- 15 May 2017
- Transport / Logistics Services
Despite losses in the US Singapore Post (SingPost) has announced that its revenues for year end 2017 were up 17.1% to S$1.35 billion.
In a statement, SingPost said that the revenue increase was “mainly from the inclusion of SingPost’s US eCommerce subsidiaries”.
However, underlying net profit fell from S$153.6m to S$115.6m. SingPost attributed this drop to “operating losses at TradeGlobal, lower contributions from associated companies, the impact of planned investments to build out a regional eCommerce logistics platform such as the Regional eCommerce Logistics Hub, as well as continued decline in Postal operating profit”.
SingPost has taken impairment charges of S$208.6m – which included S$185.0m for TradeGlobal, S$20.5m for Postea Inc., and S$9.3m 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.”
Simon Israel, Chairman of SingPost, added: “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.”
According to SingPost: “The principal issue is that TradeGlobal has significantly underperformed the business case which supported the investment. Instead of a projected profit of S$9.4m for FY16/17, TradeGlobal incurred a significant loss of S$25.8m.”
In trying to explain the “challenges” at TradeGlobal, SingPost said that its “operational difficulties include “a surge in labour costs during the recent peak season, delays in warehouse automation which impact productivity, and management changes”. Furthermore TradeGlobal has also apparently been facing “key structural challenges”, which included “disruption in the US fashion retail industry and the “loss of two large customers which accounted for between 30% and 40% of revenue”.
The SingPost Board has formed an independent committee to “conduct a thorough review of the circumstances surrounding SingPost’s consideration and approval of the TradeGlobal acquisition”. In Friday’s statement, SingPost said that the Board will “update shareholders on the outcome of the review, and will seek legal advice on appropriate actions, if any, to be taken arising from the findings of the committee”. The review is expected to be completed and the findings released before the Annual General Meeting in July.
The SingPost Chairman added: “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 Mr Paul Coutts, who commences as SingPost’s Group CEO on 1 June 2017.”
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