SINGAPORE Post : S08 +1.11% (SingPost) is back in the black with a net profit of S$11.5 million for the fiscal first half ended Sep 30, from a net loss of S$9.9 million a year before.

 

The better performance was despite a fall in revenue. The net profit was driven by lower volume-related expenses and operating expenses, as well as a smaller loss on exceptional items.

 

The logistics business in Australia and the international cross-border business also boosted the results, said the group on Thursday (Nov 2).

 

Earnings per share for H1 stood at S$0.0027, compared with a loss per share of S$0.0068 for the previous corresponding period.

 

SingPost posted a 13.7 per cent year-on-year fall in revenue to S$827.3 million from S$958.9 million. The decline was mainly due to the &ldquo normalising of sea freight rates and volumes post pandemic, as well as foreign exchange impact&rdquo .

 

With about 85 per cent of the revenue generated internationally, the group is highly exposed to the risks of foreign currency depreciation.

 

It highlighted the importance of leveraging the momentum of the international cross-border e-commerce logistics business, and said that the business has been focusing on trade lanes from Hong Kong to Australia and South-east Asia, as well as Europe to Asia, to acquire new customers.

 

Vincent Phang, SingPost&rsquo s group chief executive officer, said: &ldquo Our diversified portfolio and global presence, including our expanded operations in Australia, have enabled us to demonstrate resilience in the current uncertain global economic climate despite adverse currency movements.&rdquo

 

However, its domestic postal business continued to incur a loss in H1 because of declining mail volumes and rising inflationary costs, particularly in operating fixed infrastructure such as the post office network.

 

&ldquo SingPost has raised domestic postage rates by S$0.20 from Oct 9, which is expected to improve the domestic business in H2,&rdquo said the Republic&rsquo s postal service provider.

 

The group added that it is in discussions with the authorities to review the domestic postal business model, and develop a framework to ensure commercial viability.

 

&ldquo The board has advanced in the strategic review to enable the group and its individual businesses to be valued appropriately,&rdquo Phang added.

 

The weaknesses of Singapore&rsquo s postal market translated into a deeper loss in its post and parcel business to S$10 million from S$8.2 million.

 

The logistics segment registered a 19.2 per cent decline in operating profit at S$33.6 million, which the group attributed to lower freight forwarding profit from Famous Holdings, in tandem with the faltering sea freight outlook.

 

The operating profit of its property segment was, however, up 14 per cent to S$21.4 million. This was driven by positive rental reversions at SingPost Centre, with higher overall occupancy rate, said the group.

 

Overall, the group&rsquo s operating profit declined 24 per cent to S$31.4 million from S$41.3 million.

 

For the half year ended September, the board has declared an interim dividend of S$0.0018 per ordinary share. The group declared the same amount for the first half of the previous fiscal year.

 

The dividends will be paid on Nov 30, after books closure on Nov 17.

 

SINGAPORE Post (SingPost) has proposed to fully acquire Australian courier and logistics services provider Border Express through its subsidiary in the same country, Freight Management Holdings (FMH).

 

This will come at a maximum purchase consideration of A$210 million (S$183 million), comprising an initial purchase price and a potential earn-out payment based on the acquisition terms. The deal will be funded by internal cash and Australian dollar-denominated borrowings.

 

Border Express&rsquo network spans 16 facilities, a fleet of over 700 vehicles and 1,300 employees.

 

On Wednesday (Nov 1), SingPost said its acquisition of Border Express would augment and widen FMH&rsquo s business-to-business-to-consumer integrated logistics network as well as reach. The deal is also expected to enhance FMH&rsquo s service offerings while increasing its scale and market share.

 

This will strengthen FMH&rsquo s position in the Australia market. It will also continue to drive the company&rsquo s revenue and earnings growth. This process will enable SingPost to further its strategic ambitions in the country over the long term, said the group.

 

Assuming the acquisition was completed on Mar 31, 2023, SingPost&rsquo s pro forma net tangible assets per share as at the same date would have been S$0.0022 instead of S$0.0028. Had the deal been completed on Apr 1, 2022, the group&rsquo s earnings per share would have been S$0.0155 instead of S$0.0062.

SingPost said the proposed acquisition of Border Express aligns with the group&rsquo s strategic ambition to expand its logistics network, and foster synergy within its Australian operations to deliver enhanced value to customers as well as partners.

 

&ldquo This acquisition is immediately accretive to earnings, solidifies FMH as a leading logistics provider, and continues the growth and development of our Australian operations,&rdquo said Vincent Phang, group chief executive of SingPost.

 

In addition to the deal, the group also said it has reached an agreement with minority shareholders of FMH to take its ownership level in the company from 88 per cent to 100 per cent.

 

SINGAPORE Post (SingPost) incurred an operating loss of S$16 million in its post and parcel business in 2022, amid declining mail volumes and competition from logistics and e-commerce firms that have expanded their delivery capabilities.

 

These changes in the postal market have driven up the costs of sending mail, said Senior Minister of State for Communications and Information Tan Kiat How in Parliament on Wednesday (Oct 4), as he explained the rise in postal prices by 20 per cent to 51 cents for standard mail from next Monday.

 

Tan was responding to questions from MPs, including Workers&rsquo Party MP Jamus Lim (Sengkang GRC), who asked whether the Infocomm Media Development Authority (IMDA) had considered SingPost&rsquo s S$38.8 million profit in the last financial year (FY) when it reviewed the company&rsquo s decision to raise postage rates.

 

Tan said the postal landscape has changed dramatically in the last decade, prompting the first major increase in postage rates since 2014 so that the licensed public postal company can deliver letters to every address in Singapore. In 2014, postage prices rose from 22 cents to 30 cents.

 

While SingPost&rsquo s overall business was profitable in FY2022, more than 90 per cent of its profits came from its logistics business, and largely from its overseas investments, said Tan.

 

&ldquo SingPost&rsquo s core business in Singapore is post and parcel, which incurred operating losses of S$16 million,&rdquo he said. &ldquo This is due to the global decline in letter mail, as well as intense competition from logistics companies and e-commerce players growing their own parcel-delivery capabilities. As a result, per-letter delivery costs have risen considerably.&rdquo

 

The price increase is designed to support SingPost&rsquo s domestic business to ensure that it is able to sustain itself and not rely on its performance elsewhere, said Tan.

 

&ldquo I think we have to make clear that this is not the regulatory framework which we are operating under,&rdquo he said. &ldquo The revenues and the profits from (Singapore are) not supposed to offset the losses in other businesses, and vice versa.&rdquo

 

SingPost will provide a booklet of 10 free stamps worth 51 cents each to every household. This is likely to cover a household&rsquo s postage fees for roughly a year, as the average consumer sends less than one item of mail a month, Tan said.

 

Professor Lim asked if there is a more efficient approach than raising costs, which will spill over to key customers like large corporations and the government.

 

Tan said the government contributes to only a small proportion of the mail volume in Singapore, and that separate reviews by the government and SingPost are being carried out to assess the future of post and its operations amid greater digitalisation and lower demand for mail.

 

Yip Hon Weng (Yio Chu Kang) asked if SingPost needed approval from IMDA before raising the rates and whether the authority had taken into account the projected revenue SingPost would make in the light of the increase.

 

Tan said IMDA had approved SingPost&rsquo s request to raise rates to reflect the cost of delivering letters. The new prices are also comparable to those of countries like Japan and the United States.

 

There is no guarantee that the increase in postage will improve the financial position of SingPost, as the boost in revenue may not compensate for the decline in letter volumes if customers opt for more digital options, Tan added.

 

SingPost is expected to revamp its post and parcel business here to remain efficient, said Tan, without going into specifics. &ldquo This is a move that could put SingPost on a more sustainable path to fulfil its obligations as a public postal licensee.&rdquo

 

SingPost said previously that mail volume declined by more than 40 per cent between 2018 and 2023, and that the price increase will address rising costs in labour, utilities and transport.

 

Postage rates under the current structure are set according to different weight tiers and dimensions, ranging from 20g to 500g, and sizes of up to 162mm by 240mm by 6mm for standard regular basic mail.

 

For example, the postage for standard regular basic mail weighing up to 20g is now 31 cents, and 38 cents if it weighs up to 40g.

 

From next Monday, sending standard regular basic mail that measures up to 162mm by 240mm by 6mm &ndash roughly A5-sized &ndash and weighs up to 500g will cost a flat 51 cents. Sending A4-sized mail weighing up to 500g will cost 80 cents. 

 

Companies that cannot respond to demand and costs with their own pricing strategies may suffer protracted periods of subpar profitability

 

SBS Transit and Singapore Post (SingPost) do not usually excite investors, but they did last week on news that the public services they provide will soon cost more.

 

On Monday (Sep 18), the Public Transport Council (PTC) said bus and train fares will be increased by 7 per cent with effect from Dec 23. This is a significantly larger public transport fare hike than last year&rsquo s 2.9 per cent, and the previous year&rsquo s 2.2 per cent.

 

The following day, SingPost said it will raise domestic postage rates by 20 Singapore cents with effect from Oct 9. This translates to a more than 64.5 per cent increase in postage rate for standard regular mail &ndash from the current 31 cents to 51 cents.

 

SingPost said it will also eliminate the weight criteria in its domestic postage rate structure. This will see the postage rate for standard large mail weighing up to 500 grams being reduced by as much as 35 cents or some 30.4 per cent.

 

These increases in postage rates and public transport fares were not entirely unexpected. The PTC conducts a public transport fare review every year and SingPost said in its Q1 FY2024 business update last month that it was seeking approval from the Infocomm Media Development Authority (IMDA) for postage rate increases.

 

Yet, the size and timing of the hikes seemed to reflect confidence on the part of the authorities that consumers are in good shape to cope with higher costs as the post-pandemic economic recovery continues.

 

This boosted shares of SBS Transit and SingPost, despite generally bearish market sentiment.

 

SingPost climbed 5.1 per cent last week, closing Friday at S$0.515.

 

SBS Transit ended last week 2.3 per cent higher at S$2.64. ComfortDelGro &ndash which owns 74.4 per cent of SBS Transit &ndash was unchanged at S$1.28.

 

The Straits Times Index closed Friday at 3,204.82, down 2.3 per cent for the week.

 

Waning mail demand

The excitement generated by the hikes in public transport fares and postage rates may prove fleeting, though.

 

Companies that provide public services are often &ndash quite rightly &ndash not allowed to respond to shifting demand or cost inflation with their own pricing strategies. This may lead to protracted periods of subpar profitability.

 

SingPost said in its most recent annual report that its mail volumes had declined by more than 40 per cent from FY2019 to FY2023. (SingPost has a Mar 31 year-end).

 

The company reported a 70.3 per cent decline in earnings to S$24.7 million for FY2023, despite a 12.4 per cent rise in revenue to nearly S$1.9 billion. Operating profit declined 16.9 per cent to S$93.2 million.

 

SingPost attributed the reduced profitability to its post and parcel business, which sank into an operating loss of S$15.9 million versus an operating profit of S$24.9 million in FY2022. Revenue for this business division fell 16.2 per cent in FY2023 to S$521.3 million.

 

SingPost said last week that the higher postage rates will help it address the red ink caused by the persistent decline in postal volumes as well as rising costs.

 

Yet, the higher postage rates will do nothing to halt the decline in postal volumes. It may just be a matter of time before the red ink begins flowing again.

 

SingPost is now working with IMDA to come up with a long-term strategy to make its postal operations commercially sustainable.

 

This is a tall order, in my view. How can a business that is losing its relevance in the face of new technology be made commercially viable?

 

These days, I only check my mailbox once every few weeks &ndash and only because I fear it becoming jammed up with junk mail.

 

The way I see it, IMDA should consider allowing SingPost the flexibility to adjust its postage rates as it pleases every year in order to maintain the profitability of its mail business.

 

Neither taxpayers nor SingPost shareholders should have to foot the cost of a public service that the public increasingly does not need.

 

Affordable transport fares

Unlike SingPost, public transport operators such as SBS Transit provide a service for which there is a great need.

 

There was an average of 6.4 million bus and train rides per day in 2022 &ndash a significant improvement from 5.3 million rides in 2021 and five million rides in 2020. In 2019, before the pandemic struck, there was an average of 7.7 million bus and train rides per day.

 

The PTC said last week that the 7 per cent fare adjustment translates to additional fare revenue of S$137.4 million &ndash S$20.9 million of which will go to SBS Transit.

 

SBS Transit is required to contribute 15 per cent of this increased fare revenue &ndash or S$3.14 million &ndash to the Public Transport Fund.

 

DBS Group Research estimates the fare hike will add S$14.7 million to SBS Transit&rsquo s annual earnings. This, in turn, will boost ComfortDelGro&rsquo s bottom line by S$11 million.

 

For H1 2023, SBS Transit reported earnings of S$34.8 million on revenue of S$744.4 million. ComfortDelGro reported earnings of S$78.5 million for the six-month period, on revenue of S$1.86 billion.

 

One troubling thing for shareholders of SBS Transit is that fare adjustments by the PTC may prioritise affordability for commuters over immediate cost recovery for the public transport operators.

 

Indeed, public transport affordability has improved over the past decade. Expenditure on public transport as a percentage of income among households in the second decile was 2.4 per cent last year versus 3.1 per cent in 2013.

 

Among households in the second quintile, expenditure on public transport as a percentage of income was 1.7 per cent in 2022 compared with 2.2 per cent in 2013.

 

Yet, the latest 7 per cent fare hike announced last week was well below the maximum allowable fare increase of 22.6 per cent &ndash which comprised a 12-percentage-point increase under the current fare formula and a 10.6-percentage-point increase rolled over from last year.

 

The PTC said it will defer the remaining 15.6 percentage points to future fare review exercises. To cover the deferred fare adjustment, the PTC asked the government for an additional subsidy of S$300 million.

 

The government provides more than S$2 billion in operating subsidies annually across the bus and rail sectors.

 

To be clear, I am not arguing against keeping public transport fares low. Affordable and efficient public transport contributes to the vibrancy of Singapore&rsquo s economy.

 

Given all the subsidies involved, however, I wonder if the goal of public transport affordability could be even more effectively prioritised if SBS Transit were to be taken private by a government-related entity &ndash as SMRT Corp was in 2016 &ndash so that the interests of investors no longer need to be considered.

 

SHARES of Singapore Post : S08 +2.06% (SingPost) rose at Tuesday&rsquo s (Sep 19) open after the group announced it was introducing a significant rate increment for the first time in almost a decade.

 

From Oct 9, standard regular mail rates will be increased by S$0.20 or 65 per cent to S$0.51 from the current S$0.31. The last significant rate increment was in 2014, when postage increased to S$0.30 from S$0.22.

 

Ahead of market hours on Tuesday, the postal service provider said its latest rate increment reflects the escalating costs of maintaining the postal service.

 

&ldquo SingPost has been absorbing inflationary costs and essentially kept our postage rates constant since 2014. With the intensifying cost pressures and challenging business landscape, it is inevitable that we raise our prices to remain commercially sustainable so that we can continue providing the essential postal service for the nation,&rdquo said the group' s Singapore chief executive, Neo Su Yin.

 

The move comes amid a global structural decline in postal volumes over the last decade, which SingPost attributed to digital disruption which impacted the commercial viability of postal firms globally.

 

It noted that its mail volumes have declined more than 40 per cent between FY2018/19 and FY2022/23.

 

For the fiscal year ended March 2023, SingPost&rsquo s post and parcel segment revenue amounted to S$521.3 million, comprising over a third of the group&rsquo s full-year revenue.

 

This also marked a 16.2 per cent year-on-year decline from the previous year&rsquo s topline, bringing the segment to its first-ever full year operating loss of S$15.9 million.

 

Revenue contributions from the domestic post and parcel fell 9.3 per cent on the year, while international post and parcel revenue fell 20.5 per cent.

 

While the group said it &ldquo made inroads&rdquo with e-commerce volumes over the year, it noted that the progress was not enough to offset the impact of mail declines.

 

SingPost said the rate adjustment will help address the loss caused by a persistent decline in postal volumes coupled with costlier labour, utilities, fuel, and higher conveyance expenses.

 

&ldquo This rate increment is necessary for SingPost to continue serving its obligations as Singapore&rsquo s public postal licensee while allowing further exploration of a more sustainable postal business model in the long term, balancing the need to remain viable while safeguarding the interests of its shareholders,&rdquo added the group.

 

SingPost will also issue a first local stamp booklet of 10 stamps from end-October to each household to help manage the postage increase.

 

Going forward it will further introduce changes to simplify the domestic postage rate structure, including the elimination of the weight criteria.

 

This is expected to make postal services more user-friendly by enhancing the customer experience and provide greater convenience, it said.

 

Earlier in July, Minister of State for Communications and Information Tan Kiat How announced in parliament that adjustments to domestic postage rates will have to be of a &ldquo sufficient degree to allow SingPost&rsquo s business model to remain viable, without requiring direct government funding&rdquo .

 

The Infocomm Media Development Authority (IMDA) is in the midst of conducting a review into SingPost&rsquo s costs and operations.

 

While Lim & Tan Securities acknowledges that the impending rate hike is &ldquo a much-needed shot in the arm&rdquo for the group&rsquo s postage business, the research house does not think it will be sufficient to address the structural decline in mail volumes and business.

 

This is given the &ldquo existential threat&rdquo to the group&rsquo s mail business posed by digital disruption, said Lim & Tan&rsquo s research team in a Tuesday report.

 

&ldquo We believe the strategic review would be more important to address the valuation issue of SingPost.&rdquo  

 

At the stock&rsquo s Monday closing price of S$0.485, the brokerage noted that SingPost is valued at S$1.1 billion and trades at a consensus forward price-to-earnings ratio of 24 times. This implies a dividend yield of 1.2 per cent and a price-to-book ratio of one time.

 

Lim & Tan noted that Bloomberg&rsquo s consensus one-year target of S$0.52 implies a potential upside of just 6.1 per cent.

 

CGS-CIMB, however, upgraded its rating on SingPost to &ldquo add&rdquo from &ldquo hold&rdquo , while lifting its price target to S$0.60 from S$0.52 to factor in the higher postal rate assumptions.

 

The brokerage has assumed a 50 per cent hike in the group&rsquo s base rate effective FY2023/25, which would translate to an annual Ebit (earnings before interest and taxes) uplift of about S$20 million.

 

&ldquo We think the upcoming postage rate hike could help SingPost plug its widening postal losses, enabling investors to focus on its growing logistics business,&rdquo said analyst Ong Khang Chuen.

 

Beyond this, Ong also believes the group&rsquo s FY2023/24 earnings recovery will be anchored by the group&rsquo s international business &ndash with its recent introduction of cross-border offerings to boost customer acquisitions and enable SingPost to better manage its margins for this business.

 

CGS-CIMB estimates there are S$1 billion worth of non-core assets that are &ldquo ripe for capital recycling&rdquo , including SingPost Centre and minority-stake investments.

 

&ldquo We also believe SingPost should consider leveraging third-party capital to scale its fast-growing Australian logistics business and unlock shareholder value,&rdquo said Ong.

 

He values the group&rsquo s key unit in Australia, Freight Management Holdings, at between S$750 million and S$1.1 billion. 

 

Postal service provider is first SGX-listed large-cap to report metrics for non-traditional gender identities

 

SINGAPORE Post (SingPost) has blazed a trail for diversity, equity and inclusion (DEI) practices in Singapore, becoming the first major listed company to measure and report non-binary gender statistics.

 

In its sustainability report for the year ended March 2023, SingPost added the category &ldquo Non-binary, gender diverse or unknown&rdquo for statistics on the gender composition of its workforce and on training hours. The report stated that 55.5 per cent of the company&rsquo s employees were male, 44.1 per cent were female, and 0.1 per cent were non-binary, gender diverse or unknown.

 

Checks done by The Business Times show that SingPost is the only one among the 50 largest companies by market capitalisation &ndash as at Aug 24 &ndash listed on the Singapore Exchange (SGX) to disclose non-binary gender statistics. A spokesperson from SingPost said that the company established its diversity and inclusion policy in the 2022 to 2023 financial year, and included non-binary as a category to &ldquo promote greater inclusiveness&rdquo .

 

However, the postal service provider declined to comment or share details about how the decision to include the statistic came about.

 

The push for greater recognition of non-binary gender identities has been a slow but growing movement globally, especially in developed markets like the United States and the European Union. An Ipsos poll of 22,514 adults from 30 countries in the first quarter of 2023 showed that 3 per cent of respondents did not identify as either male or female. That 3 per cent included those who identified as transgender, non-binary, non-conforming or gender-fluid, or anything other than male or female.

 

Sustainability-related reporting standards mostly do not address gender identities directly. For instance, the widely used Global Reporting Initiative (GRI) standards on diversity and equal opportunity require that companies disclose gender metrics, but not whether those metrics should include non-binary identities.

 

SingPost&rsquo s move puts it in an exclusive club of companies worldwide. Globally, companies that report non-binary gender figures include tech giants Google and Salesforce and HSBC bank.

 

Tech corporations Meta and Apple have publicly either acknowledged that gender is not binary or rolled out initiatives in support of non-binary people, although they have not made non-binary disclosures in their annual diversity reports.

 

In Asian markets, including Singapore, non-binary gender recognition has not been as prominent an issue. While there has been a growing demand from policymakers, investors and consumers for companies to implement policies and programmes to promote greater diversity, especially at the senior management level, the key diversity metric in the Asia-Pacific region is still on increasing female representation on corporate boards, said Kim SK, vice-president for Asia-Pacific ESG and climate research at MSCI.

 

A spokesperson for ESG ratings provider Sustainalytics said that non-binary-related corporate disclosure is still low. &ldquo This could be related to the options in a corporate survey or a hesitancy in some cultures for non-binary employees to disclose openly.&rdquo

 

But SingPost&rsquo s move may be an indication of the growing importance of non-binary disclosures, which may one day be a diversity metric that ESG ratings companies look out for.

 

Sustainalytics said it views companies working towards inclusion of non-binary gender as an appropriate indicator under DEI inclusion disclosures and hopes to see more companies disclosing &ldquo a broader scope of gender&rdquo even as the ESG ratings provider continues to advance its DEI reporting indicators.

 

David Smith, senior investment director of Asian equities at abrdn, said that companies are already making more disclosures on diversity metrics as they respond to investor interests and regulatory requirements.

 

However, he noted that diversity reporting is &ldquo far from straightforward&rdquo , even as a growing number of companies are recognising that traditional gender categories may not be sufficient to fully communicate diversity at a company.

 

&ldquo This development would appear to be consistent with that view, and is, I suspect, something we&rsquo ll see more of in Asia,&rdquo Smith said.

 

The immediate benefit for companies making such disclosures would be the ability to attract and retain talent.

 

Smith said abrdn believes companies that embed diversity and inclusion standards are better placed to attract talent, get the most from their workforce, and meet the needs of their customers.

 

&ldquo If the company is perceived to be welcoming and open-minded, no doubt it is easier to attract talents even though other elements like compensation may be a bit short,&rdquo said Gabriel Nam, partner at human resources consultancy Page Executive.

 

However, Nam noted that any commercial impact or financial returns would likely not occur overnight. There are also no reporting requirements by SGX to report on non-binary gender statistics.

 

&ldquo But if the company has a vision to move ahead of their industry fellows or competitors, and foresee that eventually it may become a compliant requirement, then of course the company will enjoy the headstart,&rdquo he added.

 

Companies that recognise greater gender diversity may also cater to broader viewpoints and ideas when making business decisions or developing strategies.

 

While financial returns are still the priority for investors, ESG considerations are becoming increasingly important, especially impact investors, who are keen on measuring and assessing social impact, Nam said.

 

THE substantial shareholder of Catalist-listed ICP : 5I4 0%, Aw Cheok Huat, has amassed more than 50 per cent of the total number of shares in the company, turning his offer unconditional in all respects.

 

ICP on Friday (Aug 18) announced that he received valid acceptances amounting to over 178.1 million offer shares, or 5.34 per cent of the total number of shares, as at 6 pm on Thursday.

 

This brought the shares that he and his concert parties owned, controlled or agreed to be acquired to 50.98 per cent.

 

Aw launched a mandatory conditional cash offer for ICP shares at S$0.007 apiece on Jul 11, after acquiring an additional 773.2 million shares.

 

Before the offer was announced, the shares he already owned and controlled, including those which were agreed to be acquired by him and his concert parties, made up 45.64 per cent of the total number of shares.

 

Despite the offer turning unconditional, the offeror does not intend to extend it beyond 5.30 pm on Aug 29.

 

The offer will not be open for acceptances beyond that time on that day, said the filing.