Singapore Post (SingPost) shares fell by 3.6% today (May 15) after the company revealed an 86.6% decline in net profit for the 2016/17 financial year. The company has predominantly attributed the losses to challenging market conditions experienced by its newly acquired US subsidiary TradeGlobal, which has resulted in impairment charges of S$185m (US$132m).
In light of TradeGlobal’s poor performance, SingPost has appointed an independent committee to conduct a thorough review of the circumstances surrounding SingPost’s consideration and approval of the TradeGlobal acquisition.
Simon Israel, chairman of SingPost, said, “It is unfortunate that such a significant impairment to the TradeGlobal acquisition has to be made so soon after the transaction. A turnaround plan is being executed with the objective of recovering as much value as possible for shareholders.
“No transformation is easy and the past year has been a challenging one for SingPost. But we should not allow it to overshadow the progress of our transformation, notably the strong performance of US-based Jagged Peak and Singapore-based SP eCommerce and the build out of our eCommerce logistics platform through our joint venture with Alibaba. We expect our progress to accelerate under the leadership of Paul Coutts, who commences as SingPost’s Group CEO on June 1, 2017.”
In summary, revenue for the year rose 17.1% to S$1.35bn (US$965m), mainly from the inclusion of SingPost’s US e-commerce subsidiaries. Net profit attributable to equity holders decreased 86.6% to S$33.4m (US$23.9m), reflecting a 24.7% decline in underlying net profit and exceptional items.
Underlying net profit fell from S$153.6m (US$110m) to S$115.6m (US$82.6m) on operating losses at TradeGlobal, lower contributions from associated companies, the impact of planned investments to build out a regional e-commerce logistics platform such as the Regional eCommerce Logistics Hub, as well as continued decline in postal operating profit.
The fair value of SingPost’s investment properties saw a gain of S$108.7m (US$77.7m), related largely to the SingPost Centre, where the redevelopment of the retail section of the building is nearing completion. The gain was offset by impairment charges of S$208.6m (US$149m), comprising S$185m (US$132m) for TradeGlobal, S$20.5m (US$14.6m) for Postea, and S$9.3m (US$6.7m) for an industrial property at 3B Toh Guan Road East.
Mervyn Lim, covering group chief executive officer, said, “As part of our ongoing transformation, we continue to build out our eCommerce logistics platform to create new revenue streams and embed sustainable growth. This is fundamental to our strategy. The journey will take time as our investments are for the long term and will not benefit the bottom line immediately.”
May 15, 2017