The dividend per share for H2 FY2022 was S$0.013.

Net asset value per share stood at S$0.6142 as at end-March, marginally higher than S$0.5812 as at end-March 2022.

For the full year, net profit stood at S$24.7 million, down 70.3 per cent from S$83.1 million in FY2022.

This was in spite of the group posting a record revenue of S$1.9 billion, up 12.4 per cent from S$1.7 billion the previous year.

By segment, post and parcel raked in 16.2 per cent lower revenue in FY2023, at S$521.3 million, down from the S$622.3 million in FY2022.

That from property business was 23.1 per cent lower at S$88.3 million, compared to S$114.9 million in FY2022.

The logistics segment, on the other hand, generated 32.4 per cent higher revenue at S$1.3 billion, up from S$998.5 million previously.

Separately, SingPost announced that it has acquired a further 37 per cent of the issued share capital in Freight Management Holdings (FMH) – its fourth-party logistics service subsidiary incorporated in Victoria, Australia. This brings SingPost’s total shareholding in FMH to 88 per cent.

Shares of SingPost closed unchanged at S$0.515 on Thursday, after the release of the financial results.