Latest / Investor Exchange / Singapore Post Limited FY2025

Transcript

Singapore Post Limited FY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Welcome to the Deep Dive. Today,
• 0:09
  we're zeroing in on Singapore Post's financial year ending March 2025.
• 0:15
  Now, the headline grabbing number is a net profit of S245.1 million dollars.
• 0:23
  Sounds like a win, right? Well, maybe let's unpack this because as we often
• 0:26
  find, the initial numbers only give you part of the picture. That's exactly right.
• 0:30
  Our goal here, using SingPost's own earnings release and their results presentation,
• 0:34
  is really to move past that headline figure and really understand the underlying
• 0:39
  financial story, what's behind the figures, and maybe what we might expect going forward.
• 0:43
  It's a bit of a financial puzzle sometimes. Yeah, it definitely can be.
• 0:46
  And we're here to put the pieces together.
• 0:47
  So that headline profit, S245.1 million dollars, it turns out includes a pretty
• 0:53
  significant one off gain, doesn't it? It really does.
• 0:55
  So within that number, that S245.1 million dollars, there's actually S222.2
• 1:02
  million dollars in what they call net exceptional gains. OK.
• 1:05
  And the biggest piece of that, a really chunky S302.1 million dollars comes
• 1:10
  from selling off their Australia business, Singpost Australia Investment.
• 1:13
  Ah, the divestment, right? Yeah, exactly.
• 1:16
  And there's also a smaller positive bit from a fair value gain on properties, about $15.2 million.
• 1:23
  Okay, so big gains from selling the Aussie business, plus a bit from property.
• 1:28
  But those weren't the only unusual items, were they? There were some things
• 1:32
  pulling the other way. Precisely.
• 1:33
  Partially offsetting those, you had impairment charges. They totaled S-2.
• 1:38
  $79.6 million. Impairment. So writing down value. Yeah, basically.
• 1:44
  Reducing the recorded value of certain assets, mostly related to quantum solutions,
• 1:49
  it means they're less optimistic about their future value.
• 1:53
  So, you know, when we take these exceptional items out. Then we see the real
• 1:56
  picture. And we get a much clearer view of how the core operations actually performed.
• 2:00
  And that underlying performance, well, it tells a very different story, doesn't it?
• 2:03
  It absolutely does. The underlying net profit for the full year,
• 2:06
  so stripping out those one-offs, comes in at just $24.8 million.
• 2:11
  Only $24.8 million. Wow. And that's down 40.3% compared to the previous year.
• 2:15
  But here's where it gets really interesting.
• 2:17
  The second half of the year, from October to March, actually saw an underlying
• 2:21
  net loss of $CC6 million.
• 2:23
  A loss. Compared to what last year? Compared to a profit of $28.1 million in
• 2:29
  the same period just the year before.
• 2:31
  That's a huge swing. Okay, a loss in the second half that definitely flags a,
• 2:35
  well, a significant change in momentum.
• 2:37
  So revenue must have been a key factor here. What did the overall revenue figures look like?
• 2:40
  Well, for the full year, total revenue was $813.7 million.
• 2:45
  Now that's actually down 7.5% year on year. Down 7.5%. And what was driving that decline?
• 2:51
  The main drag was the international segment. Its revenue dropped 11.2% down
• 2:55
  to S494.3 million dollars.
• 2:58
  So clearly some significant challenges in their overseas operations.
• 3:02
  So the international side really struggled. Was there any positive news on revenue
• 3:05
  to balance that out a bit?
• 3:06
  Yes, actually. The Singapore segment, it showed a modest increase,
• 3:09
  up 2.9%, reaching S326.7 million dollars.
• 3:13
  Okay, so Singapore held up better. It did.
• 3:16
  And if we dig a little deeper into Singapore, their property business really stood out.
• 3:20
  Strong growth there. 11.9% revenue increase, hitting S86.9 million dollars.
• 3:26
  Seems their real estate side is doing pretty well. An almost 12% jump in property
• 3:30
  revenue. What was behind that? Just.
• 3:32
  Higher rents. Pretty much, yeah. Primarily fueled by higher rental income from Singpo Center.
• 3:37
  They reported really healthy occupancy rates. The retail mall was basically
• 3:41
  full, 100% occupied, up a bit from 99.6%.
• 3:45
  And their office spaces also saw higher demand occupancy hit 97.6%,
• 3:50
  up from 94.8%. So yeah, strong tenant interest definitely translating into more revenue there.
• 3:56
  It looks like a stable anchor for them. That makes sense.
• 3:58
  You know, reliable property income is definitely a good base to have, especially now.
• 4:02
  But let's circle back to the international segment's difficulties.
• 4:04
  Why the decline there? What did the report say?
• 4:07
  Well, the report points to headwinds and generally a muted performance internationally.
• 4:11
  Vague terms, headwinds. Yeah, standard corporate speak sometimes.
• 4:15
  But they did note that their freight forwarding business, Famous Holdings,
• 4:20
  showed some positive momentum.
• 4:22
  It just wasn't enough, it seems, to counteract the broader negative trends.
• 4:26
  And we should also mention the Australia segments revenue. It's way down 43.7%
• 4:33
  for the year, but that's mostly just because they sold off SPA, right?
• 4:36
  Now it's mainly just Quantium Solutions Australia left there. Got it.
• 4:40
  So it's a mixed picture on revenue. Singapore showing some resilience,
• 4:45
  especially property, but international facing real challenges.
• 4:48
  Which brings us to the wider environment. The report mentioned complex and uncertain
• 4:53
  conditions. What are they referring to? Right.
• 4:56
  They specifically highlight the complex and uncertain conditions in the global logistics sector.
• 5:00
  And this is largely put down to ongoing trade tensions. The U.S.-China stuff and all that. Exactly.
• 5:05
  U.S. tariffs, retaliatory measures, all that stuff disrupts international trade
• 5:10
  flows, makes supply chains volatile.
• 5:11
  And you can see how that would directly hit their cross-border logistics,
• 5:15
  right? Makes perfect sense.
• 5:16
  So those global trade issues, they've been around a while, but they're still biting. Very much so.
• 5:21
  The report says these tensions put downward pressure on cross-border logistics volumes.
• 5:26
  Plus, you add in other geopolitical tensions, creating instability.
• 5:31
  It just makes for a much tougher operating environment, especially for a business
• 5:35
  with big international exposure like SingPost.
• 5:38
  And crucially, they emphasize that these difficulties got worse in the second
• 5:42
  half of the financial year.
• 5:43
  Which explains that underlying loss we saw. Exactly. And they expect these conditions
• 5:48
  are likely to continue into the current financial year, FY2526.
• 5:52
  OK, sounds like a tough environment to navigate for sure. So how's SingPost
• 5:56
  responding, especially now they've sold the Australia business?
• 5:59
  Yeah. What are their strategic moves? What's the plan?
• 6:02
  Well, following that divestment, the focus is clearly shifting back to their core strengths.
• 6:06
  They're working on streamlining operations, trying to right-size the cost base
• 6:11
  for the current climate. Makes sense.
• 6:13
  A big move is reintegrating their international cross-border business into the
• 6:18
  Singapore postal and logistics operations.
• 6:21
  Oh, bringing it back together. Why? The idea is to find synergies, right?
• 6:25
  Get more operational efficiency by bringing related functions closer together,
• 6:30
  maybe cut some overheads.
• 6:31
  Okay, seems logical. Consolidate, find savings.
• 6:35
  Any other big strategic plays? Yeah, there's a notable S30 million dollar investment in automation.
• 6:41
  This is happening at their regional e-commerce logistics hub.
• 6:44
  Automation for e-commerce.
• 6:46
  Yeah. That sounds forward looking. It is. It's clearly aimed at boosting their
• 6:49
  capacity for handling small parcels, you know, from online shopping.
• 6:53
  They see that as a key growth area, which isn't surprising. No, definitely not.
• 6:57
  Plus, they mentioned ongoing talks with the Singapore government about the future
• 7:01
  operating model for the Postal Service itself.
• 7:03
  Trying to figure out how to keep it profitable and sustainable long-term.
• 7:07
  Ah, the universal service obligation challenges. That's a tricky one.
• 7:11
  Always is. And of course, they keep highlighting the property business as that
• 7:15
  stable source of income and cash flow. The anchor we mentioned.
• 7:18
  The anchor, exactly. And more broadly, the strategy involves,
• 7:21
  you know, careful capital management, tight cost control.
• 7:24
  And they're also looking at possibly selling off other non-core assets. More streamlining.
• 7:29
  Seems so. Yeah. It's all part of what they call an ongoing review and reset
• 7:33
  of the group's overall strategy, trying to adapt to how the market's changing.
• 7:37
  Okay, a lot of moving parts strategically. Now let's dig into that Australia
• 7:40
  divestment again. Big sale, big impact. And it's led to this special dividend.
• 7:45
  How are they using the money from the sale? And what does it mean for investors?
• 7:50
  Right. So the cash from selling SPII is being used for a few things.
• 7:53
  First, paying down debt.
• 7:55
  Second, returning some to shareholders, hence the dividend. Third,
• 7:59
  generally strengthening the balance sheet.
• 8:01
  And fourth, keeping some back to fund future growth. Okay.
• 8:04
  And the dividend itself? The board has proposed a special dividend,
• 8:08
  quite a big one, $0.09 per share.
• 8:10
  That totals around $202.5 million.
• 8:13
  Wow, $0.09 special. That's significant for shareholders. How does that relate
• 8:17
  to the profit they actually made on the sale?
• 8:18
  It represents about two-thirds, roughly, of the gain they recognized on this
• 8:23
  PAI disposal. And it's important to remember, this is on top of the interim
• 8:27
  dividend of 0.34 cents they already paid for the first half. Oh, okay.
• 8:31
  So assuming shareholders approve it, the total dividend for the year would be
• 8:35
  9.34 cents per share, a big chunk of that being the special one.
• 8:39
  Right. So a nice return for investors, directly linked to that asset sale.
• 8:43
  Okay, let's zoom out again. Can we get a quick snapshot of the key financials,
• 8:47
  year versus year, and especially that H1 versus H2 contrast we talked about? Sure.
• 8:51
  So looking year on year, operating profit for the full year was actually up significantly, 30.8%.
• 8:57
  But the second half saw a decline of 6.1%.
• 9:00
  And profit after tax, well, for the full year, it looks amazing,
• 9:05
  up over 200%. But that's almost entirely because of those exceptional gains,
• 9:09
  mainly the PAI sale closing in H2. Right. Got to look past the headline.
• 9:13
  Exactly. Because the underlying net profit, which shows the core business health,
• 9:17
  was down 40.3% for the full year.
• 9:20
  And as we keep highlighting, that second half slipped into that small underlying net loss.
• 9:25
  So the contrast really shows the weakening performance later in the year.
• 9:29
  Yeah, that H2 story is really telling.
• 9:31
  What about cash flow on the balance sheet? Did the sale fix things there?
• 9:34
  Well, cash flow from investing activities got a massive boost,
• 9:37
  obviously, as $640.3 million came in from this SPII disposal.
• 9:43
  Huge inflow. Huge. And that definitely improved their overall cash position.
• 9:47
  The balance sheet looks much stronger now, too.
• 9:49
  More cash, less borrowing, especially after they paid off their Australian dollar debt.
• 9:53
  They've actually swung from having net debt last year to having net cash now. Net cash, Alash.
• 9:57
  It's $346.9 million in net cash. So yes, the divestment has definitely shored
• 10:03
  up their immediate financial stability quite a bit.
• 10:05
  Okay, that's a clear, positive outcome from the sale. Finally,
• 10:09
  then, let's just quickly revisit the outlook for this year, FY2526.
• 10:12
  What's the official word?
• 10:13
  The outlook anticipates more of the same, basically.
• 10:17
  A continued challenging environment in global logistics, they expect trade tensions,
• 10:22
  geopolitical issues, all that will keep impacting international volumes and
• 10:26
  creating those headwinds.
• 10:27
  So, no quick fix expected. Doesn't sound like it.
• 10:30
  Their strategic priorities for the year are really focused on strengthening that core business,
• 10:35
  bringing international cross-border fully into the Singapore operations,
• 10:38
  finding those efficiencies and, you know, keeping a tight grip on finances,
• 10:43
  cost control, maybe selling more non-core bits.
• 10:45
  And the strategy review. And that ongoing strategic review, yes.
• 10:49
  Resetting the group's direction remains key. Okay.
• 10:52
  So summing up our deep dive then, it really feels like FY2425 was definitely
• 10:57
  a year of two halves or maybe two stories for Syncpost.
• 11:00
  You've got this strong headline profit, S245 million dollars. Yep.
• 11:05
  But that's massively boosted by the one-off gain from selling the Australia
• 11:10
  business, which, you know, did allow for that nice special dividend.
• 11:14
  Right. Shareholders got something back directly from that. But underneath that
• 11:17
  shiny surface, the core business, especially international logistics,
• 11:21
  really faced some serious headwinds.
• 11:23
  And that led to the underlying profit drop and even that loss in the second half.
• 11:27
  That sums it up perfectly. The divestment gave them a big financial injection
• 11:32
  and lets them return cash, but the core challenge hasn't gone away.
• 11:36
  They still need to navigate these tricky global conditions and make this strategic
• 11:41
  reset actually work for the long haul.
• 11:43
  Which really leads to the question for you, our listener.
• 11:46
  As Singpost goes through this, what do you see as the biggest risks ahead?
• 11:50
  And maybe the biggest opportunities, too.
• 11:53
  How much impact will this focus on Singapore and the investment in automation
• 11:57
  actually have down the line? Yeah, good questions.
• 12:00
  And if you want to get even deeper, we definitely suggest looking at SingPost's
• 12:03
  full financial reports themselves, maybe checking out some industry analysis, too.
• 12:07
  Sometimes the real nuances are buried in the details. Absolutely.
• 12:10
  It's always a good reminder, isn't it?
• 12:12
  Understanding a company's health means looking way beyond just the headlines.
• 12:16
  You need the context, the strategy, the bigger picture. Thanks for joining us on this deep dive.