SingPost sinks into the red with S$9.9m loss in H1 on exceptional charge
SINGAPORE Post (SingPost) sank into the red in its latest half-year results reported on Thursday (Nov 3), after taking into account an exceptional item related to the acquisition of an Australian unit. The charge might arise in future depending on whether SingPost’s stake rises, and the value of that unit.
SingPost’s profitability took a turn for the worse in the half year to September as it posted a net loss of S$9.9 million, compared to a net profit of S$35 million for the corresponding period a year ago. The loss was a result of a fair value charge of S$21 million arising from the higher put option redemption liability on Freight Management Holdings (FMH). Stripping it out, SingPost reported underlying earnings of S$13.2 million.
FMH is a 51 per cent-owned subsidiary of SingPost, operating a fourth-party logistics service business that provides integrated supply chain and distribution solutions in Australia.
SingPost’s chief financial officer (CFO) Vincent Yik said in an earnings call on Thursday that the size of any such charge in future depends on whether the vendor that sold its stake in FMH to SingPost will exercise the put option to sell a further stake to the Singapore-listed company.
Yik said the other factor that will affect the size of the charge is the value of FMH, which will appreciate if it performs well.
The charge increases if the value of FMH appreciates, although Yik noted that higher earnings from FMH in that scenario would also bolster SingPost’s profit.
If SingPost raises its stake in FMH, making the stake it does not already own smaller, there will be a reduced impact from any revaluation.
Group chief executive Vincent Phang added that the exceptional item should not be seen in the light of an impairment of an asset as FMH is doing “far better than it was originally contemplated”. However, there was a charge due to the obligation that it would compensate the vendor for diluting the latter’s stake when FMH performs better.
Phang noted that SingPost’s investments in logistics and in Australia are starting to bear fruits, with contributions from Down Under having ballooned to 56 per cent and 42 per cent in terms of operating profit and revenue respectively for H1 FY2023 from 4 per cent and 17 per cent for the year-ago period.
SingPost’s revenue was its highest ever for a half-year, at S$958.9 million, driven mainly by higher contributions from the logistics business, which drew in S$680.8 million, up 79.4 per cent from S$379.5 million a year ago. This was credited to the consolidation of FMH and international freight forwarding volume growth.
Phang said: “The transformation journey that we’re talking about, will take us into a global logistics player and powered by a strong suite of digitally-enabled capabilities.”
The group however noted continued weakness in its post and parcel business, which posted a 19.6 per cent year-on-year drop in revenue to S$261.7 million. On the international front, elevated air conveyance rates and lockdowns in China were cited as key factors in the decline. Domestically, the group pointed to a dip in the volume of domestic letters and parcels, as well as a major customer who had insourced their logistics.
Earnings per share declined to -S$0.0068 from S$0.0123 a year ago.
The board has declared an interim dividend of S$0.0018 per share for the half year, which will be paid to shareholders on Nov 30. For the same period last year, the group had declared a higher interim dividend of S$0.005 per share.
Operating expenses for H1 FY2023 increased by 34.9 per cent to S$920.8 million, from S$682.6 million for the same period a year ago. This more than offset the group’s 31.1 per cent increase in revenue, leading to a decline of 19.1 per cent in operating profit to S$41.3 million, down from S$51.1 million previously.
Yik stated that a strengthened Singapore dollar against an Australian currency would have an impact of less than a million dollars on its bottom line, as he noted that the Australian dollar has depreciated 6 per cent against Sing dollar year to date.
SingPost is not expecting any impact from rising interest rates because all its existing borrowings are on fixed rates.
Commenting on its future outlook, SingPost remained optimistic, highlighting that its revenue and earnings profile will continue to shift towards logistics and overseas markets as it executes new growth initiatives. It also expressed hope for its property business, citing “healthy interest and demand seen in the Paya Lebar Central area”.
The counter was trading at S$0.54, 1.8 per cent lower when market closed on Thursday, after the financial results were published.
