‘Nationalisation not on the cards': SingPost reports underlying net loss in H2; to merge Singapore, international segments

[SINGAPORE] Singapore Post (SingPost) on Thursday (May 15) ruled out the possibility of a nationalisation of the postal service provider, even as it said it is working with the Singapore government to come up with an operating model that is profitable and sustainable.
'Nationalisation is not on the cards,' said SingPost group chief financial officer Isaac Mah at a media briefing following the release of its earnings for the full year ended Mar 31.
'The government acknowledges that right now we do not have a sustainable operating model, especially for the post office network, and we are engaging them on correcting that model so that it's sustainable,' he added.
Mah said this could involve changes in what is required on the ground in terms of the postal network.
Another option, he added, could be an increase in postal rates.
'That is definitely one of the potential outcomes in this dialogue with the government,' Mah said. 'But I do not want to run ahead of myself… and at this point, we do not have any concrete details to share.'
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'We are looking at all options,' he added.
Meanwhile, amid a cloudy global economic outlook marked by ongoing trade tensions, SingPost on Thursday also announced that it has 'reintegrated' its international cross-border business into the Singapore postal and logistics business.
'Given the challenging environment and the risks around the geopolitical tensions, we've decided to move away from the space and refocus on our core competencies here in Singapore,' Mah said.
The cross-border business will continue to be part of SingPost's product offering, leveraging the international postal network. SingPost said this is 'to achieve business synergies and drive operational efficiencies'.
'The operating environment does look challenging, and the management is very conscious of it. We are keeping an eye on it, which is why we have proposed the restructure, or the reintegration of International into Singapore, so that we can unlock savings there,' Mah said.
'On top of that, we are continuing to invest in key areas like sortation because that will create advantages for us and optimised margins as well,' he added.
To this end, SingPost has invested S$30 million in a new automation system to expand processing capacity for small parcels at the Regional eCommerce Logistics Hub facility.
At the same time, following the divestment of its Australian business, Mah noted that SingPost is now in a net cash position.
'We've actually strengthened our balance sheet to a position where we can then refocus and grow in Singapore,' Mah said.
Earnings disappointment amid headwinds
Shares of SingPost closed 11.8 per cent or S$0.075 lower at S$0.56 on Thursday, after the group reported an underlying net loss of S$461,000 for the second half-year ended Mar 31, from its net profit of S$28.1 million in the year-ago period.
Meanwhile, revenue was down 12.1 per cent at S$387.5 million for the half-year period, from S$440.6 million previously.
H2 net profit surged 232.7 per cent to S$222.5 million, from S$66.9 million in the corresponding year-ago period. However, this was mainly due to the recording of an exceptional gain from the divestment of its Australia business. The gain of S$222.2 million comprises largely of a gain on disposal of SingPost Australia Investments of S$302.1 million, as well as fair-value gains on properties of S$15.2 million.
This was partially offset by impairment charges of S$79.6 million, primarily for Quantium Solutions. On Apr 16, SingPost and Alibaba agreed to unwind their respective minority cross-shareholdings on Quantium Solutions. The logistics company was majority-owned by SingPost, which paid Alibaba S$36.9 million for its stake.
SingPost proposed a special dividend of S$0.09 a share, following the divestment of SingPost Australia Investments. The date payable and record date will be announced later.
Earnings per share (EPS) stood at S$0.0989 including distribution to perpetual securities holders, from S$0.0297. Excluding the distribution, EPS stood at S$0.0965, up from S$0.0273.
For the full year, net profit jumped 212.9 per cent year on year to S$245.1 million from S$78.3 million. Revenue was down 7.5 per cent at S$813.7 million, from S$879.2 million.
Underlying net profit fell 40.3 per cent to S$24.8 million, from S$41.5 million the previous year.
By segment
SingPost's operating profit in H2 for its Singapore postal and logistics segment fell 55.5 per cent year on year to S$7.4 million, from S$16.6 million. The group noted that the post office network remained unprofitable.
But in its property segment, operating profit for the period was up 17.8 per cent at S$24.5 million from S$20.8 million previously. This came largely from higher rental income from SingPost Centre.
SingPost's international business posted a wider operating loss of S$5.3 million, from S$559,000 in the previous year, attributable to challenging business conditions in the cross-border business.
Its freight-forwarding business posted an operating profit of S$12 million, up 31 per cent from S$9.2 million, as the group benefited from higher sea freight rates.

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