Following a strategic review of its US businesses, Singapore Post Ltd (SingPost) has put its US e-commerce fullfillment companies, Jagged Peak and TradeGlobal up for sale as it exits the US market.
Intensifying competition and rising costs alongside customer bankruptcies in the industry were cited as key issues behind the move. Both companies were acquired in 2015 when the Singapore postal operator turned e-commerce company, began implementing a strategy to build an end-to-end e-commerce logistic network and technology platform.
The US investments took place under the watch of Wolfgang Baier, who resigned as chief executive in December 2015.
As a result of the decision, SingPost says its “strengths and strategic competitive advantages are in Southeast Asia and Asia Pacific, which would provide attractive growth opportunities and better returns on investments.”
We remain committed to our eCommerce business, as it remains a key part of our strategy towards future financial growth. The Group’s competitive advantage lies in Asia Pacific where we are seeing the strongest growth in volumes and yields, and we will continue to refine our businesses to leverage the growth.” – Paul Coutts, Group CEO of SingPost
SingPost, making the announcement in its full year results, expects ongoing losses from the US businesses until it completes its exit.
Paul Coutts, Group CEO of SingPost, says: “Despite our best efforts in turning the US business around, we faced increasingly intense challenges which impacted our performance. As a result, we made the difficult decision to commence the sale process for our US eCommerce business.
“We remain committed to our eCommerce business, as it remains a key part of our strategy towards future financial growth. The Group’s competitive advantage lies in Asia Pacific where we are seeing the strongest growth in volumes and yields, and we will continue to refine our businesses to leverage the growth.
“In the immediate term, we continue to focus on improving our operations in Singapore to better serve the needs of customers in our home market,” Coutts adds.
Overall the Group saw higher cross-border e-commerce volumes driving revenue gains, up 2.9 per cent to SGD 1.56 billion (USD 1.14 billion) for the full year ended 31 March 2019.
Net profit attributable to equity holders declined by 86 per cent to SGD19 million, mainly due to one-off impairment charges of the US businesses, it says. Underlying net profit declined 5.8 per cent to SGD 100.1 million excluding the impact of exceptional items and other one-off items. Excluding the US businesses, underlying net profit would have closed 15.8 per cent higher for the full year.
The Group’s Post and Parcel segment saw revenue rise 4.1 per cent for the full year, driven by strong international mail revenue growth with higher cross-border eCommerce-related delivery volumes.
The Logistics segment ended the year with a slight revenue decline of 0.3 per cent for the full year. The Group’s freight forwarding business recorded higher revenue due to an increase in freight rates, but the increase was offset by a revenue decline in the exit of unfavourable customer contracts for Quantium Solutions and the strengthening of the Singapore Dollar against the Australian dollar for CouriersPlease.
Loss on operating activities for the Logistics segment narrowed by 76.2 per cent, largely due to a reduction in losses at Quantium Solutions, it says. Chinese e-commerce giant Alibaba holds a 34 per cent stake in Quantium, with SingPost holding the remainder.
In the eCommerce segment, revenue declined 0.3 per cent for the full year, as the Group continues to face challenges in the US in the midst of what it says is “intensifying competitive and cost pressures, and an increase in customer bankruptcies in the industry”. Loss on operating activities widened to SGD 51.9 million for the full year.
Revenue for the Property segment increased by 13.5 per cent for the full year; profit on operating activities rose 29.8 per cent for the full year, largely due to rental income from the SingPost Centre retail mall.