SingPost board should speed up resetting directions

[SINGAPORE] Shareholders of postal service provider Singapore Post (SingPost) could understandably be frustrated and disappointed that the annual general meeting (AGM) held last week did not deliver the answers they wanted.

SingPost posted an underlying net loss of S$461,000 for the second half-year ended Mar 31, from a net profit of S$28.1 million in the year-ago period, and attributed the dismal performance to intensifying challenges and uncertain conditions in the global logistics sector.

This came after the group divested its key financial contributor Freight Management Holdings at the end of March – without a replacement source of revenue.

Selling the cash cow without a Plan B meant the group could only depend on its property business and the unremarkable postal and logistics businesses until whatever future endeavours bear fruit. 

When investors gathered at the extraordinary general meeting (EGM) in mid-March for the divestment of the key earnings pillar, then-chairman Simon Israel was already bombarded with questions from shareholders.

Israel said then that the board did have some ideas, but would need to evaluate them, and work with the chief executive to be appointed on the reset strategy. 

He added: “Maybe by the AGM, which is not that far away, things will be a lot clearer.”

Following the EGM, shareholders were distraught at the lack of specific direction on where SingPost – saddled with the declining postal and competitive e-commerce logistics businesses – was headed.

Yet, when they sought answers at the AGM last week, they were urged to be patient.

Israel, who stepped down at the AGM on Jul 23 after nine years on the board, asked shareholders to allow the reconstituted board and incoming chairman Teo Swee Lian time to work through the “many options”.

His counterpart Teo said these were “not easy issues”. There are also other stakeholders – customers, the regulators and SingPost staff – to think about in deciding on the future path for the group, she added.

To be fair, shareholders are not being impatient, and they are right to press the board about the future of SingPost. Bear in mind that it would take time to put into action whatever plans it has and for the plans to work out – or not.

Acquisitions could be risky, given that studies have shown the majority of such corporate actions failed. In fact, SingPost has had an unsuccessful experience in acquisitions in the US, which prompted it to take a prudent, phased approach to buying Freight Management Holdings.

A shareholder sought assurance at the AGM that it is worthy to continue holding its shares, while another earlier at the EGM describing the group as a “sinking boat” was concerned that the remaining sales proceeds from recent divestments would be ploughed into riskier or more volatile business. 

A third shareholder suggested that SingPost divest all its assets and return the capital to shareholders as he could easily make equivalent investment returns in the current stock market rally rather than wait five years for SingPost’s future venture to bear fruit.

Although four of its seven members were appointed to the board only between February and May this year and would need time to familiarise themselves with SingPost, time is of the essence in a highly competitive and volatile environment – particularly more so for SingPost operating declining or competitive businesses.

Granted, the challenges that SingPost is facing are not easy to overcome and one would argue that the board should not be rushed into decisions. 

However, it is exactly that the pursuit of viable plans to turn SingPost around has significant implications that there is urgency. What is at stake is not only the shareholders’ investments, but also its 3,000 workers’ livelihoods and morale.

The board should commit to a timeline and not wait till the next AGM to present the path forward for SingPost shareholders and other stakeholders.

It may also want to take this suggestion into consideration for its future acquisitions. 

Granted that the purchase of Freight Management Holdings had saddled SingPost’s balance sheet with debt, but it would have and should have made all the calculations before making the offer. 

In spite of the purchase being seemingly unappreciated by shareholders – it was said that the stock price did not rise in tandem with the contributions from Freight Management Holdings – if the business continues to be a promising one for the group, it should not be sold.

It was because one of the objectives of buying Freight Management Holdings was to offset the declining postal business for SingPost.

Should another core asset or business in the future fetch an attractive price, especially from an unsolicited offer, SingPost shareholders may want to think about what the offeror could have seen in it that they could have missed.

In-flight caterer and ground-handler Sats may serve as an example for SingPost. Notwithstanding the plunge in its stock price, Sats stood its ground on its billion-dollar acquisition of air cargo logistics provider Worldwide Flight Services and did not dump the proposal when the market appeared to frown on the plan.