FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT http://info.sgx.com/webcorannc.nsf/vwprint/e0d5a4ae1988df4048257102001007e2?opendocu... Page 1 of 1 27/01/2006 Print this page SingPost Group's unaudited results for the third quarter and nine months ended 31 December 2005 * Financial Statement And Dividend Announcement * Asterisks denote mandatory information Name of Announcer * Company Registration No. Announcement submitted on behalf of Announcement is submitted with respect to * Announcement is submitted by * Designation * SINGAPORE POST LIMITED 199201623M SINGAPORE POST LIMITED SINGAPORE POST LIMITED Leong Chee Sian (Ms) Company Secretary Date & Time of Broadcast 27-Jan-2006 17:05:47 Announcement No. 00048 >> Announcement Details The details of the announcement start here... For the Financial Period Ended * 31-12-2005 Attachments: Ann-Q3ResultsFY0506.pdf Total size = 170K (2048K size limit recommended) Close Window
SINGAPORE POST LIMITED AND ITS SUBSIDIARIES SGXNET ANNOUNCEMENT UNAUDITED RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED 31 DECEMBER 2005 1
PART I OF QUARTERLY (Q1, Q2 & Q3), HALF YEAR AND FULL YEAR RESULTS (1) (a)(i) Income statement for the Group, together with a comparative statement for the corresponding period of the immediately preceding financial year. FY2005/06 FY2004/05 FY2005/06 FY2004/05 3 rd Qtr 3 rd Qtr Variance 9 Months 9 Months Variance S$'000 S$'000 % S$'000 S$'000 % Operating revenue 107,980 100,510 7.4 307,802 281,469 9.4 Other operating income 4,531 4,349 4.2 13,427 12,483 7.6 Staff costs (21,125) (20,053) 5.3 (62,080) (57,935) 7.2 Depreciation (6,374) (8,671) (26.5) (19,168) (25,522) (24.9) Traffic and related expenses (23,610) (23,108) 2.2 (66,921) (61,750) 8.4 General administrative and others (20,559) (17,279) 19.0 (59,490) (50,909) 16.9 Total operating expenses (71,668) (69,111) 3.7 (207,659) (196,116) 5.9 Exceptional item gain on disposal of joint venture company - - - - 3,682 N.M. Operating profit 40,843 35,748 14.3 113,570 101,518 11.9 Share of profit of associated and joint venture companies (1) 1,734 1,558 11.3 5,807 6,248 (7.1) Profit before interest and tax 42,577 37,306 14.1 119,377 107,766 10.8 Finance income 915 314 191.4 2,324 691 236.3 Finance costs (2,132) (1,741) 22.5 (6,164) (3,728) 65.3 Profit before tax 41,360 35,879 15.3 115,537 104,729 10.3 Income tax expense (8,400) (7,801) 7.7 (22,722) (21,028) 8.1 Profit for the period 32,960 28,078 17.4 92,815 83,701 10.9 Attributable to: Equity holders of the Company 32,810 27,950 17.4 92,420 83,413 10.8 Minority interest 150 128 17.2 395 288 37.2 32,960 28,078 17.4 92,815 83,701 10.9 Underlying Net Profit (2) 30,737 27,950 10.0 86,202 79,731 8.1 Earnings per share for profit attributable to the equity holders of the Company during the period - basic 1.72 cents 1.47 cents 4.85 cents 4.39 cents - diluted 1.72 cents 1.47 cents 4.84 cents 4.38 cents Notes (1) In accordance with FRS 1 (revised) Presentation of Financial Statements, which is effective from 1 April 2005, the Share of profit of associated and joint venture companies is stated after tax. (2) Underlying net profit is defined as net profit attributable to equity holders of the Company, excluding exceptional items and depreciation impact from the change in assets useful lives on 1 April 2005. N.M. Not meaningful 2
(1)(a)(ii) Other operating income and interest income 5,446 4,663 16.8 15,751 13,174 20.0 Interest on borrowings 2,095 1,607 30.4 6,084 3,507 73.5 Depreciation and amortisation 6,401 8,698 (26.4) 19,249 25,603 (24.8) Impairment of doubtful debts and bad debts written off - (195) N.M. 124 (174) N.M. Foreign exchange gain / (loss) 845 (414) N.M. 1,526 32 @ Adjustments for overprovision of tax in respect of prior years - - - 826 - N.M. Profit on sale of investments, properties, plant and equipment 11 115 (90.4) 7 239 (97.1) Exceptional item gain on disposal of joint venture company - - - - 3,682 N.M. N.M. Not meaningful @ Denotes variance % more than 300% 3
(1)(b)(i) Balance sheet (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year. The Group The Company Dec-05 Mar-05 Dec-05 Mar-05 S$ 000 S$ 000 S$ 000 S$ 000 ASSETS Current assets Cash and cash equivalents 189,722 159,048 180,770 153,479 Trade and other receivables 52,411 40,839 43,421 32,378 Inventories, at cost 4 18 - - 242,137 199,905 224,191 185,857 Non-current assets Trade and other receivables 1,368 1,291 1,368 1,291 Investments in associated and joint venture companies 85,461 87,865 83,372 83,372 Investments in subsidiaries - - 12,105 12,105 Loan to subsidiary - - 2,756 - Property, plant and equipment 520,659 533,946 516,465 530,013 Intangible asset 369 396 369 396 607,857 623,498 616,435 627,177 Total assets 849,994 823,403 840,626 813,034 LIABILITIES Current liabilities Trade and other payables 138,903 134,332 139,902 136,259 Borrowings 25,000-25,000 - Current income tax liabilities 31,064 31,356 30,243 30,366 Dividend payable 190,932-190,932-385,899 165,688 386,077 166,625 Non-current liabilities Borrowings 294,775 300,000 294,775 300,000 Derivative financial instruments 5,225-5,225 - Deferred income tax liabilities 22,364 23,577 21,865 23,078 Deferred income 79 148 79 148 322,443 323,725 321,944 323,226 Total liabilities 708,342 489,413 708,021 489,851 NET ASSETS 141,652 333,990 132,605 323,183 EQUITY Capital and reserves attributable to the Company s equity holders Share capital 95,470 95,175 95,470 95,175 Share premium 5,322 1,950 5,322 1,950 Other reserves 5,554 4,285 1,451 965 Retained earnings 31,989 229,661 30,362 225,093 138,335 331,071 132,605 323,183 Minority interest 3,317 2,919 - - Total equity 141,652 333,990 132,605 323,183 4
(1)(b)(ii) In relation to the aggregate amount of the group s borrowings and debt securities. Dec-05 S$ 000 Mar-05 S$ 000 Amount repayable in one year or less or on demand Short term credit facility (unsecured) 25,000 - Amount repayable after one year Bonds (unsecured) 294,775 300,000 319,775 300,000 (a) The short term unsecured credit facility was drawn down for the Group s general operational purposes. This will be replaced by a bank term loan which is currently being finalised. (b) The unsecured bonds of principal amount S$300 million listed on the SGX-ST have a maturity period of 10 years from 11 April 2003. Details of any collateral. Not applicable. 5
(1)(c) Cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year. Cash flows from operating activities The Group FY2005/06 FY2004/05 FY2005/06 FY2004/05 3 rd Qtr 3 rd Qtr 9 Months 9 Months S$'000 S$'000 S$'000 S$'000 Profit before tax 41,360 35,879 115,537 104,729 Adjustments for: Amortisation of franchise fees received (23) (24) (69) (71) Amortisation of licence fee 9 9 27 27 Amortisation of management fee for borrowings 18 18 54 54 Depreciation of property, plant and equipment 6,374 8,671 19,168 25,522 Exceptional item gain on disposal of joint venture company - - - (3,682) Gain on disposal of property, plant and equipment (11) (115) (7) (239) Interest expense 2,095 1,607 6,084 3,507 Interest income (915) (314) (2,324) (691) Share of profit of associated and joint venture companies (1,734) (1,558) (5,807) (6,248) Impairment of doubtful trade receivables - (195) 87 (175) 5,813 8,099 17,213 18,004 Operating cash flow before working capital changes 47,173 43,978 132,750 122,733 Changes in operating assets and liabilities Inventories (2) - 14 - Trade and other receivables 1,662 (1,201) (10,800) (9,195) Trade and other payables 4,270 12,822 6,606 4,538 Cash generated from operations 53,103 55,599 128,570 118,076 Income tax paid (10,126) (11,098) (24,003) (26,628) Net cash inflow from operating activities 42,977 44,501 104,567 91,448 Cash flows from investing activities Dividends received from associated company - 2,190 1,269 2,190 Dividends received from joint venture company - - 7,500 7,000 Interest received 813 287 2,223 645 Purchase of property, plant and equipment (2,122) (2,560) (7,065) (11,478) Proceeds from sale of joint venture company - - - 3,682 Proceeds from sale of property, plant and equipment 14 125 34 1,274 Net cash (outflow) / inflow from investing activities (1,295) 42 3,961 3,313 Cash flows from financing activities Dividends paid to shareholders (23,865) (43,773) (99,160) (83,716) Interest paid (4,006) (1,842) (7,361) (3,686) Proceeds from draw down of short term credit facility 25,000-25,000 - Proceeds from issue of shares 1,177 526 3,667 1,951 Net cash outflow from financing activities (1,694) (45,089) (77,854) (85,451) Net increase / (decrease) in cash and cash equivalents held 39,988 (546) 30,674 9,310 Cash and cash equivalents at beginning of financial period 149,734 108,219 159,048 98,363 Cash and cash equivalents at end of financial period 189,722 107,673 189,722 107,673 6
(1)(d)(i) Statement (for the issuer and group) of all changes in equity, together with a comparative statement for the corresponding period of the immediately preceding financial year. Foreign Cash The Group Share currency flow Other Share Share option translation hedge capital Retained Minority capital premium reserve reserve reserve reserve earnings interest Total S$ 000 S$'000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Balance at 1 October 2005 95,375 4,240 1,291 2,896 (170) 1,596 213,976 3,165 322,369 Net income recognised directly in equity - Currency translation differences - - - (220) - - - 2 (218) - Cash flow hedge reserve - - - - 1 - - - 1 Profit for the period - - - - - - 32,810 150 32,960 Total recognised gains for financial period - - - (220) 1-32,810 152 32,743 Employee share option scheme: - SingPost share option - - 160 - - - - - 160 - Proceeds from shares issued 95 1,082 - - - - - - 1,177 Dividends relating to FY2005/06 - - - - - - (214,797) - (214,797) Balance at 31 December 2005 95,470 5,322 1,451 2,676 (169) 1,596 31,989 3,317 141,652 Balance at 1 October 2004 - As previously reported 95,118 1,307-2,073 - - 219,533 2,718 320,749 - Effect of changes in accounting policy - - 758 - - - (758) - - Restated 95,118 1,307 758 2,073 - - 218,775 2,718 320,749 Net income recognised directly in equity - Currency translation differences - - - 508 - - - - 508 Profit for the period - - - - - - 27,950 128 28,078 Total recognised gains for financial period - - - 508 - - 27,950 128 28,586 Employee share option scheme: - SingPost share option - - 103 - - - - - 103 - Proceeds from shares issued 43 483 - - - - - - 526 Dividends relating to FY2004/05 - - - - - - (43,773) - (43,773) Balance at 31 December 2004 95,161 1,790 861 2,581 - - 202,952 2,846 306,191 7
The Company Share Share Share option Retained capital premium reserve earnings Total S$ 000 S$'000 S$ 000 S$ 000 S$ 000 Balance at 1 October 2005 95,375 4,240 1,291 214,270 315,176 Profit for the period - - - 30,889 30,889 Total recognised gains for the financial period - - - 30,889 30,889 Employee share option scheme: - SingPost share option - - 160-160 - Proceeds from shares issued 95 1,082 - - 1,177 Dividends relating to FY2005/06 - - - (214,797) (214,797) Balance at 31 December 2005 95,470 5,322 1,451 30,362 132,605 Balance at 1 October 2004 - As previously reported 95,118 1,307-215,722 312,147 - Effect of changes in accounting policy - - 758 (758) - Restated 95,118 1,307 758 214,964 312,147 Profit for the period - - - 29,152 29,152 Total recognised gains for the financial period - - - 29,152 29,152 Employee share option scheme: - SingPost share option - - 103-103 - Proceeds from shares issued 43 483 - - 526 Dividends relating to FY2004/05 - - - (43,773) (43,773) Balance at 31 December 2004 95,161 1,790 861 200,343 298,155 (1)(d)(ii) Details of any changes in the company s share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. During the three months ended 31 December 2005, the Company issued 1,906,000 ordinary shares of S$0.05 each at prices ranging from S$0.60 to S$0.802 upon the exercise of options granted under the Singapore Post Share Option Scheme. As at 31 December 2005, there were unexercised options of 20,365,164 (31 December 2004 : 17,329,250) of unissued ordinary shares of S$0.05 each under the Singapore Post Share Option Scheme. (2) Whether the figures have been audited or reviewed and in accordance with which auditing standard or practice. The figures have been reviewed in accordance with Singapore Auditing Practice 11 Review of Interim Financial Information. 8
(3) Where figures have been audited or reviewed, the auditors report (including any qualifications or emphasis of matter). The Board of Directors Singapore Post Limited 10 Eunos Road 8 Singapore Post Centre Singapore 408600 27 January 2006 Our ref : ASR2C/02513982-A000/SKL/TSO(14) Dear Sirs SINGAPORE POST LIMITED AND ITS SUBSIDIARIES REVIEW OF INTERIM FINANCIAL INFORMATION FOR THE THIRD QUARTER AND NINE MONTHS ENDED 31 DECEMBER 2005 We have performed a review on certain interim financial information of Singapore Post Limited (the Company ) and its subsidiaries (the Group ) as at 31 December 2005 and for the third quarter and nine months ended 31 December 2005. Such interim financial information has been prepared by the Company for announcement on the Singapore Exchange. Appendix 7.2 of the Singapore Exchange Securities Trading Limited Listing Manual (the Listing Manual ) requires the preparation of interim financial information to be in compliance with the relevant provisions thereof. The accompanying interim financial information comprises the balance sheet of the Company and the consolidated balance sheet of the Group as at 31 December 2005, and the related income statements, changes in equity and consolidated cash flows for the third quarter and nine months then ended as set out in paragraph 1. The interim financial information is the responsibility of, and has been approved by the directors. Our responsibility is to issue a report solely for the use of the directors on the interim financial information based on our review. We conducted our review in accordance with the Singapore Statement of Auditing Practice 11, Review of Interim Financial Information. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of, and having discussions with, persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with Singapore Standards on Auditing and does not provide assurance that we would become aware of any or all significant matters that might be identified in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that there are any material modifications that need to be made to the accompanying interim financial information for it to be in accordance with Appendix 7.2 of the Listing Manual. Yours faithfully PricewaterhouseCoopers Certified Public Accountants Singapore 9
(4) Whether the same accounting policies and methods of computation as in the issuer s most recently audited annual financial statements have been applied. Except as disclosed under paragraph 5 below, the Group has applied the same accounting policies and methods of computation in the financial statements for the current reporting period compared with the audited financial statements as at 31 March 2005. (5) If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of the change. In FY2005/06, the Group and the Company adopted the Financial Reporting Standards (FRS) below. The FY2004/05 comparatives have been amended where as required, in accordance with the relevant transitional provisions in the respective FRS. FRS 1 (revised) Presentation of Financial Statements FRS 2 (revised) Inventories FRS 8 (revised) Accounting Policies, Changes in Accounting Estimates and Errors FRS 10 (revised) Events after the Balance Sheet Date FRS 16 (revised) Property, Plant and Equipment FRS 17 (revised) Leases FRS 21 (revised) The Effects of Changes in Foreign Exchange Rates FRS 24 (revised) Related Party Disclosures FRS 27 (revised) Consolidated and Separate Financial Statements FRS 28 (revised) Investments in Associates FRS 32 (revised) Financial Instruments: Disclosure and Presentation FRS 33 (revised) Earnings per Share FRS 39 (revised) Financial Instruments: Recognition and Measurement FRS 102 Share-based Payment FRS 104 Insurance Contracts FRS 105 Non-current Assets Held for Sale and Discontinued Operations The adoption of the above FRS did not result in changes to the Group s and Company s accounting policies except as discussed below: (i) Effect of changes to the financial statements Description of change Increase / (Decrease) $'000 FRS 39 FRS 102 Total (revised) The Group and the Company FY2005/06 Consolidated balance sheet items at 31 December 2005 Share option reserve - 1,451 1,451 Derivative financial instruments 5,225-5,225 Borrowings (5,225) - (5,225) Retained earnings - (1,451) (1,451) 10
Description of change Increase / (Decrease) $'000 FRS 39 FRS 102 Total (revised) Consolidated income statement items for third quarter ended 31 December 2005 Staff cost (share option expense) - 487 487 Total profit for the period - (487) (487) Basic earnings per share (cents) - (0.03) (0.03) Diluted earnings per share (cents) - (0.03) (0.03) The Group and the Company FY2004/05 Consolidated balance sheet items at 31 March 2005 Share option reserve - 965 965 Retained earnings - (965) (965) Consolidated equity items at 1 April 2004 Share option reserve - 552 552 Retained earnings - (552) (552) Consolidated income statement items for third quarter ended 31 December 2004 Staff cost (share option expense) - 309 309 Total profit for the period - (309) (309) Basic earnings per share (cents) - (0.02) (0.02) Diluted earnings per share (cents) - (0.02) (0.02) (ii) Description of changes (a) FRS 39 (revised) Financial Instruments: Recognition and Measurement (i) Classification and consequential accounting of financial assets and financial liabilities FRS 39 (revised) requires all financial assets and liabilities to be classified into appropriate categories at initial recognition and re-evaluates this designation at every reporting date. The classification depends on the purpose of which the financial assets or liabilities were acquired or incurred. The categories and the respective subsequent measurement rules are as follows: Loans and receivables These include the Group s trade and other receivables and cash and bank balances. They are initially recognised at their fair values plus transaction costs and subsequently accounted for at amortised costs using the effective interest method, less impairment. Previously, the Group s trade and other receivables were stated at the gross proceeds receivable less an allowance for doubtful receivable. Cash and bank balances were recognised at cost. Interest-free loans from the Company to its subsidiaries were stated at gross receivables in the Company s balance sheet. 11
Financial assets or financial liabilities at fair value through profit or loss The Group s embedded derivatives that are not closely related to the host contract, are classified in this category. They are initially recognised at fair values and subsequently remeasured to fair values at the balance sheet date with all gains and losses recognised in profit or loss in the period in which the change in fair values arise. Previously, derivatives entered into for hedging purpose are accounted for in a manner consistent with the accounting treatment of the hedged items. Otherwise, any gains and losses on derivatives are recognised in the income statement on a cash settlement basis. Other financial liabilities These are financial liabilities that are not held for trading nor designated as fair value through profit or loss. These include the Group s trade and other payables. They are initially recognised at their fair values less transaction costs and subsequently accounted for at amortised costs using the effective interest method. Previously, trade and other payables were stated at cost. (ii) Impairment and uncollectibility of financial assets FRS 39 (revised) requires the Group to assess at each balance sheet date if there is any objective evidence that a financial asset or a group of financial assets is impaired. Impairment of trade and receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The impairment charge is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The impairment charge is recognised in the income statement. Previously, the Group maintains a general provision against its trade and other receivables for risks that are not specifically identified to any customer. (iii) Accounting for derivative financial instruments and hedging activities FRS 39 (revised) requires derivatives to be initially recognised at fair values on the date the derivative contract is entered into and are subsequently re-measured at fair value at each reporting date. If hedge accounting is applied, the resulting gain or loss can be matched with offsetting loss or gain of the hedged item for fair value hedges or deferred for cash flow hedges. The Group designates the interest rate swaps as fair value hedge of the issued fixed rate bonds for interest rate risk. FRS 39 (revised) also sets out certain conditions in which hedge accounting can be applied. If the conditions are not met, hedge accounting cannot be applied and changes in the fair value of any derivative instruments that do not quality for hedge accounting are recognised in the income statement. 12
Accounting treatment for fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged item that are attributable to the hedged interest rate risk. Upon hedge discontinuation, the fair value hedge adjustment to the hedged item shall cease prospectively, and any previous fair value hedge adjustments to the carrying amount of the hedged item shall be amortised to income statement using the effective interest method. (b) FRS 102 Share-based payment FRS 102 has resulted in a change in the accounting policy for share-based payments. The Group s Share Option Scheme (the Scheme) is an equity-settled, share-based compensation plan. FRS 102 requires the Group and the Company to recognise an expense in the income statement with a corresponding increase in equity for share options granted under the Scheme after 22 November 2002 and not vested by 1 January 2005. The total amount to be recognised as an expense in the income statement is determined by reference to the fair value of the options at the date of the grant and the number of options to be vested by vesting date. At every balance sheet date, the Group revises its estimates of the number of options that are expected to vest by the vesting date. Any revision of this estimate is included in the income statement and a corresponding adjustment to equity over the remaining vesting period. Previously, the provision of share options to employees did not result in any charge in the income statement. The Group and Company recognised an increase in share capital and share premium when the options were exercised. (6) Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends. The Group FY2005/06 FY2004/05 FY2005/06 FY2004/05 3 rd Qtr 3 rd Qtr 9 Months 9 Months Based on weighted average number of ordinary shares in issue 1.72 cents 1.47 cents 4.85 cents 4.39 cents On fully diluted basis 1.72 cents 1.47 cents 4.84 cents 4.38 cents (7) Net asset value (for the issuer and group) per ordinary share based on issued share capital of the issuer at the end of the current financial period reported on and immediately preceding financial year. The Group The Company Dec-05 Mar-05 Dec-05 Mar-05 Net asset value per ordinary share based on issued share capital of the Company at the end of the financial period (cents) 7.3 17.4 6.9 17.0 13
(8) Review of the performance of the Group. (8)(i) Financial Highlights Third Quarter ended 31 December 2005 The Group continued to perform well with a good set of results for the third quarter of FY2005/06. Operating revenue rose by 7.4% from S$100.5 million to S$108.0 million. All business segments showed an improvement in performance: Mail revenue increased 3.4% from S$79.2 million to S$81.8 million, underpinned by the strong performance in international mail and hybrid mail. Domestic mail revenue was steady in Q3 FY2005/06, despite the higher base in the previous year where revenue had been boosted by several one-off business and government mailings. Direct mail volumes increased as the Group continued its efforts to grow the business. Logistics revenue grew 15.3% from S$13.9 million to S$16.0 million, mainly due to higher contributions from Speedpost, warehousing, fulfillment and distribution. Retail revenue rose 10.8% from S$11.9 million to S$13.2 million as growing contributions from financial services and higher vpost mail-order transactions offset the decline in agency services. Others, namely Philatelic revenue, increased 17.3% from S$1.3 million to S$1.5 million, due to contributions from a well-received joint stamp issue with Belgium Post, and MyStamp, which was revamped and relaunched in 2005. Other operating income, mainly rental income from SingPost Centre, improved 4.2% from S$4.3 million to S$4.5 million in Q3 FY2005/06. The Group benefited from yield enhancement initiatives, such as the creation of more lettable space at SingPost Centre. Despite the increase in lettable space, average occupancy rate at SingPost Centre remained unchanged at 99.6% at 31 December 2005. In spite of the growth in the business, the Group managed to contain operating expense growth at 6.7%. Including the impact from the reduction in depreciation arising from the change in assets useful lives effective 1 April 2005, operating expenses rose 3.7%. Operating expenses amounted to S$71.7 million in Q3 FY2005/06, compared to S$69.1 million in the previous year. As a result, the Group s operating profit improved significantly by 14.3% from S$35.7 million to S$40.8 million. Contributions by associated and joint venture companies were also higher, increasing 11.3% from S$1.6 million to S$1.7 million. This was mainly due to a one-off restructuring cost at Spring recorded in the second half of the previous year. 14
Finance income rose S$0.6 million from S$0.3 million to S$0.9 million, as the Group benefited from a larger cash position and higher interest rates during the third quarter. SingPost had built up its cash position to S$180.8 million as at 31 December 2005 for the special dividend payment on 16 January 2006. To fund its working capital requirements, it had drawn down S$25 million from unsecured credit facilities while finalising arrangements for a bank term loan. The additional borrowings, along with the higher interest rate environment, contributed to the 22.5% increase in finance costs from S$1.7 million to S$2.1 million. As a result of the good business performance and operating leverage, the Group achieved a 17.4% growth in net profit from S$28.0 million to S$32.8 million. Excluding the depreciation change impact, the Group s underlying net profit increased 10.0% to S$30.7 million. Nine Months Ended 31 December 2005 The Group performed well for the first 9 months of FY2005/06, posting growth of 9.4% in operating revenue from S$281.5 million to S$307.8 million. All business segments achieved improved performances during the period. Mail revenue increased 7.1% from S$221.5 million to S$237.3 million, on higher contributions by domestic mail, international mail and hybrid mail. Logistics revenue rose 15.7% from S$38.6 million to S$44.7 million, underpinned by higher contributions from Speedpost, warehousing, fulfillment and distribution, as well as the fuel and security surcharge implemented in December 2004. Retail revenue improved 13.4% from S$32.8 million to S$37.2 million on growing contributions from financial services, product launches/promotions utilising the Group s retail and distribution network, as well as mail-order transactions on vpost. Financial services accounted for S$3.2 million, or about 72%, of Retail s revenue growth during the first 9 months of FY2005/06. Others, namely Philatelic revenue, also posted an increase, rising 3.0% from S$4.9 million to S$5.0 million. While operating expenses have increased in tandem with the growth in business and revenue, the Group achieved a good operating leverage through enforcing cost discipline. During the period, operating expenses rose 5.9% from S$196.1 million to S$207.7 million. Excluding the depreciation impact from the change in assets useful lives, operating expenses rose 9.1%. Contributions from associated and joint venture companies were lower by about S$0.4 million during the period, following the reduction in commission payable to the Spring JV. However, the SingPost Group has an overall benefit of approximately S$3.0 million per annum due to lower outsourcing cost payable by SingPost to Spring JV arising from the commission reduction. During the period, net profit rose 10.8% from S$83.4 million to S$92.4 million. Excluding the exceptional gains and depreciation change impact, the Group s underlying net profit growth was 8.1%. The Group s cashflow generation ability remained strong. Net cash inflow from operating activities amounted to S$104.6 million for the first 9 months of FY2005/06, as compared to S$91.4 million for the same period last year. 15
(8)(ii) Detailed Financial Analysis Operating Revenue A summary of the operating revenue by divisions is as follows: Operating Revenue FY2005/06 FY2004/05 FY2005/06 FY2004/05 3 rd Qtr 3 rd Qtr Variance 9 Months 9 Months Variance S$ 000 S$ 000 % S$ 000 S$ 000 % Mail 81,847 79,172 3.4 237,323 221,510 7.1 Logistics 16,047 13,918 15.3 44,707 38,647 15.7 Retail 13,198 11,911 10.8 37,164 32,777 13.4 Others 1,504 1,282 17.3 5,039 4,893 3.0 Inter-segment eliminations (4,616) (5,773) (20.0) (16,431) (16,358) 0.4 Operating revenue 107,980 100,510 7.4 307,802 281,469 9.4 Operating Profit The breakdown of operating profit by major categories is as follows: Operating Profit FY2005/06 FY2004/05 FY2005/06 FY2004/05 3 rd Qtr 3 rd Qtr Variance 9 Months 9 Months Variance S$ 000 S$ 000 % S$ 000 S$ 000 % Mail 32,986 29,368 12.3 93,375 81,594 14.4 Logistics 3,001 2,003 49.8 6,693 5,198 28.8 Retail 2,708 2,126 27.4 5,357 3,595 49.0 Others 2,148 2,251 (4.6) 8,145 7,449 9.3 Gain on sale of joint venture company - - - 3,682 Operating profit 40,843 35,748 14.3 113,570 101,518 11.9 Operating profit margin (%) 37.8 35.6-36.9 36.1 - (9) Where a forecast or a prospect statement has been previously disclosed to shareholders, any variance between it and the actual results. In the SGXNET announcement for the second quarter ended 30 September 2005, it was stated that the operating performance remains sustainable over the next few quarters. The Group has continued to perform well during the third quarter. 16
(10) A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months. Operating Performance The Group is positive on its growth prospects. It continues to pursue and implement initiatives to grow its core business in Mail and Logistics, particularly in direct mail, international mail and Speedpost. In addition, the Group remains focused on leveraging its retail and distribution network to offer more value-added products and services to customers. It will continue to roll out the financial services to more post offices over the next few quarters. The Group will also participate with partners in product launches and continue to enhance its service offerings at the post offices and over vpost. Working Capital Financing To achieve a more optimal capital structure, SingPost made a special dividend payout of 10 cents per share, or approximately S$191 million, on 16 January 2006. As expected, with the special dividend payout, SingPost will take on additional borrowings to fund its working capital requirements. Whilst this will result in an increase in finance cost, the Group expects its debt-servicing ability to remain strong in view of its robust cashflow generation. (11) Dividends (11)(i) Current financial period reported on Interim dividend In relation to the third quarter ended 31 December 2005, the Board of Directors has declared an interim dividend of 1.25 cents per ordinary share (tax exempt one-tier). The interim quarterly dividend of 1.25 cents per ordinary share will be paid on 28 February 2006. The transfer book and register of members of the Company will be closed on 17 February 2006 for the preparation of dividend warrants. Duly completed registrable transfers of the ordinary shares of S$0.05 each in the capital of the Company received by the Company s registrar up to 5.00pm on 16 February 2006 will be registered to determine members entitlements to the dividend. (11)(ii)Corresponding period of the immediately preceding financial year Interim dividend An interim dividend of 2.3 cents per ordinary share (tax exempt one-tier) in relation to the financial year ended 31 March 2005 was declared on 1 November 2004 and paid on 30 November 2004. (12) If no dividend has been declared (recommended), a statement to that effect. Not applicable. 17
PART II ADDITIONAL INFORMATION REQUIRED FOR QUARTERLY ANNOUNCEMENT (13) Interested Person Transactions During the third quarter and nine months ended 31 December 2005, the following interested person transactions were entered into by the Group: Aggregate value of all interested person transactions during the financial period (excluding transactions less than S$100,000 and transactions conducted under shareholders mandate pursuant to Rule 920) Aggregate value of all interested person transactions conducted under shareholders mandate pursuant to Rule 920 (excluding transactions less than S$100,000) Sales FY2005/06 FY2004/05 FY2005/06 FY2004/05 3 rd Qtr 3 rd Qtr 3 rd Qtr 3 rd Qtr S$ 000 S$ 000 S$ 000 S$ 000 Singapore Airlines Limited and its associates - - 875 - Singapore Telecommunications Limited and its associates - - 3,786 - - - 4,661 - Purchases Singapore Telecommunications Limited and its associates - - 101 - Singapore Technologies Engineering Ltd and its associates - 120 - - Tuas Power Limited and its associates - 700 - - Fullerton Management Pte Ltd and its associates - 529 - - - 1,349 101 - Total interested person transactions - 1,349 4,762-18
Aggregate value of all interested person transactions during the financial period (excluding transactions less than S$100,000 and transactions conducted under shareholders mandate pursuant to Rule 920) Aggregate value of all interested person transactions conducted under shareholders mandate pursuant to Rule 920 (excluding transactions less than S$100,000) Sales FY2005/06 FY2004/05 FY2005/06 FY2004/05 9 Months 9 Months 9 Months 9 Months S$ 000 S$ 000 S$ 000 S$ 000 Singapore Power Limited and its associates - 1,863 - - Singapore Airlines Limited and its associates 920 243 2,041 - PSA International Pte Ltd and its associates - 227 - - Temasek Holdings (Private) Limited and its associates - 134 - - Singapore Telecommunications Limited and its associates - 720 6,780 920 3,187 8,821 - Purchases SembCorp Industries Ltd and its associates 5,700-590 - Tuas Power Limited and its associates - 5,130 - - Singapore Telecommunications Limited and its associates 495 845 449 - Singapore Power Limited and its associates - 202 - - Singapore Technologies Engineering Ltd and its associates - 120 470 - PSA International Pte Ltd - 575 - - Fullerton Management Pte Ltd and its associates - 529 - - Singapore Airlines Limited and its associates - 465 758-6,195 7,866 2,267 - Total interested person transactions 7,115 11,053 11,088 - Note All the transactions set out in the above tables were either based on contractual values for the duration of the contracts (which may vary from 6 months to 5 years) or based on actual transacted values during the period for open-ended contracts. 19