For the FY2024/2025 ended March 31, SingPost reported a net profit of $245.1 million, 200.8% higher y-o-y, thanks to an exceptional gain from the divestment of its Australian business.
During the year, the group recognised a net exceptional gain of $222.2 million. This comprised the $302.1 million gain on the disposal of SingPost Australia Investments (SPAI) and a fair value gain on properties of $15.2 million. This was partly offset by the impairment charges of $79.6 million related to Quantium Solutions. The group also plans to pay a special dividend of 9 cents from the net exceptional gain, which is subject to shareholders' approval at SingPost's upcoming annual general meeting (AGM).
“Over the past year, there’s been a significant shift by the group, marked by a major structural change in divestments,” remarked Mah.
The divestment of SingPost’s Australian business marked a “major milestone” and changed its profile and scale. Following the sale, SingPost will reintegrate its international cross-border business into its Singapore postal and logistics business to “achieve business synergies and drive efficiency”, he added.
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The decision came after the group assessed the “long-term viability” of the cross border business amid a “difficult trade environment, evolving global regulations and other challenges such as the competitive landscape,” said Mah.
As part of the reintegration, there will no longer be separate management teams for SingPost’s various business units. This will also likely result in a change in segments, although details will be revealed in 1HFY2025/2026.
Removing ‘duplicate functions’
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This latest realignment comes just six months after SingPost revised its reporting segments in November 2024 to Australia, International and Singapore, replacing its previous structure of Logistics, Post & Parcel and Property. The new segments were announced during SingPost’s results for the 1HFY2025 ended Sept 30, 2024.
The new structure meant that there were “duplicate functions” at the corporate level, which have since been removed. Operational functions were also reorganised to “improve operating efficiency across the organisation,” said Mah.
On Feb 19, SingPost announced that it would retrench 45 employees in a “restructuring” exercise. Mah acknowledged that the affected employees, who were mainly from corporate support units and a small number from the International business unit, were at the management and middle management levels and have “left the business” over the past three to four months.
Some of these “duplicate functions” also included the group’s different CEOs for its three business units. While the CEO of SingPost’s Singapore business left on his own accord, the CEO for its International business still remains with the group as the head of its commercial arm.
In March 2024, SingPost said it would reorganise its group into three business units - Singapore, Australia and International - where each unit would operate independently. That structure has since rolled back with the reintegration.
International remains a ‘core offering’
Despite the reorganisation, SingPost’s international segment is still seen as a “core offering”, said Mah.
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“What is differing now is that we are refocusing on the areas where we have a competitive advantage, which is through the postal network here in Singapore,” he noted.
He added that the group had diversified overseas during the Covid-19 pandemic, but found the space “very competitive” and that SingPost was “simply not at scale” compared to the global players.
“Given the challenging environment and the risks around the risks around geopolitical tensions, we've decided to move away from that space and refocus on our core competencies here in Singapore,” he reiterated.
When asked if a full divestment of the International business was on the cards, Mah noted that SingPost had previously identified freight forwarding service provider Famous Holdings as a non-core asset. The group will sell the asset “at the right juncture” and if it finds the “right buyer”. There has been interest in Famous Holdings, although the group has a “discipline” around these divestments, Mah added.
Singapore postal business still ‘sustainable’
Amid challenges, the Singapore postal business is still “sustainable” backed by a profitable delivery business, said Mah.
In February, Israel noted that e-commerce is a key driver for SingPost’s local business, with its e-commerce logistics hub in Tampines operating at full capacity. In an April 2024 interview, former CFO Vincent Yik said that a “significant proportion” of SingPost’s profitability comes from logistics and that the group will continue deepening its focus in this area.“
"As Singapore’s postal company, we have a delivery network that is best in class in terms of service standards. We have the vans, the people and the distribution capacity. We can deliver to every household in Singapore. That same infrastructure can be retooled to support e-commerce deliveries,” Yik explained at the time.
In March, SingPost announced that it would invest $30 million to grow its regional eCommerce Logistics Hub facility and its processing capacity.
With the efficiencies brought about by the new investment, Mah said the group could potentially consolidate the market and open up its network, which is currently close to other players, as well in terms of partnerships.
However, SingPost’s post office network remains a drag on earnings. In FY2024/2025, the post office network reported a loss of $14.4 million from $14.5 million last year, while postal & logistics and others, which comprise warehousing, mailroom services, financial services, philately and others, made a profit of $20.9 million, 27% higher y-o-y.
On this front, Mah shared that the group is continuing to engage with the government. “I know we’ve been talking to them for a long time, but these things take time.”
That said, the government has also acknowledged that SingPost does not have a sustainable operating model, especially for its post office network. As such, the group is taking steps with the government to ensure that the model is a viable one, to which it is exploring all options, including a further increase in postage rates.
As of May 15, SingPost operates 42 branches. While it has not been allowed to reduce the number of post offices, the group is optimising their use by using a lesser amount of space for its operations and leasing out the rest. Of the 42 branches, SingPost owns 21 of its post offices and collects rental income from them.
In terms of the overall Singaporean business, the postal and logistics business would still be loss-making if the group were to allocate the business corporate costs to the segment given the “significant change” in the last four months. “However, what I can say is, we’ve taken actions to right-size and streamline the cost base, of which the full effects of our actions, you’ll see in the current financial year.”
Spotlight on SingPost Centre
Another area under watch is the group’s flagship property, SingPost Centre, which has long been viewed by analysts as a potential asset for unlocking value.
While the property continues to be deemed as non-core to the group’s operations, it has generated strong cash flows for the group.
In FY2024/2025, SingPost Centre brought in higher rental income with a higher overall occupancy of 98.2%, up from 96.2% last year. SingPost Centre’s retail mall is fully occupied, up from 99.6% last year, while its office space is 97.6% occupied compared to its 94.8% occupancy rate last year. During the year, SingPost Centre’s operating profit rose by 14.7% y-o-y to $48.4 million.
Despite that, Mah stressed that SingPost’s long-term plan is to move its sortation capabilities into its e-logistics hub and will run its delivery and postal operations in one location.
“What that does is that it would actually open up a significant amount of space here, I think about 83,000 square feet of space that we currently use for operations, and that would then be available for other types of value creation [such as rentals],” he said.
“Even when we free up the space, you know, while we might get a better return, ultimately it does not tie on to the core strategy,” he added.
Next steps
Looking ahead, SingPost’s immediate focus is to continue streamlining its business, remain engaged with the government, a move which will make a “significant impact on its Singapore business’, as well as conduct its board renewal.
The latter is a work “currently in progress” and is likely to conclude by the time of its AGM in July. “Once that’s done, that would set the stage for us to complete the reset of our strategy. That would then facilitate the next step of our activities.”
The appointment of the group’s CEO will also depend on the board transition and strategy reset.
“So in terms of order, what needs to happen first is probably the refresh of the board. And as it stands, we have already appointed three new directors to the board, and at the upcoming AGM, you know, there will be announcements on what the new board will look like,” said Mah. “So that will probably need to conclude before the reset of [our] strategy, which then would also tie into the appointment of the CEO.”
Despite the gloomy global economic outlook, Mah pointed out that the group’s balance sheet is now “a lot stronger”. So far, the group has repaid about $600 million of its debt associated with the Australian investment, which puts it in a net cash position currently.
“We have actually strengthened our balance sheet to a position where we can then refocus [on the] growth in Singapore.”
“But I think we just wanted to be very upfront that the operating environment does look challenging, and management is very conscious of it, and we are keeping an eye on it, which is why we have also proposed the restructure, or the reintegration of international into Singapore, so that we can unlock savings there,” he concluded.
Shares in SingPost closed 7.5 cents lower or 11.81% down at 56 cents on May 15.
