Singapore Post Ltd
SGX:S08
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Singapore Post Ltd
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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.
Good morning, everyone. Welcome to SingPost's results briefing for the fourth quarter and full year FY '17/'18. My name is Jason from Investor Relations. With me today is our Group CEO, Mr. Paul Coutts; as well as our deputy GCOO [ Investor ] Services and GCFO, Mr. Mervyn Lim. I will now hand over the session to our group [indiscernible].
Thank you, Jason. Good morning, and welcome to our results briefing. For FY '17/'18, revenue rose 8.6% driven by eCommerce-related activities. Rental and Property-related income grew 29.9%, boosted by the rental income from SingPost Centre retail mall, which opened in October '17. Last year we incurred exceptional losses largely in relation to impairment charges. With the absence of exceptional losses this year, net profit for FY '17/'18 rose 278.4% to $126.4 million.
Exceptional -- excluding exceptional and one-off items, underlying net profit declined 9.2% due largely
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to Logistics contribution. Allow me to now share some highlights of the group's revenue performance for this year.
In the Postal segment, revenue rose 15% on strong growth in international mail revenue, which rose 37.4% year-on-year, driven by cross-border eComm deliveries. Logistics revenue increased 4.3% due to increased last-mile deliveries across Singapore and Australia, and higher freight forwarding volumes. These were partially offset by lower revenue from Quantium Solutions Hong Kong.
eCommerce revenue was stable despite the loss of 2 major customers as previously disclosed, as TradeGlobal added new customers over the year. Operating expenses rose 11.1% for the year. Labor and related expenses was stable as a result of our cost management initiatives.
Volume-related expenses rose 15.8%, attributed to higher international mail terminal use and air conveyance costs, in line with higher volumes. Admin and others increased 7.2% due to higher professional fees.
Depreciation and amortization expenses rose 19.1% mainly due to depreciation costs at the Regional eCommerce Logistics Hub and shortening of amortization period for intangible assets of the subsidiary TradeGlobal. Finance expenses rose mainly due to unfavorable nontrade-related foreign exchange differences.
We now share some highlights of the group's operating profit before exceptional items. Postal operating profit declined
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[ 2.4% ] due to a decline in domestic mail letter volumes, partially offset by higher contribution from international cross-border eCommerce deliveries. Logistics operating profit declined 56% due to lower contribution from Quantium Solutions, which faced intense competitive pressures in Hong Kong as well as a doubtful debt provision in Q2 for a key customer.
In eCommerce, operating losses narrowed as TradeGlobal executed in line with the turnaround business plan and delivered good cost controls over the peak season.
Property operating profit rose 16.8% with rental income from SingPost Centre retail mall. In this slide, we show the movement in underlying net
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for FY '17/'18.
There was improved contributions from eCommerce and Property segments. However, these were offset by declines in Postal and Logistics operating profit. As a result, underlying net profit declined 9.2% to $105 million.
We now share some highlights of the group's performance for the quarter. Revenue rose 13.5%, with growth across all [ 3 ] segments. Operating profit before exceptional items rose strongly, up 18% against the same period last year. This was, however, offset by lower contributions from a source which continue to invest for growth as well as higher tax provision. As a result, underlying net profit for the quarter declined 28.6% to $15.3 million.
Operating profit before exceptional items rose 18% for the quarter. Property operating profit rose 100.8%, with rental income from SingPost Centre retail mall. Logistics [operating profit ] rose 108.7% on increased volumes for last-mile deliveries and freight forwarding.
In the Postal segment, operating profit declined 9.8%. International mail margin was impacted as the industry went through a period of adjustment with a new terminal dues system taking effect during the quarter.
In eCommerce, operating losses narrowed as TradeGlobal executed in line with the turnaround business plan. The others category was impacted negatively by higher [ professional ] fees and lower gains on trade related foreign exchange differences compared to the same period last year.
This chart shows the underlying net profit trend for Q4. Contributions from the eCommerce Property and Logistics segments rose. However, these were offset by a decline in associates' contribution largely due to investments at 4PX.
In Q4 there was a negative impact from the others category mainly due to higher professional fees as well as a negative tax impact as a result of higher provision and lower government tax incentives. As a result, underlying net profit for the quarter declined 28.6% to $15.3 million.
Allow me to now move on to the cash flow and balance sheet. Cash flow from operating activities were stable for FY '17/'18. Capital expenditure was lower at $62.1 million, with the completion of the Regional eCommerce Logistics Hub and SingPost Centre retail mall. As such, free cash flow improved significantly to $136.1 million. Cash and cash equivalents decreased by $52.6 million in FY '17/'18 due largely to a net repayment of short-term borrowings of $118.9 million compared to net inflow from borrowings last year.
Last year, the group also recorded proceeds from issuance of ordinary shares and partial divestments of interest in a subsidiary to the Alibaba Group.
We now move on to the balance sheet and financial indicators. Our cash and cash equivalents stood at $314.1 million as at [ March ] '18. Borrowings declined to $244 million, with partial repayment of short-term bank loans. The group was in a net cash position of $70.1 million as of the 31st of March 2018. Our interest coverage ratio remains strong at 25.2x.
Postal revenue rose 15% for the financial year. International mail revenue rose 37.4% with higher cross-border eCommerce deliveries in particular for the Alibaba Group. This helped offset the decline in domestic mail revenue, which was down 6.6%. Operating profit declined 4% as higher contribution [ from ] international mail was not sufficient to offset the decline in domestic mail operating profit.
For the quarter, Postal revenue rose 18.2%. Despite the new terminal dues system taking effect, international mail revenue rose 38.8%.
Margins for international mail was impacted as the industry went through a period of adjustment during the quarter. As a result, Postal operating profit declined 9.8% in [ Q4 ].
Mitigating measures had helped reduce the adverse impact, and the full extent of these measures will come into effect progressively over the next few quarters.
For the Logistics segment, revenue increased 4.3% for the full year, driven by higher last-mile eCommerce volumes in Singapore and Australia for SP Parcels and Couriers Please, respectively, as well as higher freight forwarding volumes for Famous Holdings.
Operating profit declined 56%, impacted by the competitive pressures that Quantium Solutions faced in Hong Kong over the course of the year as well as a doubtful debt provision in Q2 for a key customer.
For the quarter, Logistics revenue increased 2% driven by SP Parcels and Famous Holdings. Operating profit rose 100.7%, which reflects improved contributions from our last-mile entities, SP Parcels and Couriers Please as well as higher earnings from Famous Holdings. In the eCommerce segment, the U.S. businesses performance improved as management executed on the turnaround business plan for TradeGlobal, which grew revenue and demonstrated good cost controls in particular over the peak period.
As a result, the eCommerce segment's operating losses narrowed significantly by 50.6% to $16.7 million for the full year. Revenue from Jagged Peak's merchant of record service is presented on a net basis for the quarter and full year ended 31st of March '18 compared to a gross basis previously. Figures for the prior years have been adjusted to be consistent with the current presentation.
In Q4, eCommerce revenue rose 15.7%. Despite the loss of 2 major customers as disclosed last year, TradeGlobal registered revenue growth of 38.5% in Q4 through the addition of new customers. Operating losses for the segment narrowed by 61.3% to $5.8 million.
Next, we will go through some business and corporate updates. For Q4, eCommerce-related revenue rose 27% year-on-year, driven by higher eCommerce deliveries across our network such as international cross-border mail as well as Singapore parcel deliveries. eCommerce-related revenues now represents 56.8% of total growth -- group revenue.
Next, I shall share some key operating indicators. At the Regional eCommerce Logistics Hub, our utilization for the warehouse floors stood at 96%. For the parcel sorting machine, average daily utilization during the March quarter was 21%, up from 14% from the same period last year. For the SingPost Centre retail mall, committed occupancy stood at 95.6% as at March '18.
I shall now move on to our dividend slide. The Board of Directors is recommended a final dividend of $0.02 per share. This will bring the total dividend for the financial year to $0.035 per share, representing a payout of 76% of underlying net profit. The proposed dividend is subject to shareholder's approval at the Annual General Meeting in July 2018.
I shall now move to the summary. In FY '17/'18, revenue rose 8.6%, driven by eCommerce-related activities. Net profit was up 278.4% due to the absence of impairment charges recorded in the same period last year. Underlying net profit declined 9.2%, due largely to lower operating profit from the Logistics segment. Free cash flow improved to $136.1 million
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with lower capital expenditure, which, while net cash position improved to $70.1 million, as at 31st March 2018. The board has proposed a final dividend of $0.02 per share, bringing total dividend for the year $0.035 per share.
To conclude, I would like to reiterate the key themes of our strategy, which we will execute over the next few years to take us forward in our transformation journey. These are: winning in our home market; igniting future growth engines; and extracting full value from investments. Underlying all of these is our commitment
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to drive cost leadership and optimize our cost base in our transition from a higher margin Postal business to the more competitive eCommerce Logistics business. And that ends my presentation. Thank you and I'll hand it back to Jason. Jason, please.
Thank you, Mervyn. We are now ready for the Q&A session. Operator, can we start the session please?
[Operator Instructions]
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