SHARES of Singapore Post (SingPost) : S08 +5.49% reached a seven-week high on Thursday (Jul 6) after the Singapore government said it would consider allowing the national postal service provider to adjust its postage rates to &ldquo better reflect the cost of letter mail business&rdquo .

 

The counter rose as much as 7.7 per cent or S$0.035 to reach a high of $0.49 in early morning trade. The last time the counter closed near this level was on May 15.

 

As at the midday break, SingPost&rsquo s shares were up 6.6 per cent or S$0.03 to S$0.485, with 7 million shares changing hands amid heavy trading.

 

The company later announced it would work with the Infocomm Media Development Authority (IMDA) to review its costs and operating model.

 

This includes the optimisation of SingPost&rsquo s post office network, and seeking the authority&rsquo s approval for additional postage rate adjustments to &ldquo better reflect the true cost of the letter mail business&rdquo .

 

It also intends to work with IMDA &ldquo towards a framework for long-term sustainability and commercial viability of the domestic postal service&rdquo .

Citing rapid digitsalisation and structural decline in mail volume, SingPost noted that the average consumer sends less than one letter per month.

 

By collaborating with IMDA on its review, SingPost said it aims to enhance efficiency and effectiveness while maintaining commercial viability for it to &ldquo continue delivering quality postal services to the community&rdquo .

 

&ldquo Through this structural review, SingPost seeks to balance the interests of our stakeholders as the public postal licensee and ensure its commercial viability&rdquo , said group chief executive Vincent Phang.

 

Potential postage rate adjustments would have to be sufficient enough to allow SingPost&rsquo s business model to remain viable without needing direct government funding, said Minister of State for Communications and Information Tan Kiat How in Parliament on Wednesday.

 

Tan was responding to a question on the viability of SingPost&rsquo s post and parcel business and whether measures are being taken to ensure the continuity of these services.

 

On May 11, SingPost said it was evaluating the commercial sustainability of its domestic postal business as part of a strategic review of its portfolio.

 

The move comes after the group delivered a 28 per cent drop in earnings for the second half ended 2023. For the full year, net profit was down 70.3 per cent despite record revenue.

 

THE government will consider allowing Singapore Post (SingPost) to introduce postage rate adjustments to &ldquo better reflect the cost of letter mail business&rdquo following a sharp decline in domestic letter volumes since the Covid-19 pandemic.

 

Minister of State for Communications and Information Tan Kiat How, announcing this in Parliament on Wednesday (Jul 5), said: &ldquo Domestic postage rates have largely been held constant since 2014, apart from a small increase at the start of this year.

 

&ldquo The upcoming adjustments will have to be of a sufficient degree to allow SingPost&rsquo s business model to remain viable, without requiring direct government funding.&rdquo

 

These adjustments are part of a review that the Infocomm Media Development Authority (IMDA), the postal regulator, will conduct with SingPost the review will look into its costs and operations, including optimising and automating post office services for greater cost effectiveness.

 

Tan was responding to a question on the viability of SingPost&rsquo s post and parcel business, and whether measures are being taken to ensure a continuity of these services.

 

In May, SingPost reported a 70.3 per cent plunge in net profit for FY2023 to S$24.7 million, despite posting record revenue. Its group chief executive Vincent Phang said then that the mainboard-listed company is conducting a strategic review of the commercial sustainability of its domestic postal business.

 

Tan told the House that SingPost, as a listed company, must maintain a viable business model while fulfilling its universal service obligations as a public postal licensee.

 

However, the speed and scale of digitalisation since the pandemic has led to a sharp decline in domestic letter volumes to just 260 million letters in financial year 2022, down from 490 million in FY2015, Tan noted.

 

Apart from individuals opting for paperless communications, most government agencies have also digitalised and are communicating with citizens through online channels, he said. Businesses now account for more than 80 per cent of mail users, and an average consumer sends fewer than one letter per month.

 

&ldquo With this decline, it will be challenging for SingPost to continue running a viable business with its current operating model, and at the current postage rates,&rdquo said Tan.

 

Under the review, IMDA will also examine the current postal service obligations to ensure they remain relevant in today&rsquo s highly digitalised context, particularly with the range of alternative electronic communication channels available.

 

Tan added that the government will also work closely with SingPost on a &ldquo fundamental review&rdquo of the future of Singapore&rsquo s postal service, recognising the &ldquo larger shifts&rdquo in the delivery ecosystem and changing needs here, including the rise of logistics and e-commerce players.

 

SINGAPORE Post&rsquo s chairman Simon Israel expects the decline in its postal business to continue, with the segment projected to remain in the red in the next financial year of 2023/2024.

 

The postal company had recorded a full-year loss of S$15.9 million for its postal services for the financial year ending Mar 31, 2023, the first time in its history.

 

In his message to shareholders in SingPost&rsquo s annual report that was released on Tuesday (Jun 20), Israel said that the decline in its postal segment &ldquo is a structural issue&rdquo , which &ldquo requires a structural solution&rdquo .

 

SingPost had announced in May when it released its full-year financial results for FY2022/2023 that it had embarked on a strategic review of the company&rsquo s portfolio of businesses.

 

&ldquo Our objectives are to improve shareholder returns and ensure the group is appropriately valued. The overarching theme is to move progressively towards becoming a logistics company, divesting non-core businesses and assets, and recycling capital to support further growth and transformation,&rdquo said Israel in his message.

 

The company had identified the need to transform years ago, as its postal business was facing disruption from digital substitution.

 

However, it did not foresee the Covid-19 pandemic to cause further disruption. The closure of Changi Airport and lockdowns in its key overseas markets had affected its international postal business, which was very profitable at that time and had absorbed a large share of the company&rsquo s overheads.

 

&ldquo Despite success in building an e-commerce logistics business in Singapore by leveraging our postal infrastructure and management&rsquo s efforts to rebuild our international postal business, these have not been sufficient to cover the decline in domestic mail and cost inflation,&rdquo noted Israel.  

 

Sustainability metrics

In its sustainability report also released on the same day, SingPost noted that its total Scope 1 emissions &ndash which refer to direct emissions from company-owned and controlled resources &ndash came in at 32,361 tonnes of carbon dioxide equivalent for FY 2022/2023. This is an increase from its previous FY because it had expanded its reporting scope to the cover emissions from its Australian freight subsidiary FMH Group.

 

Excluding FMH Group, Scope 1 emissions across the rest of its operations went down by 5.9 per cent to 3,682 tonnes of carbon dioxide equivalent compared to its previous financial year. For Singapore market alone, Scope 1 emissions reduced by 4 per cent over the same time period.

 

This was mainly due to the company switching its vehicles from those with internal combustion engines to electric ones.

 

The level of its Scope 2 emissions &ndash which covers indirect emissions generated by purchased energy &ndash hit 17,077 tonnes of carbon dioxide equivalent for the financial year.

 

Excluding FMH, Scope 2 emissions was at 14,521 tonnes of carbon dioxide equivalent, a 10 per cent decline compared to the year before.

 

This was partially due to the use of solar power in its e-commerce logistics hub, which was about 24 per cent of the building&rsquo s annual electricity consumption.

 

The company is looking to develop and disclose its inventory of Scope 3 emissions &ndash which refer to its indirect emissions from its value chain &ndash in phases, with an initial focus on its Singapore and Australia markets.

 

In terms of waste management, 4,558 tonnes of waste were disposed in FY2022/2023, compared to 3,847 tonnes the year before. The increase is due to the inclusion of FMH Group. SingPost did not provide waste data that excluded the effects of FMH Group.

 

As for gender diversity, SingPost noted that 37 per cent of those in senior management are women, which is just marginally higher than the 36 per cent in its previous financial year. SingPost has not reviewed its target of having at least 30 per cent of women in its senior management by 2025.

 

In addition to these metrics, SingPost has also identified key physical and transition risks as a result of its first climate scenario analysis, based on recommendations from the Task Force on Climate-related Financial Disclosures.

 

For physical risks, it found that five of its key assets in Singapore could face high exposure to extreme heat by 2100. Three could have high exposure to surface water flooding and one could have a medium exposure to soil subsidence.

 

Increased electricity costs, including indirect carbon price implications, as well as the transition to lower emission technologies have been identified as transition risks that would have the greatest impact on SingPost.

 

To reduce its climate-related risk exposure, SingPost established a carbon pricing projection model to inform stakeholders on potential carbon price implications under various scenarios and has started to pilot internal shadow carbon pricing to support long-term business planning and investment strategies. It has also looked at abatement costs at a preliminary level to assess the feasibility of mitigation measures.

 

SingPost said that it plans to expand its climate-related risk assessment and scenario analysis to its remaining assets and markets in time to come, as part of its phased approach to sustainability reporting. It will also consider seeking external assurance in the years ahead.