Singapore Post Unsp/Adr

Good morning, everyone, and welcome to ThinkPulse, to our first time on the Xbox 360 community. Today, we are pleased to have with us our new CEO, Mark Hall, who became CFO, IBECA, and COO new to me. So this session will be broadcast live and recorded. Without further ado, let me hand over to Coop. Yeah, thanks, Selena. Actually, before we jump in, Coop, could I know who's online? These are audience participants on the webcast. Anyone who registers can join it. Which are the houses that? It's open to everyone. Thank you everyone for coming to our Dutch announcement for H1 of FY26. My name is Ngoc Chiong. I'm 10 days old on the job. I think there may be a fair bit of interest on how we are going to take the company forward, our strategies. I really would like to share those with you when we are ready. But I've been only 10 days on the job. I'm afraid there's not much I can talk about on the future plan. Today we are really talking about the results announcement. section. And you know that St. Paul's has divested some assets overseas. We have folded the international division into the domestic box. We are now a single entity. We have dropped the word group from our titles. We are just as we are. So the immediate order of business for us right now is to um ensure that our business our core business run well our customers are well served so we are looking at for the immediate term operational efficiency widening our network serve our customers and keep the core business running well through our recent divestments of course achieve the proceeds We have paid out the specialty. We have paid down debt, a chunk of debt. And we'll keep the rest for our working capital, et cetera. So we will continue to maintain a disciplined capital management approach. This call is now being transcribed. So those are the immediate priorities. For the results, I will now hand over to Thank you Mark and good morning. As Mark conveyed, our focus is on a stable and sustainable future, underpinned by a strong financial position. And this first half really has to be defined by actions that reflect that commitment. We completed a major organisational alignment with the sale of the Australian business. This was an important step to ensure that our corporate structure is right size, optimised for the remaining size. This included removing overlapping corporate and support functions, integrating the cross-order operations into the portal and logistics business in Singapore, and further streamlining activities. Along with that, we have concluded several transactions. This includes the unwinding of the cross-holdings with Alibaba, leading to the divestment of 4PX, and the cessation of the joint venture Quantip Solutions. These quantum solutions subsidiaries have also since been divested and we have also completed the sale of a trade-only business, Famous Holdings. The combined result of these actions is a stronger balance sheet, providing the financial flexibility and foundation for future growth. Next slide, please. Now, Our operational developments over the first half are centred on two areas that enhance our capacity, efficiency and reach. First, on the capacity front, the $30 million investment to expand parcel-solving capacity at the e-commerce logistics hub in Tampines is on track, expected to be fully operational by mid-2026. E-commerce remains a growth driver for the logistics business. As such, we are tripling our capacity to address demand, efficiency, and service quality, which in turn will enable us to scale up this business segment efficiently. On the network front, we expanded our reach across the island through strategic collaborations and partnerships to offer our customers maximum convenience and choice. This includes partnerships with pick lockers, chairs, and fair price express outlets. We have also been deploying 24x7 cork-drop kiosks that provide a one-stop service to customers. Our post office also serves as a partnership touchpoint with PHL and FedEx. We have also started a trial for the posting and return of mail directly at the leather box nests of several HDB housing blocks. If successful, this may be rolled out island-wide, which would enhance customer convenience. These investments in capacity and level are key, not just to make the business more efficient, but also to solidify our competitive position and serve customers even more effectively. Now onto the financials. As we move from the second half of the last financial year into the review period, cost discipline was key. This has enabled the company to reverse from a $0.5 million loss in the preceding six months to an underlying net profit of $5.5 billion this past year. In operational discipline, costs have come down, reflecting two key drivers. One, organizational streamlining and cost management efforts. and two, a reduction in expenses intended with lower volumes and revenue. The recent divestments have led to exceptional gains on a disposal of about $9 million. There is also a fair value gain on Singapore Centre of $5.5 million in exceptional items. As a result, profit from continuing operations was higher at $20.6 million. In comparison, discontinued operations incurred a $2.2 million loss this half. compared to a $21 million profit in the prior period when the divested Australian business was still included. Put together, net profit was 17% lower year on year. Excluding these exceptional gains, the underlying net profit of UMP was $5.5 million lower year on year, but as mentioned, better than the loss in the second half of last year. The lower UMP year on year is attributable to two main factors. The loss of profit contributions from the Australian business, which previously boasted our results. The softer performance in the cross-border business, which I'll cover next in the segments. Now, with the change in SingPost's profile, we have revised the business segments to logistical methods, post office network and property assets. This change was from Australia, international and Singapore. Logistics and letters which now cover the delivery business both domestically and internationally, as well as other services, is our largest segment by revenues. Post office network comprises agency services, product sales, and rental of space and the post office. Property assets refer to rental and related contributions from property, properties, the largest contributor being Singapore Centre. moving into a segment by segment review. Logistics and letters face a challenging operating environment, which resulted in lower revenues of $133.5 million and an operating loss of $4.4 million. Letter mail volume continued its structural decline, a trend that we have been managing for some time. volume of domestic e-commerce delivery softened about 3% over the period. In contrast, cross-border e-commerce volume fell by 63% year-on-year, a reflection of the difficult market conditions in that space. This was part of a much larger global trend, which has seen significant volatility, particularly with the US tariff situation. taken actions to streamline the cross-border operations and also implement cost measurement measures to align with the reduced business activity. Along with the drop in volume related expenses, the segment operating costs have fallen about 27% year on year. Now moving on to the post office network. In the post office network, the decline in revenues was mainly due to lower agency services revenue. This was partly cushioned by higher rental income from leasing within the post office network properties. Our efforts to control costs and optimize the network yielded results. Costs were reduced by 13%, which lowered the operating loss from $6.7 million to $5.8 million. Property assets. Property assets comprises property rental and related activities, and mainly at St. Paul Center. The segment continues to provide consistent revenue streams. With the focus on maintaining high tenancy levels, we saw improved revenue performance driven by rental growth at Singapore Centre. Overall occupancy rate was 99.2%. Operating profit was lower, primarily due to higher expenses like property management, service costs and property tax. Now on to the balance sheet. There are a couple of points I would like to highlight. One, The balance sheet movements are largely the effect of consolidation of subsidiaries that were divested. With the divestments this year, including the Australian business, our financial position has been strengthened by proceeds from exposure. The company's cash position is $594.1 million. This provides us with financial flexibility, enabling the funding of operation investments as well as future requirements. To complete the financial picture, let me highlight some points on cash flows. Cash flows generated before working capital was lower compared to the prior period. This was expected, primarily due to the absence of contributions from divestment subsidies. The negative operating cash flow after working capital changes was driven mainly by higher settlement of payments. Investing cash flows was largely due to proceeds from disposals, affecting the realization of value for this non-core asset. Financing cash outflows was primarily due to the special dividend payout to shareholders in August with respect to the sale of the Australian business. Lastly, I am glad to share that the Board has declared an interim dividend of $0.08 per share, which represents 30% of the UMP for the first half. That concludes my presentation. I will disappear the approach as positioned as well on the road ahead. With that, I will hand over to Selina to move on to session. Thank you. Yes, why don't we start? First is, how should we think about margins moving forward, and should we expect the logistics and land segment to return to land and home here? Second question is, could we pick more colour about segments or routes that may be doing poorly for cross-border service? And also, what is your outlook for the segment at Google to be able to set the endurance level? So, first off, we don't typically comment on the forward-looking state for this. But I think what we have seen in our presentation is that We have actually executed very well on several cost-centred control initiatives. We will continue to see the efforts of this in our numbers going forward. We believe that there continues to be good opportunities in the methods and logistics space, and we will continue to build on our network as well as our service levels, which will then ensure the right for us to play in this space. Anything you want to add to that? Can I just say, as you know with the Joe Pergolo situation, that store has a lot of cost, a lot of headway between the store's daughter business. That's why we did the consolidation of the national business as part of a single unit. So this is already one of the key efforts we've undertaken, structurally being a lot leaner, in order for us to then take the strategic review with the support of SMART, then see what is the benefit for it.

Sorry, just one question.

So what the structural decline of the postal network and also the volumes, how do you actually stop that? Because this is a structural problem. So is there any plans for any, what are the key plans to stop this structural decline? Because this has been happening for the last 10 years.

So it's structural decline.

So how do you encourage people to use more videos? Because like checkbook, right? It's also a structural decline. I think you have seen that this is not possible. I think the decline of Post to Structural, that cannot be denied. So it will follow its course and all that. But I think what was good for St. Paul was the arrival of e-commerce, the growth of e-commerce. The apostles came along and I think St. Paul stayed quite hard on the Post side. And what we have to do going forward is to make ourselves competitive. So I think what we have as advantages are, of course, we still have the postman who cover all the blocks and all the letterbox nests. So he will leverage on that. Better quality of service in terms of touch points, etc. And I think to note our investments in $50 million in the sorting the company's hub, that's also to lower our cost reserve and provide higher capacity. I think the decline in the cross-border volumes, obviously we have to get capacity for this volume. So for your 30-minute investment, you decrease your cost, right? So what's the... How much cost does it decrease? So for example, your average... No, no, as you decrease your overall cost, your 30-minute investment will have to decrease your overall cost per package sent up. Decrease or decrease? Decrease. Decrease. Decrease. Reduce or reduce? Reduce. Reduce the cost. So how much cost will it actually decrease? So for example, let's say one package previously cost maybe X amount to deliver. So with this 30 million, based on the same volume, what's the decrease percentage? Well, it's very specific to the processing segment of the entire database directly. It tends to almost half of the cost that is still processing. That's why it's Currently, the cost, a lot of it is attributed to manpower cost. As you know, manpower cost continues to increase year on year. So that's something that the automation is meant to deliver as an outcome, to be able to get greater productivity, as well as give us more capacity to offer more cost-effective solutions to our customers. And this reduce in cost is including depreciation? Yeah. Inclusive depreciation.

Thank you for my experience. questions one on logistics and letters international department how much of the decline was actually supply chain realignment how much was really a competitive loss but uh assuming the volumes are pretty much bottomed out that's it all your postal volume so this is the worst of danger how much more rationalization of postal network is needed

I think the structural decline of email is really a revolution that has undertaken over the last decade or so. Emails coming in, everyone's gone digital now. There is still obviously a proportion of our population that still requires physical letters and all sorts of things. So that will continue to be the way. The decline will continue to come given that more and more digitalization is ongoing. Government is also pushing in that direction. Clearly, government has also now taken a position that it digital first, but not digital only. So this will obviously try to buffer that decline somewhat. But that said, I think in relation to the touch of the e-commerce business, which Mark mentioned earlier, where we pivoted to digitalise the infrastructure as well as the network that business nailed to also deliver e-commerce, I think that's where we are stepping our assets a lot harder. But in that case, given change and shift in the type of volumes that we're doing, the nature of the business as well. We will continue to be looking at how we can evolve the network. We also want to change the way we do deliveries to meet the new and coming demands of our customers. So that will be an ongoing process because why, as you know, the market is very competitive in the last few days. We are obviously still as part of the strategic review, reviewing how we can utilize our assets a lot differently to get greater yield for what we're doing. So that's also part of the strategic review. of overall review of our business. So you think there is more upside to the international... I think the international... Is it more like a blip or what? Is it really the new... Well, I think if you observe what's happening in the cross-border space, whether it's with the big boys, even your DHL, FedEx and all, I mean, these are obviously issues with cloud claims being half-empty. This is an issue that is affecting everyone globally in the United States. We don't think it's just you making decisions first. Now where our position will be undertaken is we will then look at where is the space that we can play in the cross-border and international business. So that's also part of the strategy that we will have to undertake. On the cross-border trade, there's a lot of uncertainty right now. I think we all know. One day there's tariffs on China, another day there's no tariffs, so they are also adjusting to the government's design.

The postal network, more rationalization is needed before it works. Assuming everything remains the same.

As I mentioned earlier, as we are pivoting our business, the last mile people want to be the start of a network. we are still rationalizing whether that network is the most efficient in how we manage it, whether it's versus fixed space, cost space, variable cost space. So these are things that we're undertaking. I can't give you an answer right now, but I think what we're trying to do is to meet whatever customers' evolving needs that our consumers have, to make sure that we deliver the best cost-effective service for our customers. Maybe just to add on to what Swee's saying, I think our press release in South Connecticut also stated enough, 80% of Singaporeans can reach one of our touchpoints within 10 minutes. The network size, total network size is about 2,500 points. So I think this is a very core part of what we do, and this kind of ensures that we have the right to create this space for development. Let me just add on to what Isaac mentioned. If you look at the network expansion that we've undertaken in the last couple of months, we have not put in any money It is really leveraging on existing infrastructure, working with partners, using their infrastructure to extend the level of confidence that the company has. So just to follow up on Sheetal's question, who is currently starting with internal budgeting and stuff to turn around the business? So what is the current plan in terms of years? I know I've been asking about in terms of years that you can foresee business, the core business, deduct the property income, turning around to a rather, I would say, decent profit or rather a sizable profit to justify the current market cap valuation. Maybe just in the focus of what we're sharing today, the first half, so I think the key message is that, you know, last half, this half we have turned the corner, right? So we have got to do, so significant efforts have to go through. There's still work to be done. We are also in the process of revoking the strategy with Mark. Your question will be answered within a fortnight or an hour. It's tied up in there. A lot of our shareholders have been waiting for you. It's been almost one year already. I understand you only come in 10 days. I'm sorry about that. I think many people have asked, we fix every many stations. We are doing this. strategic review. Once we are ready, we will be very happy to answer all the questions. Just one side question. So actually, why did you choose to leave Singtel to come here? I mean, Singtel is quite stable and doing very well. It is a very good question but since we are on the results announcement and not quite personality review. Postal network, what additional agency services can you do? Sorry? On the postal network to optimize the revenues better, what additional agency services can you do? Currently, we already provide services to 47 agencies. We are exploring adjacencies or other parties that we can work with. But right now it's still in the early stages and I think we would like to wrap it up together with the whole strategy review. Because it's all kind of tied into the amount of investments we put in to unlock some of these capabilities as well as the wider play around our non-stick business. And our call really is the ability that every single address for every day and how to leverage on those. Somehow it feels like all questions are lined up here. It's a strategic review. The number of touch points we have, the post officers, we are reviewing on the optimal number. I think that will depend on a couple of things. One that we see, the second one could be we invent the business model. Maybe we don't need to fully own all our post officers. We want to balance touch points with cost. So the cost, fixed cost, maybe it can be reset to other models, maybe like a franchise network or something like that. So these are the ideas that we are pursuing. But we've got nothing to share with you. Out of your post office, rationalization is dependent on rentals versus... So I'm trying to see whether the focus is on improving revenues at the current network or the cost is also a factor. Cost is just too much. I think it will have to be a combination of both. As in any kind of business case, you have to look at what's the opportunity in the market, how you can grow the top line, as well as the cost that's involved in unpacking the bill. So it's definitely a combination of the two. Not one or the other. On your slide, you say revenue decline from several agency services. There are also higher rental income. So if you're thinking from that perspective, the post office segment not only doesn't have income from providing services to the child, but some of the post officers no longer occupy the whole footprint. So we have actually leased out some of that footprint. That's in the rental income portion of that segment. However, given our network of post offices is finite, and we won't be renting more space just to ease it out, if that makes sense. So while there might be opportunities there to continue to grow the rental income in the post office network, it will be fairly limited. Any thoughts on trying to do something with Shah Rukh as a collection point, franchisor of the function? We already do that. Yeah, we already do that. Side office.

I think both centers.

Yes. Actually, so in the point, we've got also third party, what we call agents. That means they operate on our behalf. For example, it could be a mom and pop shop, a mama shop, it could be a bookstore. So they also collect on our behalf. We realize that, I think, in our business, because cost is the component that drives the way our consumers use cars, our further investment into infrastructure is definitely not the way to go. Which is why, as you can see, to working with student chairs, partnerships and all, using third parties. All kinds of third parties are open to explore. Now that's been, our network has become the basis across the island and keeping costs low such that it's almost down to a digitized level cost to the item that's best for us. What's the feedback so far? Finding it more efficient, running? Yes. We obviously have to study profile of where users are. For example, a lot of it is really in our first mile network. So your personal network is where your sellers are the ones that are using us through the platform to then deliver for us to then pick up the items. Rather than us going to a door to pick up one or two items, you can drop it off at your convenience at least at this location. And given that now we've got 2,500 of them all over the island, working with the likes of Pete, Cheers and all have been very, very helpful in now bringing that convenience down to 10 minutes for everywhere you park. So that's been a great extension of our convenience points. who the target audience is, which a lot of it is the upstream customer that we have, which is the sellers. It's really in the success of keeping our cost of the networks as low as possible.

Is there anything more we can do to optimize it better or most of the benefits are already captured?

Well, I think it's a matter of now finding the right partners. How more could we expand that without incurring additional cost for the customers? I believe we can do more. You know, I mean, in a couple of ways, in our own post offices where our margins will be higher. I think if we can find a way to run our own post offices at lower cost, that will improve margins. Of course, in the partner's network today, I think awareness is not so great because you also asked the question. So I think we probably can drum up awareness and work out the processes in such a way that it will improve our margins. I mean, even the PIC network itself, we are working together now. We also can leverage on that to make it more comfortable. If you note some of the moves that I think Suyin has undertaken, we are trawling the posting of letters at the foot of the HDB. That HDB, the letterboxness is our asset line. We are the only ones with that access and all those things to retrieve letters. So, letters plus more parcels is one area we will be looking at and see how we can leverage and squeeze more out of our infrastructure. So, we have our own infrastructure, the partners' infrastructure. We will see how we can do more cost-to-serve and maybe get more volume into our infrastructure. The $30 million investment at the parcels lot at what point can that centre completely take over the parcels and that sort of thing? Is there a timeline?

Without next year?

Without next year. But it will not fully take over. It will take over the whole city. For parcels, yes. For parcels, yes, but we've also got the infant facility, the lock-up area. We've also got the processing facility for larger parcels. So this is really focused primarily on the small parcels. But as you know, primarily... 70-80% of mussels that come across the cross-border of the Mastiff Bay are that small. So we will be able to generate about 400,000 capacity just from this. That long to unplugged? Long to unplugged. And the large ones will be moving to that? No, the large one is already at the logistic. Currently, there's still, we still process new letters. I think the question was, when will we ever move? Everything, because the facility is quite big, I've seen it. I think it will not take over everything because we've got the sorting center for mail that's still here. There's a certain shelf life to it. And there's a certain purpose of, I mean, there's two utilities. Of course, if we completely write down that thing, it's going to hit our focus. So over time, we will migrate and concentrate more and more so that it becomes more efficient. So you can see the old management stated that Simple Center is for sale. So is there any change in the stance? We are reviewing that stance and once they are ready, we will accept it. Secondly, is there any possibility to see, because I think there is a very good theory network, I mean not say very good, there is a very good theory network to do all their injuries and sometimes they need big volume and they are not delivered. I think they are also government. I'm not sure NTUC will call themselves government, but there's a separate matter. Thanks for the tip, we'll talk to them. So there's no talks yet? I don't know. Is this Cheers and Fairfax Express actually a part of the combination with NTUC? For the day, we are trying to see how much possibilities we can start with. Because I think the key problem for you is actually, cost is not an issue, but I think a lot of cost you have to pay for it. But I think the key is actually growing revenue. Without growing revenue, I think you'll cut costs also and you'll spend. For your first quarter, which yields are still profitable? Or is it very dependent on your post-batch for the profitable yields? when we reintegrated the international business back to the workforce, I think we primarily went back to our foundation, which is postal. So the postal network continues to be the most cost-effective way of doing deliveries. However, as maybe compared to some commercial systems, the service levels are probably not as high as compared to maybe a 2 to 3 day opportunity versus maybe a 5 to 7 day. So where we have been looking for opportunities now is if there are consumers and customers that are not looking for express level delivery, there is a space for us to pay. And it continues to be profitable in that sense, because we only pay for what we receive. So currently, as Isaac alluded to in his presentation, a lot of this is related to the boarding-related cost, only when we have the boarding-standard cost. So have you kind of, there's still a large amount non-postal network-related cross-border statistics? Currently, not as much. As I said, we have focused on what we do our best on the personal network. But that obviously does not stop us from working on partnerships. For example, the recent US GDP paid solution that we introduced was actually working with a partner and that is on a commercial solution. For the 30 million, the new blocking centre, you also mentioned that it triples your capacity. Yes, our small packet association capacity, which is currently now housed here. So once that is ready in the middle of next year, it actually triples what we can do for small packets. My understanding is the portal length is actually at the last. So even if you I think what we always try and get out of networks is the way, particularly in the last round of business, is density. For us, we are very fortunate because we run a postal network. We actually deliver to every address. But sometimes, you know, when you go and open your letterbox, there are two letters, right? But the moment we can increase density, which means if we can deliver more to a single location, that makes our network a lot more perfect. And that bottleneck is at the sorting center. Currently now for us, it's actually at the sorting center. It's probably a change, so sorting center will be increased capacity. Last mile, if you can densify, you can no more because one postman does over three parcels into one. My impression is always the last mile was the bottleneck rather than the... For us, increasing the capacity to process is definitely one of the key drivers for improving our revenue policy. Just to follow on this, because you said that it will help your e-sellers, the convenience for the e-sellers, but in this trade, I presume there'll be more critical advice to capture the inflow rather than the outflow. Correct me if I'm wrong, but maybe you're referring to the e-sellers domestic. Is that really a large part of the total evolving market? The two components are clearly, there's also cross-border goods that are disowned, coming a lot from China. There's also obviously a lot of domestic sellers that actually buy from overseas, then resell here. So, essentially they're all in the same thing. It's just a matter of who's selling what and coming from where. I think it's also important to know that a lot of they are selling through the platform. Yes. So basically, it improves your convenience for them, it makes the platforms happy, and the platforms will then put more volumes through. So it's kind of a larger cycle. While it directly benefits the convenience of these small sellers, it's part of the platform's strategy. So it's an overall ecosystem. last one for me you know your income is now like 15 for the same time your interest expense i'll do your technically net cash so i'm just wondering would that be the will you be kind of moving further down interest expense has actually fallen off quite a bit versus last year previously we carried uh even at sympos group level we carried about 300 million in m&e debt That has now all since paid down. So it has actually come down a lot versus last year. If you compare it to our cash holdings, it is actually not that big, but the amount of interest earned on the cash is actually higher. So we do still have two classes of bonds outstanding. $100 billion crunched at another $200 billion. On top of that, there's also the perpetuals of $260. But if you look at the kind of, because that is a hybrid, right? So on the kind of equity accounting available to us, we are seen as a net cash position. I hope your question is valid. Especially if there are interest rates looking to come down, I think you will be able to use some of that burden. It's just a follow-up on Paul's earlier question, talking about densifying the last mile. That has to do with putting the capacity on these gardens. I hope you understand. Are you actually having short calls? There's a pipeline which is stuck at the sorting center, or are you thinking that once it triples, then you'll be able to attract more? This investment is to address a backlog volume. Is it preparing for So what happens now is that during the peak period, the new period where there's a lot more volume coming in, you have to throw men at the top. So in our business, unless you have the automation and the sortation capabilities, then the alternative is to use people. And as you know, people cost is always going up. So this investment is reaching a point where we recognize that we need the capacity, we need the cost, for each item to then be a little bit slower. So it was the right time to then put the investment in one to address existing crisis that we have in terms of requiring men to do the issue as far as to create capacity to allow our customers to go alongside with them as that business goes ahead. We have time for maybe one or two more questions.