SingPost to reorganise business units & adopts new payout plan post strategic review

SINGAPORE: The board of Singapore Post (SingPost) has greenlit five strategic thrusts for growth to unfold over the next three years, along with the adoption of a revamped payout scheme.

This decision follows the group’s announcement on Tuesday (19 March) that it has concluded its strategic review, initiated in May 2023, in a timeline shorter than a year.

Championed by SingPost’s exclusive financial advisor, BofA Securities, the review centred on orchestrating the group’s gradual evolution into a logistics powerhouse.

Primarily, the group will undergo a restructuring into three distinct business units: Singapore, Australia, and International.

This revamped corporate framework is poised to offer enhanced flexibility and pave the way for future opportunities, the company stated.

Currently, SingPost draws its revenue from three core business segments: logistics, post and parcel, and property.

Notably, the previous fiscal year witnessed the group’s inaugural full-year loss in its post and parcel business for FY2023, leading to a group-wide operating deficit of S$15.9 million, a stark contrast from the operating profit of S$24.9 million recorded in FY2022.

“Each business unit will have the agility and empowerment to operate in their own markets, to develop market leadership and build on their core capabilities according to their individual strategies,” the group articulated regarding its revamped corporate structure.

“This provides clarity on the valuation of the individual businesses against comparable market and sector ratings.”

Subsequently, the group aims for each business unit to yield returns surpassing the cost of capital.

To achieve this objective, a catalogue of non-core assets and businesses, including select properties and diverse international holdings, has been earmarked for potential monetization to facilitate capital replenishment.

SingPost further commits to distributing 30 to 50 per cent of its underlying net profit from FY2024 to FY2025.

“The Board believes this is a balanced policy taking into consideration the capital needs of the enterprise and sustainable returns to shareholders.”

Previously, the group’s dividend policy was anchored in a payout ratio of 60 to 80 per cent of underlying net profit per financial year.

In its FY2023 annual report, SingPost acknowledged deviation from this dividend policy range over the preceding three financial years, attributing it to operational challenges and the imperative to preserve cash for growth-oriented initiatives.

For the fiscal year ended 31 March 2023, the group disbursed total dividends amounting to S$0.0058 per share, comprising a final dividend of S$0.004 per share and an interim dividend of S$0.0018.

This constituted approximately 40 per cent of the group’s underlying net profit for FY2023.

The group also committed to the revitalization of urban logistics and delivery services in Singapore, the attainment of operational scale in Australia, and leveraging its asset-light model and fourth-party logistics platform to cater to cross-border clientele.

“The Group will explore options across key geographies to further enhance the eCommerce supply chain network, expanding the hubs in Singapore, Hong Kong and Europe.”

Chairman: Share price fails to reflect SingPost’s true value

Simon Israel, Chairman of SingPost, emphasized that following consultations with BofA Securities, the Board has concluded that the Group’s share price inadequately reflects the company’s intrinsic value.

“This is particularly apparent considering the value of the SingPost Centre, the Group’s Australian business and the Group’s growth potential. ”

He believed that Management’s execution of the group strategy “will unlock value for shareholders and deliver agility and sustainable long-term growth as an international logistics enterprise.”

Vincent Phang, Group Chief Executive, reiterated the company’s commitment to executing these newly approved growth drivers to “create market leadership, orientate to growth and generate shareholder value”.

Singpost achieves S$24.8 million profit in 2022 from its post and parcel activities

In September last year, SingPost announced the postage rate increase of 20 cents, raising standard regular mail rates from 31 cents to 51 cents, effective from 9 October 2023. This was the most significant rate hike since 2014.

SingPost claims the rise in rates is due to the growing costs of maintaining the postal service, a sentiment shared by many postal firms globally. The company cites the challenges of digital disruption leading to decreased postal volumes.

While it is reported that SingPost incurred a loss of nearly S$16 million in 2023, it’s worth noting that in 2022, SingPost recorded a profit of S$24.8 million from its post and parcel activities.

This followed profits of S$43.5 million in 2021 and S$119.8 million in 2020.

According to the Business Times, SingPost in August 2023 reported year-on-year growth of 11.8 per cent in its operating profit for the first quarter ended 30 Jun, to S$11.9 million from S$10.6 million in the same period the year before.

This came despite a decrease in revenue by 15 per cent to S$404.1 million from S$475.2 million previously.