Singapore Post increased revenues nearly 10% from April to September on higher e-commerce volumes in its home market, Australia and the Asia Pacific region but Covid-19 pandemic-related costs led to a sharp fall in profits.
Revenue for the first half of the 2020/21 year rose 9.6% to S$707.8 million, led by growth in the Post and Parcel as well as Logistics segments, with strong eCommerce volume growth across the group.
However, net profits declined 42.1% to S$30.9 million and profit on operating activities declined 50.9% to S$39.8 million, as Covid-19 disruptions led to a sharp rise in international transportation costs as a result of flight disruptions as well as labour-related expenses.
Paul Coutts, Group Chief Executive Officer, said: “SingPost is capitalising on the growth in eCommerce, which has resulted in our rise in revenue, off-setting the decline in letter mail volumes in the Domestic Post and Parcel segment.
“Despite the strong demand for our logistics and delivery services, margins for some of our business segments have been eroded through higher costs associated with Covid-19, and we expect this to be the case for as long as the global pandemic continues.”
Looking ahead, he commented: “While we remain optimistic in the strategies taken to reposition ourselves for the new norm, Covid-19 continues to pose significant challenges to the operating environment for businesses. Therefore, we remain judicious in managing our expenses, cashflow and liquidity, even as we execute our key strategic initiatives such as the Future of Post and recent investment in Australia in order to secure our future.”
Strong parcel growth offsets mail decline
In the Post and Parcel segment, revenue rose 5.2% for the half year. Domestic Post and Parcel saw significant eCommerce volume growth of 43% for the half year ended September, as initiatives such the new tracked letterbox product were well-received by customers. eCommerce revenue now stands at 32% of all Domestic Post and Parcel revenues, up from 18% the previous year.
In contrast, volumes of letters and printed papers continue to decline as expected due to electronic substitution. The group also faced higher costs with additional health and safety arrangements for Covid-19, including temporary housing for Malaysian colleagues in Singapore. These measures, while costly, allowed SingPost to continue its service obligations to Singapore.
Smart letterboxes in Singapore
SingPost is in the midst of restructuring operations in its home market through a Smart Urban Logistics initiative, aimed at reinventing a sustainable national mail delivery system to drive long-term business performance and value creation. SingPost unveiled a smart letterbox delivery system prototype last year and by the end of this year will commence a one-year public trial of smart letterboxes.
“Residents will enjoy unprecedented convenience, security and accuracy for their mail, paving the way for an eCommerce-led future of postal services in Singapore. The new smart letterbox will have several state-of-the-art features, including push notification through an app for residents whenever they receive mail; larger containers/drawers to hold eCommerce items; and a keyless access system for mail retrieval,” according to the group. More details will be unveiled later this month.
Airlift crunch hits international results
Meanwhile, in the International Post and Parcel business, cross-border eCommerce volumes were largely resilient. This was achieved despite Covid-19 causing a massive disruption to international air freight out of Changi Airport, with a 96% reduction in passenger fleet movement. The resulting long delays and limited cargo space meant significantly higher conveyance costs that largely eroded International Post and Parcel’s margins, the group said.
E-commerce drives logistics growth
In the Logistics segment, revenue rose 20.3% for the half year. CouriersPlease, Quantium Solutions and SP eCommerce experienced robust growth as a result of increased adoption of eCommerce activities in Asia-Pacific. In particular, CouriersPlease saw solid volume growth in Australia, with revenue rising 48% for the half-year.
Both Quantium Solutions and SP eCommerce continue to benefit from the reengineering of processes to improve customer experience, efficiency, and scalability. This has resulted in more customers taking up their suite of eCommerce logistics solutions, which include warehousing, fulfilment as well as front-end solutions, according to the group.
Meanwhile, the group’s freight forwarding entity Famous Holdings delivered a resilient performance despite facing a global trade slowdown.
As a result, the Logistics segment delivered a strong turnaround to a profit of S$5.7 million for the half year ended 30 September 2020, from a loss of S$3.5 million in the same period last year.
Strategic investment in Australia
The logistics segment will be expanded through SingPost’s latest international move. On 19 October 2020, the group announced that it has entered into a conditional sale and purchase agreement to invest an aggregate 38% equity interest in Freight Management Holdings Pty Ltd (“FMH”) for an aggregate consideration of approximately A$85.0 million (approximately S$84.1 million).
FMH is a leading 4th party logistics service company in Australia. Through the use of proprietary technology, FMH manages and executes its customers’ supply chain and distribution requirements.
The investment will allow the SingPost Group to further scale its Business-to-Business-to-Consumer (B2B2C) logistics capabilities in Australia and capitalise on the growing eCommerce segment. Together with CouriersPlease and Quantium Solutions Australia, the Group aims to derive synergistic benefits, grow volumes and build scale. This provides a strong platform for the SingPost Group to drive revenue and earnings in Australia over the long term.
Weaker property business
For the Property segment, which comprises commercial property, rental and self-storage business, revenue declined 7.8% to S$55.5 million in the half-year, largely due to rental rebates provided for eligible tenants amounting to about S$3.2 million, as well as lower receipts from car-park and atrium sales. Correspondingly, profit on operating activities fell 11.4% to S$23.7 million.
