When I lasted attended Singapore Post’s annual general meeting in 2018, the management were touting the success of their turnaround plan for the company’s ecommerce segment, where losses had halved from $33.8 million the previous year to $16.7 million.
The turnaround looked to be on track, so it came as a surprise when SingPost announced the sale of its two U.S. ecommerce business – Jagged Peak and TradeGlobal — in April this year.
The announcement of the sale caught me off guard as I remembered that the management was rather optimistic at the 2018 AGM about turning around the ecommerce segment where it was reported that Trade Global’s Q4 revenue had grown at 19%. I decided to attend the AGM this year to find out more about the management’s change of heart.
Here are five things learned from the 2019 Singapore Post AGM:
1. Ecommerce segment losses widened to S$51.9 million in FY2019 despite the time and resources the management invested in the turnaround plan. The board conducted an in-depth strategic review and decided to exit the ecommerce industry. The sale is still in process and will be announced once finalised. Chairman Simon Israel cautioned that shareholders should have realistic expectations about the sale as SingPost is exiting a very challenging business. (Update: Jagged Peak and TradeGlobal have since filed for bankruptcy protection.)
2. SingPost increased its local market share in the parcel business from 35% to 45% in FY2019. The second and third largest players are Qexpress and NinjaVan respectively. The management pointed out that Qexpress only services its own Qoo10 customers, and the ‘real’ competitor is NinjaVan. NinjaVan successfully filled a gap in the market when it was founded a few years ago during the initial boom in ecommerce deliveries. Over the past year, SingPost executed a clear strategy to grow its parcel business which allowed the company to win market share from NinjaVan.
3. A shareholder was concerned about the expiring land leases for some of the properties that SingPost owns. The management said that it has engaged with the relevant authorities for an extension of these leases. However, they will not entertain discussions until the leases fall below a certain number of years. The management don’t see any impact arising from this issue and are positive on a possible lease extension. They added that SingPost may explore renting instead of owning properties as the rental model is more scalable for its business.
4. A shareholder asked about SingPost’s possible capital expenditure (capex) moving forward. The management replied that they expect a capex of S$50-60 million annually, which is around 3-5% of total revenue.
5. Dividend payout will be maintained at 60-80% of underlying profit. The chairman reiterated that the company’s dividend policy will remain unchanged since it was revised three years ago when the dividend payout was deemed unsustainable. SingPost’s investor base tends to be yield-focused, but the company needs to reinvest its profit to grow its business. The latest annual dividend per share of 3.5 cents works out to 79% of underlying profit. However, do note that underlying profit has been declining, from $160.2 million in FY2015 to $100.1 million in FY2019. If this trend continues, we can expect the dividend to reduce further in the near future.
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