Singapore Post Ltd
SGX:S08
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
0.38
0.565
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SGD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Singapore Post Ltd
You don't have any saved screeners yet
Ladies and gentlemen, thank you for holding. We are now ready for the briefing. I shall now hand over to the management of SingPost to begin the briefing. Thank you. Please go ahead.
Hi. Good morning, everyone. This is Jason from Investor Relations. Welcome to SingPost's results briefing for the first quarter of FY 2018/'19. With me today is our Group CEO, Mr. Paul Coutts; as well as our deputy group -- GCEO of Corporate Services and GCFO, Mr. Mervyn Lim.
I'll now hand over the session to Mervyn for the presentation. Mervyn, please.
Thank you. Good morning, everyone. Welcome to our results briefing. Allow me to first share some highlights about Q1 results. Revenue rose 3.3%, driven by eCommerce-related activities. We recorded strong free cash flow, up 93.9% year-on-year. Operating profit before exceptional items rose 1.2% year-on-year. On a quarter-on-quarter basis, it rose 22.5% against Q4. Underlying net profit was lower by 9.8%. On a quarter-on-quarter basis, it rose 60.4% against Q4. We shall now move on to the P&L statement.
Revenue rose 3.3%, driven by international mail and Property. In Q1, the group recorded an exceptional loss of $6 million, due mainly to fair value loss on warrants from an associated company compared to an exceptional gain of $4 million last year, due mainly to fair value gain of the same warrants.
Income tax expense rose 38.8% to $11.6 million, largely due to the additional tax provision for our foreign subsidiary. Consequently, reported net profit declined 40.4%.
Excluding exceptional items, underlying net profit declined 9.8% as the improved operating profit before exceptional items was offset by lower associates contribution and higher taxes.
Total expenses increased 2.7% in Q1, lower than revenue growth of 3.3%. The high expenses were largely due to the increase in volume-related expenses as the group seeks to grow eCommerce volumes to benefit from economies of scale from operating leverage.
Volume-related expenses remained the largest cost component for the group and rose 6.2% in Q1, due largely to higher international mail terminal dues. Labor and related expenses declined by 5.5% on cost management initiatives. Admin and other expenses rose 10.7%, largely due to higher insurance and property tax expenses.
Allow me to share some highlights for the quarter. We have made significant progress in winning in our home market. Parcel sorting utilization at the Logistic hub was 24% for the quarter ended June 18, up from 16% last year. Average volume sorted per day were up 47% year-on-year. With respect to extracting full value from investments, Quantium Solutions delivered a good turnaround as we narrowed losses by 45% compared to last year. We are reshaping the QS business, enhancing capabilities and capacity to better serve eCommerce businesses.
This was aided by new customer wins, including our contract with specialized bicycles for an end-to-end Southeast Asian logistics and warehousing solution. Under our drive to cost leadership initiative, we have reduced cost for non-volume related expenses by 2.2%.
Our eCommerce-related revenues continued to grow. For Q1, eCommerce-related revenue rose 8.8% year-on-year, driven by higher eCommerce deliveries across our network such as cross-border mail as well as Singapore parcel deliveries. eCommerce-related revenues now represents 53.7% of total group revenue. Allow me to move on to the cash flow and balance sheet.
Net cash inflow from operating activities for the quarter ended 30 of June 2018 rose to $71.3 million from $58.4 million in the same period last year. With the completion of SingPost Centre retail mall redevelopment, capital expenditure declined to $9.2 million for the quarter compared to $26.4 million in the corresponding period last year. As such, free cash flow improved significantly to $62.1 million.
We now move to the balance sheet and financial indicators. Our cash and cash equivalents stood at $377.6 million as at June '18 compared to $314.1 million as at March '18. This was largely contributed by cash from operations. Total borrowings rose marginally from $244 million as at March '18 to $248 million as at 30 of June 2018. The group was in a net cash position of $129.4 million as at 30 of June 2018. EBITDA, excluding exceptional items, was $50.1 million for Q1 '18/'19. Our interest coverage ratio remains strong at 21.1x.
Allow me to move on to the segmental results. From 1st April 2018, SingPost has reclassified the reporting of certain business units into 4 key business segments, mainly: Post and Parcel; Logistics; eCommerce; and Property.
Post and Parcel segment comprises the core Postal and Singapore parcel delivery business of the group. This includes domestic mail, international mail, vPOST, products and services transacted at the post offices as well as the Singapore parcel delivery business, SP Parcels.
Logistics segment comprises the Logistics businesses of the group. This includes Quantium Solutions, Couriers Please and Famous Holdings. The comparative period last year had included SP Parcels' General Storage Company and other logistic businesses, which have accordingly been reclassified.
eCommerce segment comprises the front-end-related eCommerce businesses. This includes SP eCommerce in Asia Pacific as well as our U.S. eCommerce businesses.
Property segment includes commercial property rental as well as the self-storage business of General Storage Company.
This slide provides an overview of the various segments' contribution to group revenue and operating profit performance for the quarter. The Post and Parcel segment remains the largest contributor to group operating revenue, followed by the Logistics and eCommerce segments. Property revenue consists of commercial rental and self-storage revenue from General Storage Company.
Operating profit. Post and Parcel is the largest contributor to operating profit at $41.8 million, followed by the Property segment at $13.2 million. The Logistics segment reported a positive contribution of $0.1 million for Q1 compared to a $2.5 million loss last year. We will now take a look at each of the segments.
In the Post and Parcel segment, international mail and SP Parcels revenue rose due to higher eCommerce deliveries for both cross-border and domestic Singapore, respectively. This helped to offset the impact of lower domestic letter mail volumes. For international mail, the group had implemented measures, which help mitigate the adverse impact of higher terminal dues. However, margins were lower compared to last year. Consequently, Post and Parcel operating profit declined 3.8%.
In the Logistics segment, revenue declined 2.2% in Q1, largely due to lower volumes recorded in the freight-forwarding business. The Logistics segment registered operating profit of $0.1 million compared to operating losses of $2.5 million last year, due largely to the turnaround of Quantium Solutions, which narrowed its losses by 45% compared to the corresponding quarter last year. Earnings contribution from Famous Holdings and Couriers Please also rose.
In the eCommerce segment, revenue declined 4.3%, largely due to the U.S. businesses as pricing pressures resulted in the price per order declining compared to last year. Operating losses rose to $9.3 million compared to $4.8 million in the prior year. This was largely due to the U.S. businesses, which experienced pricing pressures as well as a change in sales mix, with the decline in fulfillment revenue with higher gross margins and growth in freight revenue, which have significantly improved gross margin. Further, there was an increase in technical labor cost to support business integration efforts.
This chart shows the impact of various segments on underlying net profit. Contributions from the Property and Logistics segments rose. However, these were offset by decline in eCommerce, Post and Parcel. We also incurred higher taxes due to an additional provision for a foreign subsidiary. As a result, underlying net profit for the quarter declined 9.8%.
Let me now move to the summary of our results. In Q1, revenue rose 3.3%, driven by international mail and Property. Net profit was down 40.4%, due largely to exceptional fair value losses from warrants in an associated company. Excluding exceptional items, underlying net profit declined 9.8% as the improved operating profit performance before exceptional item was offset by lower associates contribution and higher taxes.
Free cash flow improved to $62.1 million, with a lower capital expenditure while net cash position improved to $129.4 million as at June '18. The board has declared an interim dividend of $0.05 per share.
With that, I conclude my presentation, and thank you. I'll hand it back to Jason.
Thank you, Mervyn. Okay. Right now, we will start our Q&A session. Operator, please..
Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Sachin Mittal.
Just 2 questions. Firstly on the turnaround of the U.S. operations and the eCommerce, it seems to go in the reverse direction rather than in the right direction. And you have pointed out all of your pricing pressures, different model mix. So what I'm trying to understand is what it delivers in terms of trends going forward? Because those issues are not going to go away anytime soon. And what happened in the last 1 to 2 quarters? Suddenly, that we had such a drastic change. That's question number one. Because I can only see it 1 or 2 quarters back and seeing it now. Secondly, when I look at the eCommerce latest revenue, it's only 9% growth year-on-year. Last quarter it was 37% growth. So has it got to do with the accounting change or if finding out to something else?
It's Paul here. Thanks for the question. So let me just try and address that. And...
[Audio Gap]