SingPost Q3 2024: Revenue Growth Masks Profit Decline Amid Strategic Divestment Moves
SingPost released its business update for the third quarter of FY24/25, reporting a notable seasonally high performance with overall group revenue rising by 12.1% year-on-year to S\$510.6 million. However, this revenue surge was counterbalanced by a sharp 23.8% decline in operating profit down to S\$21.1 million, as operating expenses climbed significantly amid persistent macro-economic pressures including inflation, supply chain disruptions, and fierce competition.
The update highlighted contrasting performances across its various segments. In Singapore, overall delivery volumes grew by 3.4%, driven by a rebound in letter mail volumes even as eCommerce-related volumes lagged. Despite this, revenue in the Singapore postal and logistics segment declined due to lower income from logistics, financial, and other services, leading to an operating loss relative to the profit recorded in the same quarter last year.
The property leasing business emerged as a bright spot, with improved rental income from the SingPost Centre, where occupancy rates rose to 98.2% by the end of December 2024 from 96.2% as of March 2024.
Internationally, the cross-border eCommerce business suffered markedly, experiencing a nearly 30% decline in volume, which resulted in reduced revenues and an operating loss. In contrast, the freight forwarding segment reported better performance, buoyed by higher sea freight rates that boosted both revenues and profits.
A key development for shareholders is the performance of the Australia business. This segment delivered higher revenue and operating profit year-on-year, greatly aided by the consolidation of Border Express following its acquisition in March 2024. In a move that is likely to influence share prices, SingPost announced a proposed divestment of its Australia business. The deal, agreed with Pacific Equity Partners for an enterprise value of A\$1.02 billion, is subject to shareholders’ approval at an upcoming Extraordinary General Meeting. This strategic decision underscores the board’s commitment to progressively divest non-core businesses and unlock value.
From a balance sheet perspective, shareholders should note that cash and cash equivalents have decreased, largely due to investments in property, plant, and equipment, along with lease, interest, and dividend payments. Meanwhile, borrowings have risen by 4.8% due to additional bank loans related to Border Express’s deferred consideration, worsening the net debt position by 35.7% relative to March 2024.
On the sustainability front, SingPost is actively working on reducing its scope 3 emissions by collaborating with suppliers through the Queen Bee Enabled Sustainability Transition (QUEST) program. Additionally, the installation of a new solar energy system atop the SingPost Centre further demonstrates its commitment to meeting its 2030 net zero targets for scope 1 and 2 emissions.
Looking ahead, SingPost plans to focus on building market share in its Singapore operations by optimizing post office networks and adjusting locations to balance cost efficiency with consumer demand in a digital age. While the property business is expected to remain stable, the international cross-border segment might continue to face headwinds from trade disputes, geopolitical tensions, and evolving regulations.
The mix of revenue growth alongside significant pressures on operating profit, mounting net debt, and the strategic divestment of the Australia business, presents a complex outlook that investors will be closely monitoring. These developments have substantial implications for the share price, prompting shareholders to stay alert and engaged as SingPost recalibrates its strategy in a challenging economic environment.
Disclaimer: This article is provided for informational purposes only and does not constitute financial advice. Investors are advised to conduct their own research and consult professional financial advisors before making any investment decisions.
