SINGAPORE - Singapore Post has warned that a United States e-commerce firm it acquired in 2015 has been performing poorly and its value on the company's books could be significantly impaired.
It said that TradeGlobal has been hit by cost pressures arising from tight competition in the Cincinnati area for labour over the festive season.
TradeGlobal was also impacted by developments at two key customers - one decided to insource its e-commerce freight operations while another filed for bankruptcy.
SingPost shareholders had earlier questioned if the company overpaid to acquire TradeGlobal and other subsidiaries.
TradeGlobal accounted for $169 million in goodwill and $43 million in customer relationships - an intangible asset - in SingPost's 2016 financial statements.
TradeGlobal has not achieved the underlying profit assumptions of the business plan which supported the investment for the nine months of the financial year, SingPost said on Friday (Feb 10).
TradeGlobal incurred a significant loss instead of a projected profit in the third quarter peak season. It is expected to make a loss for the full year.
SingPost said any impairments will be reflected in its results for the full year ending March 31.
It announced this alongside its third-quarter results, which showed net profit fell 27.9 per cent compared with year earlier to $31.4 million on the back of operating losses in its US e-commerce business, costs related to the new Regional eCommerce Logistics Hub and a fall in domestic mail volumes.
Revenue for the three months to Dec 31 rose 16.8 per cent to $369.4 million, with the inclusion of SingPost's US e-commerce subsidiaries.
"We are building out our capabilities, broadening and deepening our e-commerce logistics network, to secure the future of SingPost. There are challenges along the journey and it is going to take a number of years for our investments to contribute," said Mr Mervyn Lim, SingPost's covering group chief executive.
Earnings per share for the quarter was 1.28 cents, down from 1.84 cents a year earlier. Net asset value per share was 76.58 cents as at Dec 31, up from 72.26 cents on Mar 31.
The company declared an interim dividend of 0.5 cent per share for the quarter.