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GOING INTERNATIONAL
ANNUAL REPORT 2014/2015
Australia
China
Hong Kong
India
Indonesia
Japan
Malaysia
New Zealand
Philippines
Singapore
Taiwan
Thailand
United Kingdom
United States
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OUR VISION
CONTENTS
REGIONAL LEADER IN ECOMMERCE LOGISTICS AND TRUSTED COMMUNICATIONS
Rapid globalisation and proliferation of technology make it imperative to go beyond Singapore shores for long-term growth. SingPost has been steadily expanding its presence overseas, leveraging its subsidiaries and partners. SingPost is building on its five business pillars - Mail, Digital Services, Logistics, Retail & Financial Services, and eCommerce – to become a global brand. Continuing to evolve, to innovate, to leapfrog in the constant endeavour to serve stakeholders. Driven by its vision to be a regional leader in ecommerce logistics and trusted communications.
6 Letter to Shareholders 10 Board of Directors 14 Mail 17 Logistics 20 Retail & eCommerce 23 Property 24 Investor Relations 25 Shareholder Returns 26 Business Review 27 Group Financials 28 Group Five-Year Financial Summary 30 Financial Review and Outlook 36 Corporate Governance Report 65 Building a Long Term Sustainable Group and Strengthening CSR
71 Profile of Key Executives 73 Statutory Reports and Financial Statements 235 SGX Listing Manual Requirements 238 Shareholding Statistics 240 Contact Points
MAIL LOGISTICS ECOMMERCE DIGITAL
SERVICES RETAIL &
FINANCIAL SERVICES
5BUSINESSPILLARS
Retail & Financial Services eCommerce Logistics
Mail Digital Services
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100
15
ACROSS SINGAPORE AND INTO THE REGION
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As part of its regional thrust, SingPost has been adding relevant capabilities in various geographies
as a conduit for businesses to connect into Southeast Asia and wider Asia. Building on its competencies, SingPost is pioneering a fully integrated low-cost
ecommerce logistics model covering freight, customs and regulations management; warehousing
and fulfilment capabilities; last mile delivery and returns; and ecommerce web services. Its Regional
eCommerce Logistics Hub in Singapore will be a vital springboard to regional markets.
ECOMMERCE LOGISTICS
4
1500
5 MILLION
NEW GROWTH OPPORTUNITIES
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For consumers and businesses, the emergence of a global marketplace means choice, convenience, mobility, speed, ease of use, 24/7. SingPost addresses these needs with digital and mobile solutions including mobile apps, SAM, and ScanMail. These omni-channel platforms offer customers a consistent and unified experience. SingPost is also investing over S$100 million to further innovation,
productivity and customer service. These include a more efficient mail sorting system, new generation post
offices integrated with 24/7 automated self-service lobbies, and higher-capacity three-wheeler scooters.
TRUSTED COMMUNICATIONS
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Dear Shareholders,
Much has been achieved over the last 12 years since the Group first embarked on its transformation. From a domestic postal operator, SingPost has more recently become a regional player in ecommerce logistics. Since the IPO in 2003, SingPost’s market capitalisation has grown by approximately 260 per cent, and total shareholders’ return over the period amounted to approximately 350 per cent. Over the years, we have been putting into place the building blocks of an end- to-end ecommerce logistics solutions platform in Asia Pacific, in our bid to survive the reality of declining mail. We are continuing to pioneer and push beyond our current forays into this field, and build upon this foundation to expand and grow.
Financial Performance
The Group’s focus on ecommerce and logistics has been bearing fruit. Revenue amounted to S$919.6 million in FY2014/15, an increase of 12 per cent from S$821.1 million in FY2013/14. Notably, approximately 33 per cent of revenue came from our expanding overseas interests, compared to 12.9 per cent three years ago, at the start of the accelerated transformation.
In addition, we estimate ecommerce related revenue at about 28 per cent of group revenue in FY2014/15, with ecommerce customers across the Group numbering over 1,000.
In spite of the Group’s continued investment in transformation contributing to an increase in operating costs, we achieved a steady profit performance. Underlying net profit, which reflects the Group’s core operating performance, was S$157.2 million, an increase of 5.2 per cent from S$149.5 million last year. Net profit, which now includes fair value gains from investment properties, was lower by 17.9 per cent at
LETTER TO SHAREHOLDERS
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S$157.6 million compared to the restated S$192 million for FY2013/14.
Operating cash flow remained healthy, at $235 million as at 31 March 2015 compared to S$241.8 million as at 31 March 2014. Free cash flow was lower at S$130.6 million in FY2014/15 compared to S$204.1 million in the previous financial year as a result of higher capital expenditure. The Group remained in net cash position of S$345.8 million.
Dividend
Given the healthy operating cash flows, the Board is recommending a variable dividend of 1.25 cents per share, in addition to the final quarter dividend of 1.25 cents per share. This would bring the total annual dividend to 6.25 cents per share.
Barring unforeseen circumstances, SingPost will continue to pay out a base annual dividend of 5 cents per share. This will be paid on a quarterly basis, i.e. 1.25 cents per share per quarter.
Transformation Update
The Group’s efforts in spearheading ecommerce logistics are being recognised. In June 2014, SingPost was awarded the World Mail Award for eCommerce.
Investments in the transformation continue. Capital expenditure has increased. In FY2014/15, capital expenditure amounted to S$104.4 million, a 176.5 per cent increase from FY2013/14.
Trusted Communications In support of the Government’s call to raise productivity, we invested S$45 million in new mail sorting equipment. The integrated machines, which were installed and commissioned smoothly during the
financial year, help to deliver both a more productive as well as better service. This is especially so, as operating costs in Singapore continue to increase. The increase in postage rates during the financial year, the first effective rate revision since 2006, will help to partially mitigate cost increases.
As part of our ongoing efforts to transform the post office network, we started to roll out new generation post offices which are remodelled into vibrant lifestyle hubs integrated with 24/7 automated self-service lobbies.
Our investment in innovation continued with the integration of transactional services onto a digital platform. This offers a unified user experience for our customers across the self-service automated kiosks, mobile phones, tablets and personal computers.
We also continued to upskill our frontline staff. Development initiatives like Lean Six Sigma, WSQ certification courses and organisation-wide C3 service training were rolled out to help staff stay relevant, and raise their productivity and income. This is also in line with the Government’s efforts to drive lifelong employability and greater productivity. It also helps the company to innovate and create value in new ways.
Regional eCommerce Logistics During FY2014/15, Alibaba Investment Limited took a 10.3% stake in SingPost via share issue and treasury share transfer.
Our web-solutions business has taken on more globally known mono-brand customers and further extended into new online markets in Asia. To strengthen our regional ecommerce logistics capabilities, our subsidiaries undertook several overseas acquisitions and joint ventures. SP eCommerce entered a joint venture to tap the ecommerce opportunities in the market. Acquisitions included:
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• The Store House in Hong Kong by General Storage as part of the regional expansion of the self-storage solutions business;
• Couriers Please in Australia by Quantium Solutions for a complete end-to-end ecommerce logistics chain in the Pacific region; and
• F.S. Mackenzie UK and FPS NZ by Famous Holdings which extended its freight forwarding network.
Investments in ecommerce logistics infrastructure continued. The fully integrated Regional eCommerce Logistics Hub, which is expected to be operational in the second half of 2016 and be equipped with state- of-the-art technology, will be the first of its kind in Southeast Asia.
We reached our stretch target of 100 automated smart parcel locker stations, POPStations, in Singapore, and introduced more services on the locker stations, such as posting of parcels and payment for online purchases.
Transformation of Support Enablers Underpinning the Group’s transformation are the critical investments in supporting enablers, such as technology and human resources.
For the Group to play a leading role in enabling our customers to operate in the online space, we must have the necessary technology capabilities. We have been investing in various areas such as track and trace for our delivery network, IT integration for our various operations, digital platforms and mobile apps.
In addition, the Group is shaping a lean operation backbone across the organisation. For example, we are leveraging technology for support services, revamping and improving processes, and outsourcing support functions. This will also enable the Group to be more
efficient and have systems that are flexible and scalable as we expand our presence into various markets across the region.
Our employees are our most valuable asset. We are strengthening our talent and management bench, and investing in training and upgrading the skill sets of our staff. We continue to provide support for lower income staff through the SingPost Inclusivity Fund.
People and Culture
Our transformation efforts have delivered strong results because our core values are embedded in our culture, ensuring long-term sustainability. Our core values of Trust, Total Customer, One Team, Top Execution, and Transformation have proven more important than ever, serving as the bedrock for over 7,000 employees across geographies, including newly acquired companies. Our values shape our culture, and help us to better serve our stakeholders.
Going International
We are pushing ahead with the next phase of the Group’s transformation. With building blocks in place in key markets in Asia Pacific, we are now further accelerating our overseas expansion. This is in keeping with the Government’s encouragement of local companies to spread their wings overseas. Our key focus is to extend and strengthen the Group’s ecommerce logistics network in Asia Pacific, especially our warehousing and delivery capabilities.
Our investments into the future will continue, with higher expenditure on resources and infrastructure. We are investing in building up talent in our workforce in Singapore and the region as the Group operates in
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the international arena. Infrastructure, such as the upcoming Regional eCommerce Logistics Hub, will position us for further growth.
As part of our growth strategy, we will continue to pursue investment opportunities, including M&As and joint ventures in the region.
As we go international, our commitment to the Singapore market and domestic customers remains unchanged. This is despite the fact that the Group faces increasing challenges. The structural decline in the traditional postal business is reflected in lower letter mail volumes and post office transactions. Costs have risen significantly over the past eight years since the postage rate increase in 2006. The recent rate revision in October 2014 provides some relief. Costs such as labour expenses, are expected to continue rising in Singapore. Competition has intensified as more operators enter the regional markets for a share of transhipment, ecommerce and logistics businesses.
Commitment to All Stakeholders
SingPost is committed to its service obligations and quality of service standards as the Public Postal Licensee of Singapore. Notwithstanding the challenges of declining traditional letter mail volumes and rising costs of operation, we have been investing in postal infrastructure and service quality, even as some postal operators worldwide have been scaling back.
The Group is commited to being a good corporate citizen and contributes to the community through corporate adoptions of charities and causes, donations and sponsorships. Apart from corporate giving, we also encourage our staff to volunteer their time and contribute towards our adopted charities -- Food from
the Heart and the Jamiyah Children’s Home. Giving back to society is, and always will be an integral part of our corporate culture and we will continue to engage and contribute to the community.
Thank you
On behalf of the Board, I wish to express my appreciation to our management and staff who have been essential in driving the Group forward. We greatly appreciate the continued support of our partners, the union and customers, as we forge ahead with our transformation.
I thank our Board of Directors for their invaluable guidance and contributions during this critical period. They have gone beyond the call of duty, in their efforts to help the company accelerate its transformation. On behalf of the Board of Directors, I welcome our new directors, Mr Goh Yeow Tin and Mr Justin Chen. The Board has been further strengthened by their presence and benefitted from their insights.
Last but not least, we appreciate the support of our shareholders during these challenging but exciting times as we transform the Group into a regional leader in ecommerce logistics and trusted communications.
LIM HO KEE CHAIRMAN
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BOARD OF DIRECTORS
Lim Ho Kee, 70 Chairman Non-executive, independent director
Date of first appointment as a director: 25 April 1998
Date of last re-election as a director: 29 June 2012
Board committee(s) served on: Executive Committee (Chairman) Nominations Committee (Member)
Academic & Professional Qualification(s): Bachelor of Science (Economics), London School of Economics, United Kingdom
Present Directorships in other listed companies (as at 31 March 2015): Nil
Principal Commitments: Majuven Pte. Ltd. (Managing Partner)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Jardine Cycle & Carriage Limited Keppel Land Limited
Goh Yeow Tin, 63 Deputy Chairman Non-executive, independent director
Date of first appointment as a director: 7 July 2014
Date of last re-election as a director: -
Board committee(s) served on: Compensation Committee (Chairman) Executive Committee (Member)
Academic & Professional Qualification(s): Bachelor of Engineering (Honours) (Mechanical), the University of Singapore Masters of Engineering (Industrial Engineering and Management), the Asian Institute of Technology
Present Directorships in other listed companies (as at 31 March 2015): Vicom Ltd Sheng Siong Group Ltd OEL (Holdings) Limited Lereno Bio-Chem Ltd. AsiaPhos Limited
Principal Commitments: Seacare Medical Holdings Pte Ltd (Non-Executive Chairman)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Nil
Tan Yam Pin, 74 Non-executive, independent director
Date of first appointment as a director: 25 February 2005
Date of last re-election as a director: 4 July 2014
Board committee(s) served on: Audit Committee (Member) Board Risk and Technology Committee (Member) Compensation Committee (Member) Executive Committee (Member)
Academic & Professional Qualification(s): Bachelor of Arts (Economics), University of Singapore Master of Business Administration, University of British Columbia Fellow, Canadian Institute of Chartered Accountants, Canada
Present Directorships in other listed companies (as at 31 March 2015): Keppel Land Limited Great Eastern Holdings Limited
Principal Commitments: Singapore Public Service Commission (Deputy Chairman)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) BlueScope Steel Limited (Australia)
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Professor Low Teck Seng, 60 Non-executive, independent director
Date of first appointment as a director: 8 October 2010
Date of last re-election as a director: 28 June 2013
Board committee(s) served on: Board Risk and Technology Committee (Chairman)
Academic & Professional Qualification(s): Bachelor of Science (First Class Honours) and Ph.D, Southampton University Institute of Electrical and Electronics Engineer (Fellow) Royal Academy of Engineers (Fellow)
Present Directorships in other listed companies (as at 31 March 2015): Excelpoint Technology Ltd ISEC Healthcare Ltd
Principal Commitments: National Research Foundation (Chief Executive Officer)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Innotek Limited
Keith Tay Ah Kee, 71 Non-executive, lead independent director
Date of first appointment as a director: 25 April 1998
Date of last re-election as a director: 4 July 2014
Board committee(s) served on: Nominations Committee (Chairman) Audit Committee (Member) Executive Committee (Member)
Academic & Professional Qualification(s): Fellow, Institute of Chartered Accountants in England and Wales Honorary Fellow, Institute of Singapore Chartered Accountants
Present Directorships in other listed companies (as at 31 March 2015): Singapore Reinsurance Corporation Limited Rotary Engineering Limited FJ Benjamin Holdings Ltd YTL Starhill Global REIT Management Limited
Principal Commitments: Stirling Coleman Capital Ltd (Non-Executive Chairman)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) SATS Limited
Dr Wolfgang Baier, 41 Group Chief Executive Officer Executive, non-independent director
Date of first appointment as a director: 5 October 2011
Date of last re-election as a director: 4 July 2014
Board committee(s) served on: Executive Committee (Member)
Academic & Professional Qualification(s): Ph.D in Laws (Distinction), University of Vienna Master of Laws, University of Vienna (Austria) Master of Business Economics, Universities of Exeter (UK) and Graz (Austria)
Present Directorships in other listed companies (as at 31 March 2015): Nil
Principal Commitments: Nil
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Nil
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Bill Chang York Chye, 49 Non-executive, non-independent director
Date of first appointment as a director: 15 Nov 2010
Date of last re-election as a director: 28 June 2013
Board committee(s) served on: Board Risk and Technology Committee (Member) Compensation Committee (Member)
Academic & Professional Qualification(s): Bachelor of Engineering (Electrical and Computer Systems Engineering) (Honours), Monash University
Present Directorships in other listed companies (as at 31 March 2015): Nil
Principal Commitments: Singapore Telecommunications Limited (Chief Executive Officer, Group Enterprise) Singapore Polytechnic (Chairman of Board of Governors)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Nil
Chen Jun, 41 Non-executive, non-independent director
Date of first appointment as a director: 31 July 2014
Date of last re-election as a director: -
Board committee(s) served on: Nil
Academic & Professional Qualification(s): Bachelor of International Finance and Accounting, Shanghai University EMBA degree, INSEAD, France
Present Directorships in other listed companies (as at 31 March 2015): Alibaba Health Information Technology Limited
Principal Commitments: Alibaba Group Holding Limited (Vice President)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Nil
Soo Nam Chow, 61 Non-executive, independent director
Date of first appointment as a director: 20 December 2013
Date of last re-election as a director: 4 July 2014
Board committee(s) served on: Audit Committee (Chairman) Nominations Committee (Member)
Academic & Professional Qualification(s): Fellow Member, Association of Chartered Certified Accountants, United Kingdom Member, Institute of Singapore Chartered Accountants
Present Directorships in other listed companies (as at 31 March 2015): Mapletree Industrial Trust Management Ltd
Principal Commitments: Nil
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Nil
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Aliza Knox, 54 Non-executive, independent director
Date of first appointment as a director: 30 August 2013
Date of last re-election as a director: 4 July 2014
Board committee(s) served on: Board Risk and Technology Committee (Member)
Academic & Professional Qualification(s): Masters in Business Administration in Marketing (Distinction), New York University Graduate School of Business Administration Bachelor of Arts in Applied Math and Economics (magna cum laude), Brown University
Present Directorships in other listed companies (as at 31 March 2015): InvoCare Limited GfK SE
Principal Commitments: Twitter, Inc., Singapore (Managing Director)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Nil
Michael James Murphy, 61 Non-executive, non-independent director
Date of first appointment as a director: 7 August 2009
Date of last re-election as a director: 29 June 2012
Board committee(s) served on: Board Risk and Technology Committee (Member)
Academic & Professional Qualification(s): Bachelor of Science (Nuclear Engineering and Industrial Technology), University of Massachusetts
Present Directorships in other listed companies (as at 31 March 2015): Nil
Principal Commitments: Postea Group, Inc. (Founder and Chief Executive Officer)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Nil
Zulkifli Bin Baharudin, 55 Non-executive, independent director
Date of first appointment as a director: 11 November 2009
Date of last re-election as a director: 4 July 2014
Board committee(s) served on: Audit Committee (Member) Compensation Committee (Member) Nominations Committee (Member)
Academic & Professional Qualification(s): Bachelor of Science (Estate Management), National University of Singapore
Present Directorships in other listed companies (as at 31 March 2015): Ascott Residence Trust Management Limited
Principal Commitments: Uzbekistan (Non-Resident Ambassador) Kazakhstan (Non-Resident Ambassador) Indo Trans Logistics Corporation (Chairman) Civil Aviation Authority of Singapore (Board Member) Singapore Management University (Member, Board of Trustees)
Past Directorships in listed companies held over the preceding three years: (from 31 March 2012 to 30 March 2015) Hup Soon Global Corporation Limited
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Continued investments in service
Even as SingPost accelerates its transformation efforts, it continues to sharpen its focus on meeting the needs of customers in this digital age, and delivering a better service experience.
To strengthen our capabilities and enhance delivery service quality, we are investing over S$100 million in the Singapore market over several years, despite mail volume decline and increasing costs of operation. The new S$45 million integrated sorting machines were fully operational in the second half of FY2014/15. These further increased the automation process, sorting capacity and speed of sorting, leading to improved efficiency and accuracy. As part of its efforts to enhance service quality, SingPost strengthened its postal workforce, hiring additional delivery staff and Quality Control officers to boost capacity to serve the increase in population and new housing estates. We also increased the salary of our postmen and frontline staff as well as continued to work closely with the Union to introduce measures to enhance job satisfaction. The postage rate adjustment in October 2014 will help to partially fund the investment in service enhancements.
In response to the growing ecommerce demographic, SingPost introduced new initiatives to offer customers greater choice and convenience during FY2014/15. We developed an envelope version of SmartPac known as SmartPac Lite for ecommerce items of up to 1kg to cater to the growing population of local online retailers. We also extended our operations to six delivery days, with Saturdays dedicated to delivering mail packages, as well
Continued investments to drive innovation, productivity and customer service to bring greater value to customers.
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as extended our call centre service to offer customers round-the-clock access. In addition, we expanded our fleet of higher capacity three-wheeler scooters for more and heavier ecommerce items, greater stability and safety for the postmen.
Our continuous efforts to enhance service quality have generated positive results. SingPost was bestowed the Service Provider of the Year 2014 Award by the Postal Technology International. Locally, SingPost was the only company in the transport and logistics sector to report a significant improvement in the Customer Satisfaction Index of Singapore 2014. Customer satisfaction in postal services increased to 71.2 points.
Smarter ways to connect
We remain focused on developing and innovating our digital offerings to help businesses seize the growth opportunities of the digital economy. In FY2014/15, we launched a subscription based digital mail service - ScanMail for small and medium-sized enterprises (SMEs), enabling them to access important physical documents in a digital setting anytime and anywhere.
We also strengthened our suite of integrated direct mail solutions. DMrocket, our direct mail business extended its interactive digital offerings to include Augmented Reality app, samplestore.com and Marketing Lab. Marketing Lab is an all-in-one portal that helps corporate customers run targeted campaigns to achieve their marketing objectives and return on their investment. The Sample Store, our tryvertising online platform, is developing a mobile application that will
provide a seamless consumer experience for redeeming samples on-the-go, facilitating sample search and sending in sample requests.
Strengthened international postal collaborations
As Singapore’s designated representative at the Universal Postal Union (UPU), SingPost participates actively in various working groups and committees in the UPU Postal Operations Council (POC). Through working in the various POC committees such as Product Strategic Integration Group, Supply Chain Integration, Markets Development and Physical Services, SingPost helps to define the postal industry for the future.
SingPost continues to serve on the boards of various international and regional postal cooperatives. It leads the Asia Pacific and ASEAN communities in a few postal initiatives to stimulate growth and improve service quality.
We remain focused on developing and innovating our digital offerings to help businesses seize the growth opportunities of the digital economy.
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Philately & Stamps
To strengthen bilateral ties with other postal administrations, SingPost collaborated with Philatelie Liechtenstein to release the first joint stamp issue, as well as with China Post on a commemorative prepaid
To mark Singapore’s 50th year of independence, SingPost rolled out a series of SG50 commemorative products
postcard celebrating the 20th anniversary of the founding of Suzhou Industrial Park. We also released stamp issues covering significant national events, such as commemorating 50 years of tourism and the completion of Singapore Sports Hub. A total of 11 stamp issues were released in FY2014/15.
In celebration of Singapore’s 50th year of nation building, we started releasing a three-set series of commemorative stamps from 2013, with the final set to be issued in 2015. In January 2015, we kicked off our first SG50 activities - stamped mail imprinted with a SG50 slogan depicting Singaporeans’ unique and fun traits, values and characteristics each month. We also launched a special edition SG50 MyStamp Folder showcasing Singapore iconic landmarks, culture and events, as well as limited edition SG50 Hello Kitty plush collectibles and MyStamp folder to celebrate the occasion.
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LOGISTICS
Stronger international presence
As part of our strategy to be a regional ecommerce logistics leader, we have made a number of acquisitions and invested in logistics infrastructure and last mile capabilities to strengthen our end-to-end integrated ecommerce logistics value chain. These include freight, customs and regulations management; warehousing and fulfilment capabilities; last mile delivery and returns; and ecommerce web services. Our focus is Asia Pacific, where we understand the region’s business and cultural characteristics.
Our wholly owned subsidiary, Quantium Solutions, made steady progress in expanding geographic coverage and capabilities. It acquired Couriers Please Holdings, an Australian express parcel delivery service, enabling us to provide end-to-end solutions across ecommerce, forwarding, warehousing and delivery in Australia. Quantium Solutions also expanded its ecommerce warehouse footprint with additional facilities in Hong Kong, Indonesia, New Zealand and Singapore.
We extended our international freight network through Famous Holdings, our freight forwarding arm. Famous acquired UK-based freight forwarder F.S. Mackenzie, providing the Group an entry point into the Western European freight market and strengthened its ability to provide customers with integrated ecommerce logistics solutions. Famous also acquired 90 per cent of Famous Pacific Shipping (NZ) in January 2015, broadening its network and boosting its end-to-end fully integrated ecommerce logistics solutions in the Pacific region.
We continued to develop our end-to-end ecommerce logistics solutions for a variety of markets across Asia and globally.
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The fully integrated Regional eCommerce Logistics Hub with state-of-the-art automation will help to facilitate our expanding ecommerce logistics business.
General Storage, which offers self-storage solutions under the brand of Lock+Store, acquired The Store House which has four storage facilities in Hong Kong. During the year, its facility in Malaysia commenced operations, offering cost-effective storage solutions and serviced office space. In Singapore, General Storage expanded its service offerings to include serviced office space at its flagship Chai Chee facility, and a bulk package counter at its Serangoon North outlet. SMEs can also tap on Lock+Store’s short- and long-term storage facilities with an option to use its ‘store, pack and deliver’ service for added convenience and speed. Additionally, SMEs can also rent office space as their businesses expand.
Enhanced speed-to-market
While SingPost forges ahead with its regional plans, the Singapore market remains a key priority as it continues to strengthen its logistics hub services for Singapore as well as internationally.
To enhance our ecommerce logistics capability amid a fast growing ecommerce market in Asia, SingPost is investing approximately S$182 million to develop a fully integrated Regional eCommerce Logistics Hub. The integrated hub, which includes an office block, will house automated parcel sorting and warehousing systems and bring together the ecommerce activities of Quantium Solutions, Singapore Parcel, Lock+Store and
SP eCommerce. The new facility when fully operational in the second half of 2016 is expected to further improve productivity, leading to lower handling cost and higher operational efficiency.
We continued to focus on enhancing our domestic parcel delivery operations and services to increase customer satisfaction. For instance, SMEs can use ezy2ship.com which allows them to prepare, pay and print postage for their packages easily from their office and at their own convenience. ezy2ship.com also allows them to manage and track their shipments easily.
We rolled out EzyTrak Mobile - an android delivery application that made our delivery more cost-efficient. The app facilitates our couriers to perform their job
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With the POPStation app, consumers can pick up their parcels even more quickly when they are within close proximity to the POPStation.
easily on any android-based smartphone, and allows customers to sign the delivery acceptance and rate our courier services as well.
Greater convenience
In our continuous efforts to provide customers greater convenience, we rolled out 100 POPStations islandwide at accessible places, such as shopping malls, office buildings, sports and recreation centres, post offices, petrol stations and community centres. Designed for today’s on-the-go lifestyles, the POPStation is popular with parcel recipients as it offers 24/7 access, security and convenience at no extra cost. We also added innovative features to further enhance customers’ online shopping experience, including a mobile app that enables remote unlocking of the secured locker, making parcel collection even speedier. The app also allows customers to track their parcels, receive alerts, manage their accounts or get information on the POPStation locations. Other new features enable customers to post their parcels, pay for their online purchases and collect them on-the-spot as well as return parcels.
To bring even greater convenience to online shoppers, SingPost works with eRetailers who can use the
POPStation as an alternative last-mile delivery option for customers. Partner eRetailers onboard include popular brands like Omigo, Taobao, vPost, Xiaomi and Zalora with more customers in the pipeline.
Our relentless efforts in enhancing our delivery service have not gone unnoticed. We were awarded the 2014 EMS Gold Certification Award by the Universal Postal Union, earning the honour of being the only company in the world to have won an award every year since 2001.
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We rolled out more than 10 new generation post offices with self-help friendly features that offer 24/7 access to key services.
RETAIL & ECOMMERCE
New generation post offices
We continued to make our post offices future-ready to meet the changing needs and lifestyles of our customers, particularly in the areas of their global ecommerce and digital needs. Following the successful pilot at Raffles Place Post Office, we rolled out more than 10 new generation post offices with self-help friendly features that offer 24/7 access to key services such as parcel collection and bill payments. This helped improve customer experience while enhancing staff productivity. Steps were also taken to streamline the product offerings, with an emphasis on merchandise related to customers’ mail and logistics needs. More new generation post offices will be rolled out gradually in the coming years.
The post office network serves as touchpoints for third parties that are interested in leveraging our convenient islandwide network and trusted infrastructure. In FY2014/15, we saw strong interest from financial institutions and government agencies in outsourcing day-to-day transactions, such as bill payments and cash deposits/withdrawals to the post office network. Customers will be able to access an expanded range of transactions through both physical and digital channels.
A new way to connect
The rise of digital technologies is transforming the way individuals and businesses communicate and access services. With customer centricity in mind, we began to build, design and work towards a unified user
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experience across our digital assets from web to mobile. We aim to integrate it seamlessly from online to our offline properties, such as in our post offices. We also integrated digital advertising across our digital assets i.e. web, mobile, TV and kiosks. Our enhanced SingPost app hit 0.4 million downloads, a 2.5 times growth from the previous year.
During the year, we extended our Self-service Automated Machines (SAM) from a kiosk to an omni- channel platform. In keeping with our innovation approach and alignment with customer’s changing lifestyles, we launched the web and mobile version of SAM in October 2014, and the pilot of the redesigned SAM kiosk in March 2015. Customers can access many SAM kiosk transactions on their own devices through the mySAM web portal and SAM mobile app. More enhancements will be added in the near future.
Financial services To provide greater accessibility to customers seeking life insurance solutions, SingPost rolled out AXA@POST at 34 selected post offices. This exclusive postassurance partnership with AXA, which was first announced in 2013, commenced in January 2015. We also introduced the AXA Rewards programme to reward AXA@POST customers for their support. They can select premium gifts at SingPost’s online marketplace, www.omigo.com.sg, and have them delivered to their doorstep.
The Standard Chartered SingPost Platinum Visa credit card, launched in 2012, was refreshed with new features added to better serve the growing ecommerce needs of customers. It is the first in the market to provide an ‘online price guarantee’ which allows the cardholder to get back 50 per cent of the price difference from the bank should he find a better deal online after purchase. It also offers seven per cent cashback on online purchases, which is the highest cashback rate offered in Singapore for online shopping. Importantly, the card also comes with ‘card safe guarantee’ to protect cardholders from fraudulent and unauthorised transactions.
Integrated eCommerce solutions
In the ecommerce space, we continued to enable businesses to tap the growing ecommerce market in Asia. We expanded our online offerings in the region to include Australia, New Zealand, Hong Kong and South Korea, providing businesses a connection into Asia Pacific.
With AXA@POST, customers have access to financial planning advice and services at selected post offices.
22
We continued to scale up investments in technology like online security, scalability, marketing and omni- channel capabilities, remaining at the forefront of ecommerce and logistics in the region. Leveraging key partnerships with global technology providers, we enhanced our technology services further to help businesses expand their ecommerce operations across multiple markets in a scalable, sustainable model.
In April 2015, SingPost rolled out a fully integrated end- to-end ecommerce fulfilment solution to help SMEs sell online, scale and enhance productivity. This solution,
ezyCommerce automates the order-to-fulfilment cycle enabling SMEs to leverage SingPost’s efficient warehouse management and extensive distribution networks to scale up their business across multiple marketplaces and countries. Modular solutions such as shopping cart integrations, returns and import services will be rolled out progressively. During the year, our ecommerce solutions gained traction. We have more than 1,000 ecommerce customers which include global brands such as Deckers Outdoor, Muji and Triumph. In February 2015, we partnered Google for the first Great Online Shopping Festival in Singapore.
To provide online shoppers more cost efficient shipping solutions, our online shipping portal, vPost, launched a sea freight service between US and Asia Pacific. vPost also partnered postal administrations such as Australia Post and Austria Post to enable their residents to have their online purchases from US, UK, China and Japan shipped to them.
For our continuous efforts to help businesses to efficiently grow their business locally and internationally, SingPost won the World Mail Award for eCommerce in June 2014.SingPost launched ezyCommerce, a fully integrated end-to-end
ecommerce fulfilment solution, to help SMEs efficiently grow their business locally and internationally.
23
PROPERTY
Singapore Post Centre (SPC), a mixed-use development, comprising office, industrial and retail lease space, is our largest property. To focus on enhancing value for our shareholders and in tandem with the Urban Redevelopment Authority’s plans to make Paya Lebar Central one of the sub-regional centres in Singapore, the Group intends to redevelop the retail mall of SPC. SPC continued to enjoy a high occupancy rate of 96 per cent as at 31 March 2015.
List of Major Properties
Name Address Title Yrs With
Effect From
Land Building
(SQ M) Gross Floor Area (SQ M)
Airmail Transit Centre 21 North Perimeter Road Leasehold 30 25.09.00 2,903 8,862
Alexandra Post Office 110 Alexandra Road Leasehold 99 31.03.92 2,305 923
Bukit Panjang Post Office 10 Choa Chu Kang Leasehold 99 31.03.92 3,264 2,015
Jurong Delivery Base 2 Kian Teck Way Leasehold 30 16.10.95 4,016 3,574
Kallang Delivery Base 18 Jalan Lembah Kallang Leasehold 30 16.09.98 2,761 6,850
Killiney Road Post Office 1 Killiney Road Leasehold 99 31.03.92 1,029 555
Loyang Delivery Base 25 Loyang Lane Leasehold 30 16.10.95 3,519 3,225
MacPherson Post Office 70 MacPherson Road Leasehold 99 31.03.92 1,918 315
Pasir Panjang Post Office 396 Pasir Panjang Road Leasehold 99 31.03.92 1,726 391
Serangoon Garden Post Office 54 Serangoon Garden Way Leasehold 99 31.03.92 1,215 307
Serangoon Road Post Office 755 Upper Serangoon Road Leasehold 99 31.03.92 1,353 3,012
Simpang Bedok Post Office 350 Bedok Road Leasehold 99 31.03.92 1,134 329
Singapore Post Centre 10 Eunos Road 8 Leasehold 99 30.08.82 32,738 137,134
Tanglin Post Office 56 Tanglin Road Leasehold 99 31.03.92 2,622 2,678
Woodlands Delivery Base 9 Woodlands Walk Leasehold 30 16.10.95 3,040 2,393
24
INVESTOR RELATIONS
Enhanced investor engagement and communications
As the pace of transformation continues, we proactively communicate with the investor community to convey information and insights on market dynamics, challenges and strategy. We make use of one-on-one and group meetings, conference calls, post-results roadshows, investor conferences, site tours and various other channels to communicate with investors.
Management participated in investor conferences and non-deal roadshows in Singapore and the region. They also conducted quarterly results briefings to analysts and media, and post-results roadshows. About 181 investor meetings and calls were made during the financial year.
A total of eight research firms covered SingPost, issuing 50 research reports and notes during the year. We continue to partner with the Securities Investors Association of Singapore (SIAS) to organise investor presentations for their members.
FY2014/15 Dividends Per Share
Interim Q1 FY2014/15 1.25 cents
Interim Q2 FY2014/15 1.25 cents
Interim Q3 FY2014/15 1.25 cents
Final FY2014/15 (Proposed) * 2.50 cents
Total Dividends Paid/Proposed * 6.25 cents
* For the approval of shareholders at the 23 rd Annual General Meeting
FY2014/15 IR Calendar of Events
May 2014 Q4 and Full Year FY2013/14 results briefing to analysts and media dbAccess Asia Conference 2014 - Singapore
Jun 2014 CIMB 4th Annual Asia Pacific Conference and Invest Malaysia Conference 2014 - Kuala Lumpur
Jul 2014 22nd Annual General Meeting / Extraordinary General Meeting DBS Vickers The Pulse of Asia Conference - Singapore
Aug 2014 Q1 FY2014/15 results briefing to analysts Post-results investor lunch meeting
Sept 2014 UBS ASEAN Conference 2014 - Singapore Non-deal roadshow - Hong Kong
Oct 2014 UOB Kay Hian Asian GEMS Conference - Singapore
Nov 2014 Q2 and H1 FY2014/15 results briefing to analysts and media Post-results investor lunch meeting
Feb 2015 Q3 and 9M FY2014/15 results briefing to analysts Post-results investor lunch meeting
Mar 2015 Bank of America-Merrill Lynch ASEAN Conference 2015 - Singapore
25
SHAREHOLDER RETURNS
80
40
120
200
160
240
80
100
120
140
160
180
200
Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Nov-14Oct-14 Dec-14 Jan-15 Feb-15 Mar-15
S$1.36
S$1.95
Normalised values Share vol (m)Share volume SingPost STI
SingPost +43.9% FS STI +7.4%
Source: Bloomberg
SingPost Share Price and Trading Volume vs FS STI (FY2014/15)
Share Ownership by Investor Groups
Institutional Holdings by Geographic Distribution
SINGAPORE 22%
NORTH AMERICA
25%
ASIA 21%
EUROPE 32%
RETAIL INVESTORS
30%
INSTITUTIONAL INVESTORS
33%
ALIBABA INVT LTD
10%
SINGTEL 23%
OTHERS 4%
26
The SingPost Group has three main operating divisions: Mail, Logistics and Retail & eCommerce. For the financial year ended 31 March 2015, the Group recorded revenue of S$919.6 million, of which 50.8 per cent was contributed by the core business of Mail. Logistics comprised 42.2 per cent of Group revenue, while Retail & eCommerce contributed the remaining 7.0 per cent. The Mail Division accounted for the bulk of the Group operating profit, at 77.3 per cent, compared to 11.6 per cent by Logistics and 5.2 per cent by Retail & eCommerce.
Revenue Breakdown Operating Profit Breakdown
Geographical Revenue Breakdown
Legend:
LOCAL 67.5%
OVERSEAS 32.5%
7.0%
42.2%
50.8% 77.3%
11.6%
5.9% 5.2%
Mail - Domestic - International - Hybrid - Philatelic
Logistics - Quantium
Solutions - Famous
Holdings - Logistics
including Singapore Parcel, Lock + Store, Transhipment and others
Retail & eCommerce - Retail - Financial
Services - eCommerce
Others - Property
BUSINESS REVIEW
27
658.8
821.1
919.6
565.8
578.5
10.7
14.1
10.3
19.7
14.2
136.5
192.0
157.6
161.0
142.0
6.25
6.25*
6.25
6.25
6.25
174.4
206.6
182.9
227.5
186.4
178.6
204.1
130.6
174.6
150.5
FY12/13
FY10/11
FY11/12
FY13/14
FY12/13
FY10/11
FY11/12
FY13/14
FY12/13
FY10/11
FY11/12
FY13/14
FY14/15
FY12/13
FY10/11
FY11/12
FY13/14
FY12/13
FY10/11
FY11/12
FY13/14
FY12/13
FY10/11
FY11/12
FY13/14
FY12/13
FY10/11
FY11/12
FY13/14
141.0
149.5
157.2
149.6
135.4
Income Statement
Revenue (S$M) Return on Average Invested Capital (%)
Operating Profit (S$M) Free Cash Flow (S$M)
Net Profit (S$M) Dividend (cents per share)
Underlying Net Profit (S$M)
GROUP FINANCIALS
FY14/15
FY14/15
FY14/15
FY14/15
FY14/15
FY14/15
* For the approval of shareholders at the 23rd Annual General Meeting
28
GROUP FIVE-YEAR FINANCIAL SUMMARY
FINANCIAL YEAR ENDED 31 MARCH
2015 2014 2013 2012 2011
(RESTATED)* (RESTATED)*
Income Statement (S$ million)
Revenue 919.6 821.1 658.8 578.5 565.8
Operating profit (1) 186.4 227.5 174.4 182.9 206.6
EBITDA (2) 229.0 263.7 214.1 214.8 232.6
Net profit (3) 157.6 192.0 136.5 142.0 161.0
Underlying net profit (4) 157.2 149.5 141.0 135.4 149.6
Balance Sheet (S$ million)
Total assets 2,197.8 1,740.5 1,924.0 1,430.2 1,092.9
Ordinary shareholders’ equity 1,117.2 765.5 690.4 313.0 326.1
Cash and cash equivalents 584.1 404.4 628.3 617.4 338.7
Net (cash)/net debt (345.8) (170.3) (91.8) (111.6) 164.3
Perpetual securities 346.8 346.8 346.8 346.8 -
Net debt plus perpetual securities (5) 1.0 176.5 255.1 235.2 164.3
Cash Flow (S$ million)
Net cash inflow from operating activities 235.0 241.8 203.0 176.6 186.9
Capital expenditure (cash) 104.4 37.8 24.4 26.1 12.3
Free cash flow (6) 130.6 204.1 178.6 150.5 174.6
ANNUAL REPORT 2014/2015 29
GROUP FIVE-YEAR FINANCIAL SUMMARY
FINANCIAL YEAR ENDED 31 MARCH
2015 2014 2013 2012 2011
(RESTATED)* (RESTATED)*
Key Ratios
EBITDA margin (%) 24.9 32.1 32.5 37.1 41.1
Net profit margin (%) 17.1 23.4 20.7 24.5 28.5
Return on average invested capital (%) 10.3 13.1 10.0 14.2 19.7 Return on average ordinary shareholders
equity (%) 16.7 26.4 27.2 44.4 52.0
Net debt to ordinary shareholders equity (%) N.M. N.M. N.M. N.M. 50.4 Net debt plus perpetual securities to ordinary shareholders equity (%) (5) 0.1 23.1 36.9 75.1 50.4
EBITDA to interest expense (number of times) 36.4 41.6 16.8 17.2 16.3
Per Share Information (S cents)
Earnings per share - basic 6.85 9.32 6.44 7.41 8.37
Earnings per share - underlying net profit (4) 7.32 7.84 7.45 7.17 7.78
Net assets per share 68.4 58.5 54.8 34.9 17.3
Dividend per share - ordinary 6.25 6.25 6.25 6.25 6.25
NOTES (1) Operating profit is defined as profit before interest, tax and share of profit of associated companies and joint ventures. (2) EBITDA is defined as profit before interest, tax, depreciation, impairment and amortisation. (3) Net profit is defined as profit after tax and minority interest. (4) Underlying net profit is defined as profit after tax and non-controlling interests, before one-off items and gains and losses on sale or revaluation of
investment, properties, plant and equipment. (5) Net debt plus perpetual securities and its ratio to ordinary shareholders equity are presented for comparative purposes. (6) Free cash flow refers to net cash inflow from operating activities less cash capital expenditure. (7) N.M. Not meaningful.
* Details of the restatement are disclosed in Note 2.1.
30 SINGAPORE POST LIMITED
FINANCIAL REVIEW AND OUTLOOK
FINANCIAL YEAR ENDED 31 MARCH
GROUP 2015
S$’000 2014
S$’000 CHANGE
%
(RESTATED)*
Revenue 919,582 821,111 12.0
Operating profit 186,365 227,544 (18.1)
Share of profit of associated companies and joint ventures 6,660 4,358 52.8
Net profit 157,611 191,962 (17.9)
Underlying net profit (1) 157,188 149,450 5.2
Basic earnings per share (S cents) 6.85 9.32 (26.5)
Underlying earnings per share (S cents) 7.32 7.84 (6.6)
NOTE (1) Underlying net profit is defined as profit after tax and non-controlling interests, before one-off items and gains and losses on sale or revaluation of
investment, properties, plant and equipment.
* Details of the restatement are disclosed in Note 2.1.
The Group posted an increase of 12.0% in revenue in FY2014/15. Growth in ecommerce and logistics related businesses and the inclusion of new subsidiaries offset the decline in the traditional postal business. Excluding the M&A impact, revenue was S$830.0 million, an increase of 1.1% for the full year.
FINANCIAL YEAR ENDED 31 MARCH
REVENUE 2015
S$’000 2014
S$’000 CHANGE
%
Mail 500,252 490,950 1.9
Logistics 464,758 368,513 26.1
Retail & eCommerce 92,002 86,666 6.2
Inter-segment eliminations (137,430) (125,018) 9.9
919,582 821,111 12.0
ANNUAL REPORT 2014/2015 31
FINANCIAL REVIEW AND OUTLOOK
In the Mail division, the decrease in traditional letter mail volumes was reflected in the weaker performance of domestic mail and hybrid mail. Whilst the international mail business also faced declining letter mail volumes, revenue was supported by growth in ecommerce related activities.
For the full year, Logistics revenue was underpinned by continued growth in ecommerce related activities and the inclusion of new subsidiaries.
In Retail & eCommerce, revenue from ecommerce services continued to grow strongly, offsetting declines in traditional retail & agency services and financial services.
Rental and property related revenue posted a decline of 2.3% from S$44.9 million to S$43.9 million. This was largely due to lower rental income from Singapore Post Centre, which accounted for approximately 90% of total rental and property related revenue.
Miscellaneous income amounted to S$6.6 million, compared to a loss of S$0.1 million last year. The difference was due to gains on the disposals of property, plant and equipment, higher interest income and trade related foreign exchange gain. The same period last year had also included higher provisions for the restructuring of overseas operations.
Labour and related expenses were higher mainly due to increased operating cost in Singapore and continuing investment in new talent and skill upgrading for the growth transformation.
The increase in volume-related expenses was largely due to the inclusion of new subsidiaries, and growth in international traffic and business activities.
Administrative and other expenses rose as a result of higher property related expenses and professional expenses related to M&As and other transformation initiatives. The higher property related expenses were mainly attributable to increased rental expenses for its operations.
With the change in accounting policy, depreciation for investment properties was not charged. However, depreciation and amortisation expenses went up as a result of the review of the Group’s intangible assets and the inclusion of new subsidiaries.
32 SINGAPORE POST LIMITED
FINANCIAL REVIEW AND OUTLOOK
FINANCIAL YEAR ENDED 31 MARCH
OPERATING PROFIT 2015
S$’000 2014
S$’000 CHANGE
%
(RESTATED)*
Mail 143,989 142,639 0.9
Logistics 21,542 14,162 52.1
Retail & eCommerce 9,746 7,489 30.1
Others(1) 11,088 63,254 (82.5)
Operating Profit 186,365 227,544 (18.1)
Add: Fair value (gain)/loss on investment properties (5,163) (44,510) (88.4)
Add: One-off items 4,740 1,998 137.2
Underlying Operating Profit 185,942 185,032 0.5
NOTE (1) Others refer to the commercial property rental operations and unallocated corporate overhead items.
* Details of the restatement are disclosed in Note 2.1.
The Group recorded an increase of 0.5% in underlying operating profit from S$185.0 million to S$185.9 million. Operating profit amounted to S$186.4 million, compared to the restated figure of S$227.5 million for FY2013/14, due predominantly to changes in fair value gain. Mail operating profit was marginally higher, as the Group focused on productivity and efficiency to manage the increase in operating costs, particularly with the investments in service quality improvements.
Despite continued expenditure to build the regional logistics business and networks, Logistics achieved a strong increase in operating profit. This was due to the inclusion of new subsidiaries and contributions from ecommerce related activities.
In the Retail & eCommerce segment, the improvement in operating profit was mainly attributable to higher contributions from financial services and better performance by SP eCommerce.
Operating profit in Others was lower predominantly due to the differences in fair value gains compared to last year, and one-off items. Property operating profit was otherwise steady.
Share of profit of associated companies and joint ventures grew by 52.8% from S$4.4 million to S$6.7 million.
The Group recorded an increase of 5.2% in underlying net profit from S$149.5 million to S$157.2 million for FY2014/15.
ANNUAL REPORT 2014/2015 33
The improvement in underlying performance was attributable to the Group’s organic growth as well as the inclusion of new subsidiaries, despite the increased operating costs incurred for its transformation.
Net profit attributable to equity holders was lower by 17.9% at S$157.6 million, compared to the restated figure of S$192.0 million previously. This was due to lower fair value gain of S$5.2 million in FY2014/15 compared to S$44.5 million in the previous financial year, as well as one-off items.
FINANCIAL YEAR ENDED 31 MARCH
CASH FLOW 2015
S$’000 2014
S$’000 CHANGE
%
Net cash inflow from operating activities 235,002 241,849 (2.8)
Net cash used in investing activities (235,917) (37,570) @
Net cash provided by / (used in) financing activities 180,625 (428,156) N.M.
Net increase / (decrease) in cash and cash equivalents 179,710 (223,877) N.M.
Cash and cash equivalents at beginning of year 404,430 628,307 (35.6)
Cash and cash equivalents at end of year 584,140 404,430 44.4
Free cash flow 130,588 204,093 (36.0)
Cash capital expenditure as a percentage of revenue 11.4% 4.6%
NOTES @ Variance exceeding 300%.
N.M. Not Meaningful.
Operating activities
Net cash from operating activities was healthy at S$235.0 million in FY2014/15, compared to S$241.8 million last year.
Investing activities
Net cash used in investing activities was S$235.9 million, compared to S$37.6 million previously. During the year, cash outflow for acquisitions of new subsidiaries amounted to S$119.8 million. The Group invested S$104.4 million in property, plant and equipment, including new mail sorting equipment, property projects currently under development such as the Regional eCommerce Logistics Hub, and additional POPStations. The Group purchased financial assets of S$23.3 million comprising mainly corporate bonds. The cash outflow was partially offset by proceeds of S$11.0 million from the disposal of property, plant and equipment, S$8.3 million from interest received and S$6.0 million from the maturity of financial assets.
FINANCIAL REVIEW AND OUTLOOK
34 SINGAPORE POST LIMITED
Financing activities
Net cash from financing activities was S$180.6 million, compared to net cash used of S$428.2 million previously. During the year, the Group received proceeds of S$298.9 million from ordinary share issues and S$31.9 million from the treasury share transfer. Cash outflows for dividend and perpetual securities distributions amounted to S$128.1 million and S$14.9 million respectively.
Free cash flow
Free cash flow (operating cash flow less capital expenditure) was lower at S$130.6 million in FY2014/15 compared to S$204.1 million in the previous financial year, as a result of the Group’s increased capital expenditure.
CAPITAL MANAGEMENT
The Group is committed to an optimal capital structure and constantly reviews its capital structure to balance capital efficiency and financial flexibility.
Use of the proceeds from the share issue and treasury share transfer to Alibaba Investment Limited is in line with the intended use stated in the SGXNET announcement dated 28 May 2014. The proceeds are being deployed for capital expenditure such as the development of the Regional eCommerce Logistics Hub, upgrade of information technology systems, and M&A investments.
FINANCIAL YEAR ENDED 31 MARCH
GROUP DEBT AND PERPETUAL SECURITIES 2015
S$’000 2014
S$’000 CHANGE
%
(RESTATED)*
Total debt 238,327 234,128 1.8
Net cash (345,813) (170,302) 103.1
Total debt plus perpetual securities# 585,153 580,954 0.7
Net debt plus perpetual securities# 1,013 176,524 (99.4)
Net debt plus perpetual securities to ordinary shareholders equity (%)# 0.1% 23.1%
EBITDA to interest expense (number of times) 36.4 41.6
# Presented for comparative purposes. * Details of the restatement are disclosed in Note 2.1.
FINANCIAL REVIEW AND OUTLOOK
ANNUAL REPORT 2014/2015 35
The Group was in a net cash position (cash and cash equivalents less borrowings) of S$345.8 million as at 31 March 2015. The cash holdings will be utilised for investments, capital expenditure, working capital and other funding needs.
Interest coverage ratio (EBITDA to interest expense) remained high at 36.4x.
DIVIDEND
Given the Group’s healthy cash flows, the Board of Directors is recommending a final dividend of 2.5 per cents for the financial year ended 31 March 2015. Together with the interim dividend payments of 1.25 cents per share for each of the first three quarters, the annual dividend in respect of the current financial year would amount to 6.25 cents per share.
CENTS PER SHARE
Interim Q1 1.25 cents
Interim Q2 1.25 cents
Interim Q3 1.25 cents
Proposed final 2.50 cents
Total dividends paid and proposed in relation to FY2014/15 6.25 cents
Barring unforeseen circumstances, the Group will endeavour to pay a minimum annual dividend of 5 cents per share. This will continue to be paid on a quarterly basis.
OUTLOOK
The Group continues to invest in ecommerce logistics infrastructure, technology and capabilities as it expands its end- to-end ecommerce logistics solutions in Asia Pacific. Capital expenditure is expected to remain high in FY2015/16 due to investments in infrastructure such as the Regional eCommerce Logistics Hub and POPStation network.
The Group also intends to redevelop its retail space at Singapore Post Centre and will make further announcements in due course.
The Group continues to pursue investment opportunities in Singapore and the region. In January 2015, its subsidiary Famous Holdings acquired 90% of Famous Pacific Shipping (NZ) Limited. Its ecommerce services subsidiary SP eCommerce entered into a joint venture in Indonesia to tap the growing ecommerce market in March 2015.
Since the MOU signed with Alibaba Investment Limited last year, the two organisations have been working well together. Discussions on the proposed business collaboration are ongoing and SingPost will provide an update in the near term when details are finalised.
FINANCIAL REVIEW AND OUTLOOK
36 SINGAPORE POST LIMITED
CORPORATE GOVERNANCE REPORT
INTRODUCTION
The Board and Management of SingPost are committed to achieving a high standard of corporate governance which they recognise as being essential for the long term sustainability of the Group’s businesses and performance.
The Board and Management of SingPost are pleased to report that SingPost has complied in all material respects with the principles and guidelines set out in the Singapore Code of Corporate Governance 2012 (2012 Code). The Board and Management of SingPost continues to review and enhance its processes taking into account industry best practices and the needs and circumstances of the Group.
A BOARD MATTERS
Principle 1: The Board’s Conduct of Affairs
Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.
Role of the Board
SingPost is led by an effective Board that is collectively responsible for the long-term success of the Company. Each director exercises his/her independent judgment and acts in good faith in the long-term interest of the Company. The Board provides leadership and guidance to Management on the Group’s overall strategy, reviews Management performance and oversees the Group’s overall performance objectives, key operational initiatives, risk management and corporate governance practices, financial plans, annual budgets, major funding proposals, and major investment and divestment proposals. The Board also approves financial results for release to the Singapore Exchange Securities Trading Limited (SGX-ST), the appointment of directors and key management staff, and all changes in the composition and terms of reference of Board Committees.
A framework of internal controls is in place setting out financial authorisation and approval limits for operating and capital expenditure, procurement of goods and services, as well as acquisition and disposal of investments. The Board’s approval is required for transactions exceeding certain threshold limits, while authority for transactions below those limits is delegated to the Executive Committee, and Management to optimise operational efficiency.
Board Committees
To assist the Board in discharging its duties and to enhance the effectiveness of the Board, the Board has established the Board Committees set out in the table below. Each Board Committee has written terms of reference, which clearly set out its respective authority and duties.
ANNUAL REPORT 2014/2015 37
CORPORATE GOVERNANCE REPORT
Board Committee Key Responsibilities Membership
Executive Committee • Oversees the management of the business and affairs of the Group as may be delegated by the Board.
• Exercises oversight over Management.
• Approves investments and divestments within the threshold limits delegated to it by the Board and makes recommendations to the Board in respect of investments and divestments over such limits.
Mr Lim Ho Kee (Chairman) Dr Wolfgang Baier Mr Goh Yeow Tin Mr Tan Yam Pin Mr Keith Tay Ah Kee
Nominations Committee • Assists the Board in fulfilling its responsibilities on ensuring Board effectiveness and the selection, nomination, appointment or re-appointment of directors.
• Assists the Board in fulfilling its responsibilities on Board succession planning, evaluation and training.
• Reviews and makes recommendations to the Board on key staff appointments of the Group.
Mr Keith Tay Ah Kee (Chairman) Mr Lim Ho Kee Mr Soo Nam Chow Mr Zulkifli Bin Baharudin
Compensation Committee • Assists the Board in fulfilling its responsibilities on developing an appropriate compensation and remuneration framework for directors and employees of the Group.
Mr Goh Yeow Tin (Chairman) Mr Bill Chang York Chye Mr Tan Yam Pin Mr Zulkifli Bin Baharudin
Audit Committee • Assists the Board in fulfilling its oversight responsibilities on internal controls, financial reporting, compliance and risk management of the Group.
Mr Soo Nam Chow (Chairman) Mr Tan Yam Pin Mr Keith Tay Ah Kee Mr Zulkifli Bin Baharudin
Board Risk and Technology Committee
• Assists the Board in fulfilling its oversight responsibilities on risk management of the Group.
• Assists the Board in fulfilling its oversight responsibilities on matters relating to technology in executing the business strategies of the Group.
Professor Low Teck Seng (Chairman) Mr Bill Chang York Chye Ms Aliza Knox Mr Michael James Murphy Mr Tan Yam Pin
Board Meetings and Attendance
The Board meets at least quarterly to review and approve the release of the Group’s quarterly results as well as to discuss and resolve upon matters requiring the Board’s approval. Additionally, towards the end of each financial year, the Board participates in a strategy workshop with Management to plan the Group’s longer term strategy. Typically, the Board strategy workshop is held offsite in a country where the Group has significant investments to
38 SINGAPORE POST LIMITED
allow the Board to meet with the Group’s business partners, thereby developing stronger business relationships and allowing Board members to gain a first-hand insight into these investments. A Board meeting is held alongside the Board strategy workshop to review the Group’s strategy and to consider and approve the Group’s budget for the following financial year. Board and Board Committee meetings, as well as the annual general meeting (AGM) of the Company, are scheduled in advance of each year in consultation with the directors. Ad hoc Board and Board Committee meetings are convened as and when warranted by particular circumstances between these scheduled meetings. Directors who are unable to attend a meeting in person can participate by telephone. Decisions of the Board or a Board Committee may also be obtained via circular resolution. The Board sets aside some time at meetings to discuss Management’s performance without the presence of Management. The directors also communicate on an ad hoc basis without the presence of Management to review matters of a confidential nature.
The attendance of each director at Board meetings and Board Committee meetings for the financial year ended 31 March 2015 is as follows:
BOARD EXECUTIVE COMMITTEE
NOMINATIONS COMMITTEE
COMPENSATION COMMITTEE
AUDIT COMMITTEE
BOARD RISK AND TECHNOLOGY
COMMITTEE
Number of Meetings Held
7 14 3 1 4 4
Name
Lim Ho Kee 7/7 14/14 3/3 - - -
Goh Yeow Tin (1) 4/4 6/6 - - - -
Dr Wolfgang Baier 7/7 14/14 - - - -
Bill Chang York Chye
7/7 - - 1/1 - 4/4
Chen Jun (2) 3/4 - - - - -
Aliza Knox 6/7 - - - - 3/4
Professor Low Teck Seng (3)
6/7 - - 1/1 - 4/4
Michael James Murphy
6/7 - - - - 1/4
Soo Nam Chow (4) 7/7 - 3/3 - 4/4 -
Tan Yam Pin (5) 7/7 14/14 - 1/1 4/4 4/4
Keith Tay Ah Kee (6) 7/7 13/14 3/3 - 4/4 -
CORPORATE GOVERNANCE REPORT
ANNUAL REPORT 2014/2015 39
Zulkifli Bin Baharudin
7/7 - 3/3 1/1 2/4 -
NOTES (1) Mr Goh Yeow Tin was appointed as a director of SingPost on 7 July 2014. Subsequently, he was appointed as a member of the Executive
Committee on 14 January 2015. He was also appointed as the chairman of the Compensation Committee on 14 January 2015 in place of Professor Low Teck Seng who stepped down as chairman and member of the Compensation Committee. He was appointed as Deputy Chairman of the Board on 12 May 2015.
(2) Mr Chen Jun was appointed as a director of SingPost on 31 July 2014. (3) Professor Low Teck Seng stepped down as chairman and member of the Compensation Committee on 14 January 2015. (4) Mr Soo Nam Chow was appointed as a member of the Nominations Committee on 10 April 2014. He was also appointed as the chairman of the
Audit Committee on 10 April 2014 in place of Mr Keith Tay Ah Kee who stepped down as chairman of the Audit Committee. (5) Mr Tan Yam Pin was appointed as a member of the Compensation Committee on 10 April 2014. (6) Mr Keith Tay Ah Kee stepped down as chairman of the Audit Committee on 10 April 2014 but remains as a member.
Board Induction and Training
Upon appointment of each new director, the Company Secretary provides a formal letter to the newly appointed director stating the director’s duties and advising disclosure obligations under the Companies Act, Cap. 50 and SGX- ST listing rules. All newly appointed directors also undergo a compulsory orientation programme to familiarise them with the Group’s businesses and strategic objectives. The programme includes presentations by the Group Chief Executive Officer (Group CEO) on the Company’s strategic plans and financial performance, and presentations by senior management on their respective businesses, directions and corporate governance practices. The orientation programme not only serves its objective of thoroughly acquainting the director with the nature and workings of the Group’s business, but also serves as a platform for new directors to get to know members of senior management and to ask questions.
Board directors are kept informed of changing commercial risks faced by the Group through briefings at Board meetings, as well as articles and reports circulated to the Board. In addition, facility visits are arranged for directors to better understand the Group’s business operations. The board strategy workshop programme will include updates on developments in the industry, new technologies relevant to the Group’s businesses and information on the competitive landscape in which the Group’s businesses operate. Board directors are also briefed on changes in regulations and guidelines.
Principle 2: Board Composition and Guidance There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10 per cent shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.
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Board Composition
The current Board comprises 12 directors, two-thirds of whom are independent. Excluding the Group CEO Dr Wolfgang Baier, all the other directors are non-executive directors. Profiles of the directors can be found on pages 10 to 13 of this Report. The Board is of the view that given that two-thirds of the directors are independent and all (except for the Group CEO) are non-executive, decisions of the Board are made objectively.
Together, the directors bring with them a wealth of experience and a broad range of expertise relevant to the Group’s businesses and transformation strategy, including postal services, ecommerce, logistics, accounting, finance, business and management, strategic planning, information and communication technology, engineering and regional business experience.
The Board continually reviews its size and composition with a view towards the progressive refreshing of the Board and to strike the appropriate balance and diversity of skills, experience, gender and knowledge of the company to support the Group’s businesses and transformation strategy. The Board had increased its strength by appointing two new directors, Mr Goh Yeow Tin and Mr Chen Jun in the past financial year. The Board also continually reviews the size and composition of the various Board Committees to enhance the effectiveness of the Board and to achieve an equitable distribution of responsibilities among the Board members while fostering active participation and contribution. In deciding the composition of the Board Committees, relevant skills together with diversity of experience and backgrounds are considered alongside the need to maintain the appropriate checks and balances between the different Board Committees.
Review of Directors’ Independence
The Board determines, taking into account the views of the Nominations Committee, the independence of each director on an annual basis and as and when circumstances require, based on the guidelines provided in the 2012 Code. Each director is required to complete a director’s independence checklist of himself. Special scrutiny is applied in assessing the continued independence of directors who have served over nine years. Each director (other than the director concerned) is required to complete a director’s independence checklist of each director who has served over nine years. The Nominations Committee reviews the checklists in arriving at its recommendations to the Board on the independence of directors. In addition, as part of their Board effectiveness assessment, Egon Zehnder was tasked with seeking the views of the directors on the independence of those directors who had served over nine years.
Three directors have served on the Board for more than nine years from the respective dates of their first appointment. They are Mr Lim Ho Kee, Mr Tan Yam Pin and Mr Keith Tay Ah Kee. During their confidential interviews with Egon Zehnder, all directors expressed a clear view that the three directors were independent in their thinking and behaviour, taking into account what is best for the company and the broad range of stakeholders.
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Based on the recommendations of the Nominations Committee and the findings of Egon Zehnder, the Board is of the opinion that, with the exception of the Group CEO Dr Wolfgang Baier, Mr Bill Chang York Chye, Mr Chen Jun and Mr Michael James Murphy, all the directors are independent. Mr Bill Chang York Chye is the Chief Executive Officer (Group Enterprise) of Singapore Telecommunications Limited which holds more than 10 per cent of the total voting shares in SingPost. Mr Chen Jun is a Vice President of Alibaba Group Holding Limited which holds more than 10 per cent of the total voting shares in SingPost. Mr Michael James Murphy is the Chief Executive Officer, a director and substantial shareholder of Postea Group, Inc.. Mr Michael James Murphy is deemed non-independent as a result of various agreements entered into between the SingPost Group and the Postea Group.
The Board is of the view that despite serving for more than nine years, Mr Lim Ho Kee, Mr Tan Yam Pin and Mr Keith Tay Ah Kee continue to exercise strong independent judgment. While remaining committed to the progressive renewal of the Board, the Board believes that the in-depth knowledge of the Group’s businesses possessed by Messrs Lim, Tan and Tay is invaluable and thus that they should continue as directors of the Company.
Principle 3: Chairman and Chief Executive Officer
There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.
Separation of the Role of Chairman and Group CEO
The Chairman and Group CEO are separate persons and are not related to each other. Mr Lim Ho Kee is the non- executive and independent Chairman. Dr Wolfgang Baier is the Group CEO. The respective roles of Chairman and Group CEO are kept separate to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision-making.
Role of the Chairman
The Chairman leads the Board in facilitating effective and comprehensive deliberations on matters brought to the Board, including strategic issues, talent management and succession planning. The Chairman plays a pivotal role by providing advice and guidance to the Group CEO and Management, particularly in the drive to transform the Group. At Board meetings, he sets the agenda and ensures material information is provided to the Board to facilitate good decision-making. At meetings, he promotes open dialogue and debate between the directors of all agenda items, especially strategic issues. The Chairman also monitors the translation of the Board’s decisions and directions into executive action. The Chairman maintains effective communication with shareholders and fosters good relationships with stakeholders such as the staff union, SingPost staff, government, regulators, customers and other partners. At AGMs and other shareholder meetings, the Chairman ensures constructive dialogue between shareholders, directors and Management.
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Role of the Group CEO
The Group CEO is responsible for making strategic proposals to the Board and implementing the Group’s strategies and policies as well as the Board’s decisions. He assumes the executive responsibility for the day-to-day management of the Group, with the support of the Executive Leadership Group (ELG). The ELG comprises the Group Chief Financial Officer (Group CFO), Group Chief Operating Officer (Group COO), Executive Vice Presidents and various heads of departments of SingPost. The ELG meets at least once a month to review and direct the execution and implementation of the Group’s strategy, business development, financial and risk management policies, operational policies and activities.
Regulatory Approvals
The appointments of the Chairman and the Group CEO of the company require the prior written approval of the Infocomm Development Authority of Singapore (IDA) and the Monetary Authority of Singapore (MAS).
Lead Independent Director
Though not required by the 2012 Code, Mr Keith Tay Ah Kee is the Lead Independent Director. As the Lead Independent Director, he leads and encourages dialogue between independent directors without the presence of the other directors and provides feedback to the Chairman. As the Lead Independent Director, he is also available as the alternate channel for shareholders, should shareholders fail to resolve concerns through the normal channels of the Chairman, Group CEO or Group CFO, or when such normal channels are inappropriate.
Principle 4: Board Membership
There should be a formal annual and transparent process for the appointment and re-appointment of directors to the Board.
Nominations Committee
The Nominations Committee comprises four independent non-executive directors (please refer to page 37 of this Report for their names) and is chaired by the Lead Independent Director. The key responsibilities of the Nominations Committee are (i) to review the size and composition of the Board and Board Committees, (ii) to ensure that the Board has the appropriate balance of expertise, skills, knowledge, experience, attributes and abilities, (iii) to review directors’ independence and performance, (iv) to advise on Board succession planning and (v) to review training and professional development programmes for Board members.
Succession Planning and Nomination Process
Board membership is refreshed progressively and in an orderly manner, bearing in mind the contributions from long- standing directors who have over time developed a deep understanding and insight into the Group’s businesses.
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When the need for a new director is identified, the Nominations Committee draws up a list of candidates identified through consultation with directors, Management and shareholders and their network of contacts. The Nominations Committee is empowered to engage professional search firms to draw up a shortlist. The Nominations Committee meets with the candidates that it has shortlisted to (a) assess the suitability of each candidate, (b) communicate to the candidates the level of commitment expected, and (c) provide sufficient information for the candidates to make an informed decision on accepting the role. After a candidate has been endorsed by the Nominations Committee, it will make a recommendation to the Board for the approval of the appointment. Upon the Board’s approval, SingPost will seek IDA’s approval, in accordance with the requirement set out in the Postal Services Act, Cap. 237A and MAS’ approval in accordance with the requirement set out in the Money-changing and Remittance Businesses Act, Cap. 187 respectively.
Alternate Directors
The Board does not encourage the appointment of alternate directors. No alternate director has been or is currently appointed to the Board.
Directors’ Time Commitment
The Nominations Committee is tasked with ensuring that directors have given sufficient time and attention to the affairs of SingPost and to decide if a director has been adequately carrying out, and is able to continue carrying out, the duties of a director of the company. In doing so, the Nominations Committee will consider the other directorships held by the directors and their principal commitments. The Board believes that each director has to personally determine the demands of his or her other directorships and commitments and assess how much time is available to serve on the Board and Board Committees effectively. Accordingly, the Board has not made a determination of the maximum number of listed company board representations a director may hold. For the past financial year, the Nominations Committee has determined that all the directors have devoted a satisfactory amount of time and attention to the company and have discharged their duties adequately.
Rotation and Re-election/Re-appointment of Directors
The Board subscribes to the principle that all directors should stand for re-election at regular intervals and at least once every three years. SingPost’s Articles of Association require newly appointed directors to retire and stand for re-election at the AGM immediately following their appointment (new directors re-election rule). The Articles also require a director to retire and stand for re-election at the AGM if, were he not to do so, he would at the next AGM have held office for more than three years (over three years re-election rule). Directors who are aged 70 or over are statutorily required to retire and seek re-appointment at each AGM (S153 requirement). Finally, the Articles require one third of the remaining directors starting from those with the longest term in office since their appointment or re-election/re-appointment to retire from office by rotation at each AGM (one-third rotation rule). Pursuant to the foregoing, eight directors will retire and submit themselves for re-election/re-appointment at the forthcoming AGM:
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Name Retiring and standing for re-appointment/re-election pursuant to:
Mr Lim Ho Kee S153 requirement
Mr Keith Tay Ah Kee S153 requirement
Mr Tan Yam Pin S153 requirement
Mr Goh Yeow Tin (appointed on 7 July 2014) new directors re-election rule (Article 97)
Mr Chen Jun (appointed on 31 July 2014) new directors re-election rule (Article 97)
Mr Michael James Murphy (last re-elected in 2012) over three years re-election rule (Article 91(a))
Mr Bill Chang York Chye (last re-elected in 2013) one-third rotation rule (Article 91(b))
Professor Low Teck Seng (last re-elected in 2013) one-third rotation rule (Article 91(b))
Principle 5: Board Performance
There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.
Board Effectiveness Assessment
The Board believes that the effectiveness of the Board is ultimately reflected in the long-term performance of the Group. The Board, in consultation with the Nominations Committee, conducts an annual assessment of the performance and effectiveness of the Board as a whole and its Board Committees and of the contribution by each director to the effectiveness of the Board. To optimise the value of the independent assessment that had been conducted by Egon Zehnder for the previous financial year, the Nominations Committee decided to again appoint Egon Zehnder. Egon Zehnder is one of the top three global organisational advisory firms and has performed over 500 similar board reviews around the world. Egon Zehnder has no connection with SingPost or any of its directors other than as its advisor on Board effectiveness and executive hiring.
The view on the Board’s effectiveness was formed by looking at various criteria that included: the composition and size of the Board; the Board’s access to information; Board processes; Board dynamics; the Board’s input to SingPost’s strategy; how the Board engages with Management; how the Board tracks performance and manages risks; how the Board plans for succession of key leadership roles; and the effectiveness of the Board Committees.
As part of the process, the newly appointed directors completed appraisal forms which were collated by Egon Zehnder. Each director also separately shared views with Egon Zehnder in one-on-one confidential discussions.
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Egon Zehnder reviewed the results of the appraisal with the Chairman of the Board and with the Nominations Committee. Egon Zehnder re-affirmed its assessment that the Board continues to function very effectively and has improved most notably in the following areas since the last review: renewal and greater diversity, refreshment of Board Committees and risk management.
The Board, in consultation with the Nominations Committee, based on each director’s attendance, preparedness and participation at Board and Board Committee (where applicable) meetings is of the view that each director has contributed effectively to the Board and has demonstrated commitment to his/her role. Principle 6: Access to Information
In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.
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