Singapore Post Limited (S08) Earnings Call Transcript & Summary

A very good morning, and thank you for joining us for SingPost Group's results briefing for the first half of FY '22-'23. I'm Selena Chong from SingPost Investor Relations. Our results briefing today with the analysts and investors is held online via Teams and webcast live. We also welcome viewers joining us on the webcast. This session is recorded for playback purposes. Allow me to introduce our management conducting the session today. Mr. Vincent Phang, Group CEO; Mr. Vincent Yik, Group CFO. Our Australian colleagues, Mr. Simon Slagter, FMH Group CEO; Mr. Richard Thame, CouriersPlease CEO. They're joining this session from Australia. On the call also from Singapore are Mr. Li Yu, CEO for International; and Ms. Neo Su Yin, CEO for Singapore. We have a set of presentation that management will bring us through and we'll open the floor for questions after that. I'll now hand over the session to our Group CEO, Vincent.

Thank you, Selena. Good morning, everybody, and greetings from Australia. It is significant that we are conducting our results briefing from down under here as this market becomes a significant pillar for our group. I'm pleased to have our Australian colleagues join us today, Simon Slagter, CEO for FMH; as well as Richard Thame, CEO of CouriersPlease. And both Simon and Richard will speak about the developments in Australia later. We have just concluded a fruitful 1H Board meeting with the entire Board of Directors here in Australia. The Board has visited the various operations and also involved in strategy reviews with our Australia team. Our first half results demonstrate that we are gaining traction in our transformation efforts. When we last spoke, I highlighted what our transformation journey is: diversifying our revenue base to more Logistics and more International while continuing to serve our home market in Singapore. Logistics is now a clear revenue and profit driver, as you can see from the results with Australia as a major contributor. At the same time, we continue to invest into our Singapore operations through our Future of Post program, so we can uphold service quality and ensure relevance to our market. With this, we are certainly positioning the group for growth and we'll continue to invest in strategic initiatives across the strategic pillars of Australia, International and Singapore. Let me elaborate on the group's transformation in the next couple of slides. To drive our efforts, we have restructured and aligned the organization over the past year to focus on our strategic pillars, we have brought aboard key executives with deep industry experience as part of our transformation journey. Let me introduce you the new members of the leadership team. I'll first like to introduce Simon Slagter who has been with FMH Group for more than 7 years. Simon has been instrumental to the rapid growth that FMH has seen: building the team, architecting the technology, driving the 4PL business and making targeted acquisitions to grow the business. Next is Richard Thame, who joined us earlier in the year. Richard has solid experience, spending more than 10 years in the couriers and delivery logistics space in Australia and has deep relationships with customers in the B2C space. We've also recently announced the appointment of Li Yu, our CEO for International business. Prior to joining us, Li spent more than a decade at a leading global express company, where we held various international assignments in the Americas, China and notably overseeing APAC global logistics and distribution. We have previously also announced Noel Singgih who joined us earlier in the year as our Group CIO. And prior to joining us, Noel spent more than a decade, too, at another global supply chain company where he was the CIO for Asia Pacific. With the breadth of experience and industry knowledge on our management team, I'm confident that we are in a good position to drive the execution of our strategic initiatives. Now our transformation journey. I want to emphasize this because this is where the rubber meets the road. Through the transmission journey, the group will evolve into a global logistics player with a strong suite of digitally enabled capabilities. The pandemic has had a profound impact on our business and further accelerated Postal volume declines. Our investments into new growth areas in logistics will increasingly yield benefit. Our first half results indicate the start of this change with the group achieving the highest revenue of any half year. The strategic acquisition of FMH was a key move to launch the group forward in the overseas logistics space in the attractive Australian market that is structurally profitable and stable. The acquisition has given us an important asset in this technology platform, which underpins FMH's successful digitally enabled 4PL business. Through this network, we continue to bolt on logistics assets that increase our capability for this market. In the near term, this will allow us to build and scale a technology-led integrated B2B and B2C logistics business in the Australian market. Simon and Richard are collaborating to create this seamless value proposition for our customers' omnichannel needs, trade from warehouses, deliver [ bulks modally ] into store, into homes always powered by a digital solution. Over the longer term, we will be able to extend this digitally enabled B2B2C logistics capability into other key markets and help our customers evolve their supply chains. Additionally, we will continue to look at opportunities for strategic investments for growth. The potential of the global e-commerce logistics market continues to be strong. The recent market research report by Vantage Research titled Cross-Border B2C E-Commerce Market Size projects continued strong growth of cross-border e-commerce at 25% CAGR from now to 2028 with the Asia Pacific region capturing the majority of the growth opportunity. We are optimistic of our market opportunities in the region as well as in Singapore. The positive long-term outlook for e-commerce forms the basis for our strategic intent in the International and Singapore pillars. In the International space, although our business has met with significant pandemic-related challenges, we see opportunities to build new markets and tradings. We have embarked on this reorientation, positioning our assets and operations globally to focus on the cross-border supply chains and build a significant cross-border e-commerce logistics business. Li is spearheading this development. Place of Singapore, this remains a core market to us. As we continue with transformation to build on e-commerce while maintaining our postal obligations, we are investing in our Future of Post program for a smart and environmentally sustainable urban logistics ecosystem that will enable us to reap benefits in the longer term. These investments will also add to our operating leverage. Su Yin continues the good work of our building a best-in-class service levels to ensure our relevance, resilience and reliability for our home market. As we continue with the transformation of the group, the earnings profile is changing. Prior to the transformative acquisition in Australia, revenues and profits were largely from Singapore. In the first half, there is a change, a very decided change, as you can see, away from Postal and Singapore. Compared to last year, Australia increased from 17% of the overall revenue pie to 42% while Singapore is now at 15%, down from 24% previously. Our International business was impacted by the exceptional challenges that the cross-border business had to deal with in the last few years, but we expect this to gradually recover. You can expect this profile to continue to evolve with further expansion in the logistics and in overseas markets. Let me speak to each of our strategic pillars starting with Australia. Since our acquisition of FMH, first as an associate company in 2020 and then as a 51% subsidiary, the company has been growing well and delivering value. Over the last few years, FMH's CAGRs are around 30% and 50% for revenue and profit, respectively. Contributions are strong with good organic business growth and strategic bolt-on acquisitions that it has undertaken to build out its network. In the first half, FMH last year accounted for the 235% increase in our Australian revenue. As approved by shareholders at the AGM last November, SingPost has granted offers to buy to FMH's shareholders that could further increase our stake in the company eventually to 100%. We are combining the capabilities of our Australian businesses, leveraging each of their capabilities. For instance, CouriersPlease is utilizing solutions from FMH's tech platform, which optimizes routes and saves costs. We are also increasing e-commerce logistics volumes through Quantium Solutions into CouriersPlease's network with a new cross-border service. I'll now hand over to Simon, who will provide you with a little bit more color on FMH and also his plans, and then to Richard, who will speak about the B2C market in Australia.

Thanks, Vincent. So we're definitely innovating in our integrated logistics in Australia with the logistics ecosystem that's underpinned by our technology. Through our tech platform, we serve both customers who require logistics solutions as well as our carrier partners who provide a wide array of logistics offerings. In terms of value to customers, our technology provides automation and visibility. And so our carriers we provide them with purpose rates that actually fits perfectly into their network so it grasps value on both sides of the equation. This obviously improves utilization of carriers' profitability for both customers and carriers and enables truly efficient and sustainable supply chains. Success of this has been demonstrated in our continued growth in the 4PL business over the past decade with new business wins and customers up trading. FMH is the market leader of 4PL services in Australia with over 150 carriers and more than 500 customers across a wide range of sectors. We continue to innovate to maintain our competitive edge. We're currently rolling out an enhanced tech platform that will further improve outcomes for everybody in the supply chain. This is proprietary technology. It's multi-carrier, multiuser platform, providing end-to-end visibility and detailed insights and reporting that will continue to underpin our leading market position. So now adding 3PL and why. As part of our logistics ecosystem, we've been growing our in-house 3PL business to extract maximum value from our network and our service offering. The in-house logistics business comprises warehousing services as well as specialist carriers in various geographies across various different sectors and services. This 3PL business consists of strategic bolt-on acquisitions that we made to fill out network gaps that we saw, as well as adding our end-to-end B2B2C network that we are building. The slide in front of you provides a visual of the network in our in-house announced logistics as well as now including CouriersPlease. Together with CouriersPlease, FMH has 39 facilities nationwide and presence in key cities across Australia. The potential for the B2B2C logistics ecosystem is very exciting, and we're pushing ahead with our strategic plan to build and expand our business and network in this space. So at this point, I'm going to hand across to Richard Thame to speak more about the B2C's business in Australia.

Good morning, everyone, and thank you, Simon. It's an exciting time for us at CouriersPlease, already one of Australia's most successful and reliable parcel delivery brands. Demand for e-commerce deliveries is expected to grow over the long term. The e-commerce market in Australia has already reported to be worth some AUD 63 billion with 4 out of 5 households buying something online last year. Today, the last-mile delivery market in Australia is estimated at AUD 10.6 billion, and our market share today is around 3%. We're certainly optimistic about the potential of this market. CouriersPlease operates an asset-light franchise model, which sets us apart from other players. This allows us to scale without adding fixed costs. We have a wide network covering 90% of the population today with more than 800 franchisees across nearly 850 territories around the country. In particular, we have a strong fleet in the capital cities of Australia, where the majority of e-commerce deliveries are made. This is a solid foundation that we're now building on to add scale and grow our B2C market share. It is certainly exciting that this critical last-mile piece is being plugged into the whole B2B2C logistics ecosystem to create an end-to-end integrated logistics capability for the Australian market. Thank you, and I'll hand back to Vincent Phang.

Thanks, Richard, and thanks, Simon, for the update on Australia. Let me now touch on the International pillar mix. The International business was a significant contributor to our revenue and earnings pre-COVID, you are aware, and the impact of COVID has been nothing short of profound. That's it, I'm glad to report that following the exceptional circumstances in the first quarter, the International Post and Parcel business is now stabilizing and improving as we actively addressed the issues. Vincent Yik will elaborate on that a little bit later. Conveyance costs, both in air and sea freight have also started to moderate. We are cautiously optimistic of the situation. It looks more stable now, though we know that air capacity out of Changi Airport is yet to be back at pre-COVID levels when the business thrived on the tremendous scale and connections available there. As we really like this business, we will be looking at resilience, reliability and sustainable cost-effective solutions to serve our global customers. Specifically, these are the few things evident. Our International operations have been reorganized and strengthened with various operations and services now integrated and centralized. We continued to review our network for new hubs and connections, for example, with our extra territorial office of exchange in the U.K., which in essence is an overseas commercial office by SingPost. We have a new hub in Europe for volumes originating from the West. The cross-border e-commerce logistics business has traditionally benefited from east to west volumes, that is from generally China to the rest of the world. We see opportunities in new e-commerce origin markets, and we're focusing on growing cross-border supply chains with Australia and Asia, specifically Southeast Asia, in core destination markets. Moving on to the Singapore pillar. Volumes have certainly come off the high base during the pandemic as experienced by the industry at large. That's it. Excluding a major customer who has in-sourced part of his own logistics, we have actually grown our e-commerce logic volumes by 14% in the first half, increasing volumes with current customers as well as winning new accounts. While we reached a high of 42% of e-commerce contribution to revenue during the pandemic, this is for Singapore revenues, the near-term pullback has us at 36% and that ratio is now growing again. Operating costs have increased in this inflationary environment, and this has an impact on the cost of maintaining our service obligations such as the post office network, such as the operating leverage of our operations in the home market. As Vincent Yik will also share later, there is a high cost to serve from a postal -- national postal obligation standpoint, which will then better inform you of the margins and the earnings between the Post and Parcel segment. More importantly, despite the worst of conditions through the last 2 years, we have continued to uphold the best-in-class service levels across the globe. It is only with this consistency in performance that we can continue the strong legacy and the legitimacy of the country's postal service, which is an essential service. In the first half, we delivered CDC, NS50 vouchers, ART test kits to households across Singapore. And our post offices helped to relieve the surge in passport applications and collections experienced by the ICA. The same reliability and excellence we will expect from the postal service is and will be the basis of our development of e-commerce logistics. Singapore continues to provide test kit for innovation in [ the world of ] logistics developing new concepts of automation and smart technology to improve productivity and efficiencies. As part of our Future of Post program, we are investing to develop a cost- and carbon-efficient, high-service quality footprint. This covers a range of initiatives, including reviewing our network footprint and asset deployment, leveraging technology to reduce manpower needs. Some of these initiatives introduced in the first half, which you may have already read in the news include, new nodes in the network with POPStop. These are new e-commerce service centers and kiosks to be employed at MRT stations. The new POPDrop, a smart drop box for e-commerce, first-mile deliveries. This is a self-service dropoff box with an in-built tracking capability that will enable our trackable products to be tracked right upon dropoff. We've also added on the network a lot of stations in condominiums island-wide with the acquisition of the parcel center network. Such initiatives plus more in the next few months you will hear of will enable us to provide a cost-efficient, high-quality service enabled by technology as well as the most carbon-efficient one in times to come. On the sustainability front, we are implementing initiatives to achieve our net zero targets, which we have announced previously. We are tracking towards this relentlessly and have good progress on various projects such as the full electrification of our fleet targeted by 2026 and incorporating green requirements in our buildings. I'm also glad to share the recognition that we have received for our governance standards. We had award in diversity and continued high ranking on the Singapore government's transparency index. We continue to embed sustainability across our organization as part of our transformation. There are very -- these are, sorry, very dynamic times for SingPost. We've changed positively underway. The transformation is starting to yield results, and we continue to position the group for growth. Transformation is a process that requires us to methodically reorientate, restructure, refocus and execute with discipline the strategies that we have outlined. This process is increasingly becoming digital in nature. It is certainly well underway. I hope the first half results clearly show you the orientation and offer an early view of how the group's operations and performance will be. I will encourage analysts and investors to view us through that lens. A lot has been done across the group and more is in the pipeline. We are pursuing growth in Australia, rebuilding our International business and enhancing infrastructure in Singapore. Alongside that is the embedment of sustainability as we transit to a low-carbon world. This is how we are a purpose-driven organization, making every delivery count for people and plant. At this point, as we invest further for long-term growth, we are also reviewing our assets for opportunities to unlock value to support our growth pursuit. With this, let me hand over to our Group CFO to bring you through the financials. Thank you, and over to you, Vincent.

Thank you, Vincent. Good morning, everyone, and greetings from Melbourne, Australia. As CEO has highlighted, Singapore Post is undergoing a much needed transformation and doing it during very turbulent times. So while it has been challenging, there have been some green shoots of encouraging results. So I'll now take you through the financials and give you some color and context to the numbers. So looking at these slides, there are a few key notes that I want to highlight regarding our first year (sic) [ first half ] results. Firstly, the changing revenue and profit profile of our business with our growing Australian contributions. I should also note that this is the highest revenue we ever recorded in any half year. Number two, an improvement of Post and Parcel segment in Q2 after a very challenging first quarter. Three, underlying net profit of $13.2 million after you take out exceptional items, and in particular, there was an exceptional charge of $21 million, which arose because of the higher valuation of FMH. And I'll elaborate on this in the next few slides. First, on the quarterly performance. It is really as far as 2 quarters, and the second quarter was significantly better than the first. In our Q1 business update, we had shared that the Post and Parcel segment had faced some exceptional challenges during the period. So there were strong improvements since then as can be seen in the higher operating profit in Q2. So operating profit grew 3x to $30.7 million versus $10.6 million in the first quarter. In the second quarter, though, there was an exceptional items totaling $24 million in the P&L. So in particular, there was a $21 million increase in the redemption liability on the offer-to-buy to the FMH shareholders. So the strong performance of FMH in the near term has led to a higher valuation of FMH. So we expect the performance of FMH to continue on this growth trajectory. And with this, our investment value has increased. Therefore, the normal effect that the increase in value is a fair valuing charge to the P&L. So if the value of FMH increased, we take a charge to the P&L. So excluding this exceptional item, we have recorded underlying net profit of $13.2 million. So as mentioned, there has been a very deliberate and significant shift in both the revenue and earnings profile of the group. So in particular, the share of Australian revenue and profit as shown by the red segments in the chart has increased significantly and due to the transformative acquisition of FMH. So the shift is significant. It shows the group emerging from -- emerging as a global logistic operator with contributions beyond the traditional Postal business and beyond just Singapore. Now to the segmental breakdown. Here, we can see the strong growth in the Logistics segment. So this was again due to FMH and also the freight-forwarding business under Famous Holdings. So Logistics is now the largest contributor of both revenue and profits for a group. The share of Post and Parcel revenue has decreased and in the first half recorded an operating loss, and I'll touch on each of this segment in the next few slides. Starting with our Logistics business. So revenue in this segment has increased nearly 80% with the Australian business contributing to the part of this growth. This was due to FMH and [ I'll show more of this ] in the next slide. CouriersPlease revenue has declined marginally from a high base [indiscernible]. So this is partially due to the pullback of the e-commerce delivery volume. So we continued, as Richard said, continued to gain market share with higher volumes from customers. But the total e-commerce volume has moderated somewhat from the peak of COVID. Freight-forwarding revenue continued to improve year-on-year, though we are also starting to see some moderation in sea freight rates. This will likely lead to a softening in the freight-forwarding market. In the first half, Logistic operating profit was up 156% to $41.5 million. As you can see from the next slide, FMH has performed well since our initial investment in 2018. So its revenue come from 2 main segments, as Simon has touched on, the 4PL segment as well as the 3PL business. We are seeing good momentum in both businesses with customer wins and up trading as we gain more of our customers' share of wallet as well as inorganic contributions from acquisitions in the 3PL businesses. So revenue has doubled over the last 3 years while operating profit has tripled. And with its largely asset-light model and capital cost management, operating margins has also improved to high single digits. And it is precisely this growth that led to the higher valuation of FMH and the consequent fair value charge to the P&L. So moving on to the Post and Parcel segment. So as mentioned, operating conditions were far better in Q2 than Q1. Overall, for the first half, revenue was down by 19.6%. E-commerce logistics volume was lower in both the IPP and B2B businesses. And with the escalation in operating costs, the segment reported operating loss in the first half. In the IPP business, the first quarter saw air conveyance rates still at very elevated levels and new disruptions when various cities in China started going into lockdown. As the bulk of our cross-border e-commerce logistic volumes originated from China, there was a significant impact on both volumes as well as cost. So we took measures to manage our conveyance costs, such as extensive evaluation of cost-effective airlines and working with charters to reduce the reliance on air freight rates. We have added transit parts in other locations and introduced direct injection solutions into key markets to thereby rely on -- reducing transshipment through the Singapore airport. And with these measures, margins in the IPP business have stabilized in Q2. In DPP, cost challenges remains an issue. In this inflationary environment, the cost of maintaining the postal infrastructure and service obligations have certainly increased and will continue to increase. For instance, for those of you who drive, you know firsthand how fuel price has increased significantly. In fact, fuel costs for the delivery fleet has risen continually over the last few years. In the first half of this year, the increase was about 18% and this was on top of the previous year's 20% increase. Other costs such as utility and a delivery basis and across our post-office network, rental, labor cost has also gone up over the past years. On the volume front, the contraction in letter mail continues. Average letter volume per quarter has declined from some 112 million about 3 years ago to now 75 million in Q2. So that's down by 1/, 3 resulting in both lower revenue as well as margins. So with the higher operating costs and lower postal delivery volume, it is now no longer able to fully offset the cost of running fixed post office network. While e-commerce logistic volume has helped provide replacement revenue through the last 2 years, the downtick from a major customer has impacted us in Q1. Since then, we have replaced some of this volume with new wins in Q2. As you can see, the operating leverage can significantly benefit our e-commerce business with incremental volume gains. So that's it. As mentioned earlier, we are working towards creating benefits in the longer term as we transform the postal infrastructure into one that is cost efficient, digitally enabled as well as sustainable. So moving on to the Property segment. Property revenue improved with positive rental reversions in SingPost Centre. The footfall has also increased significantly as the market opened up. Occupancy is at nearly 90% for the Property. The commercial PC market has been relatively buoyant and there is a healthy interest and demand for space in this Paya Lebar precinct. So we are optimistic on the demand for the office and retail leases at SingPost Centre that will be expiring in the next financial year. So excluding the self-storage business that has been sold, operating profit for the Property segment is relatively flat as higher costs, particularly the utility costs, [ took a bite off ] the increase in revenue. So moving on to our financial position mix. Operating cash flow was lower the drop in profit and higher tax paid. So investing cash flow was largely for acquisition as well as additions to our property, plant and equipment. So this was partly offset by proceeds from financial assets that have matured as well as disposal of an associated company and -- plus from interest received. Financing cash flow. Cash inflow was from the proceeds on the perpetual securities that we issued in April this year. So as a result, the group's net cash position increased to $435 million from $280 million as at the end of the last financial year. For the first half -- now to dividend. So for the first half, the group will be paying out an interim dividend of $0.18 per share. So this payout is similar to the interim payout for last year at 30% of the underlying net profit for the first half. So with that, I conclude my presentation, I will open the floor for Q&A. Thank you.

Thank you, gentlemen. Management will now take some questions. [Operator Instructions] May we have the first question.

This is [ Chu Peng ] from OCBC. So I have 3 questions, the first one is on the e-commerce growth. So given the weaker economic growth, how do you see the trend going forward? Are you expecting weaker demand? Or what's the demand right now? Then my second question. So what's your priorities in the near term and also the strategy over the longer term? And third question is do you face any labor shortage in your Singapore and Australia's operations?

Okay. [ Chu Peng ], I think I've managed to get most of what you're saying. Your second question was about the International business is it?

It's for the e-commerce.

E-commerce Okay. Right. So let me attempt to give you a bit of color. So your first question is about the demand for e-commerce. I mean needless to say, we're all reading literature that across the globe there's softening consumer sentiments. The economies around the world are not exactly going well. Everybody is tightening their belts. So there is certainly a short-term view that there is some fallback and that's across everybody within the industry. In terms of medium to long-term outlook, as I mentioned earlier, we maintain our optimism with that. I think the signs are there that there are some conversions of supply chains from the traditional retail to future, and we're talking about 5 years out. I think the trend will continue. This is what we see. It's also an opportunity for us right now to take stock of what's gone on in the last 2 years. So clearly it has been above due to COVID across our markets. And we have, to an extent, struggled to keep up with that kind of growth. So having the chance to take stock and to plan out, we've seen the future, if anything, how do we invest in the right areas to make sure that we capture those opportunities I think will be the strategy that we apply. And that kind of answers your second question, I agree. Labor, and here, maybe I'll invite both Richard, Simon and even Su Yin, if you have any comments to just jump on clearly, labor is tight across all our markets. It's not an easy time with the opening of our borders. [indiscernible] has helped. So in Singapore that has elevated, but at the same time there is strong demand for any kind of jobs, labor everywhere, the whole industry is doing the pitch. So for us, I think far more important -- the most important thing for our entire group, the CEOs on the call will attest to that, is the focus on service quality. So we will not deprioritize what we think is the customer promise and we'll continue to discharge our obligations the best we can. And the indications are that we have done that through the worst of times over the last 2 years, delivery performance has been upheld. It even improved in some instances. So tough, certainly something to be mindful of, watching very closely, investing for our future, investing in the right way and improving productivity and ultimately reducing the reliability -- the reliance on labor. So anybody else to add anything, Richard?

Yes. I think you're absolutely right, Vincent. There's no question that access to labor is going to continue to be a challenge, both in the short and medium term. But at the same time, I think there are some valuable lessons that we've taken out of that enormous shift in volume that we saw throughout COVID. And I think part of that question was around our investment in automation. So that's certainly something that's on the radar for the business here in Australia and I know other parts of the world as well. And to your point about the e-commerce volume, certainly, they have taken off recently, but there's no doubt at all that they've settled at an elevated level. So we do expect that trend to continue. And I think the good thing from a labor perspective is that we are now in a position where we can plan sensibly and the great thing certainly here in the Australian market is that we're able to attract terrific talent and we are an asset-light model so we're able to -- we have the agility to be able to adapt to some of the changes that we're starting to see in the market post-COVID.

Yes. Thanks, Richard. If I could just segue this to a small point, I'll ask Simon to comment on this to give a bit more color. So at the time of disruption, time of when the challenges were seen in the pandemic, and even now with the labor shortages, with the opening of borders, the ability for our business, especially Simon's business, in helping customers address the supply chain challenges will [indiscernible]. We are able to help them with their needs by tapping on a broader supply base. It's actually one of the reasons why the business has grown quite strongly. So I'll let Simon speak a little bit to that.

Yes. Definitely, we've seen a massive shift in mindset to outsourcing logistics functions through the pandemic, which has really benefited our business significantly. I think to the question about labor shortages, when you have unemployment rates around 3.5%, access to labor across all industries and all roles is pretty tough. But when you're an expert in your industry, you're able to attract specific roles a lot easier because you're an employer of choice in that space. So as an example, if I'm a retailer and operate my own warehouse, it's more -- far more difficult for me to attract talent than it is if I'm a 3PL provider. So we're able to almost nail the 2 problems with one solution where customers are outsourcing their problems to us. I mean, we have the ability to attract what little talent is in the market at the moment a lot easier. So it provides a win-win solution for everyone.

We have the next question from Llelleythan.

Just a few questions. So the first one will be, I just want to understand more about the charge. So I think I heard that as FMH grows its revenue and operating profit, valuation increases. So looking forward, do we look at -- do we foresee further charges or basically any additional charges as FMH grow? So -- and secondly is the e-commerce volumes. I just want to check how much was volume from the major customer? So excluding this volume, did e-commerce actually grow the volumes, the domestic one? And for the third question, so what -- at what level -- sorry, air conveyance costs are still around like 200% from what I see on the slide. So at what level do you think there will be a ramp-up in -- not to say ramp-up, but an improvement in international store volumes? And just one more is what are the future plans for the SingPost Centre? As the SingPost Centre is doing well, it's a strong contributor, it's consistent. But what are the plans to -- maybe for, let's say, for a divestment? And maybe you could invest more into Australia, seeing that Australia is such a strong growth driver. So I'm just curious on what the plan is for -- yes.

Right. Thanks, Llelleythan. All very good questions. So if I may, I'll ask Vincent, the CFO, to address the issue on the value charge, and at the same time we'll talk about the SPC development, that there was a question. After that, I'll provide a bit of color for the 2 other questions you raised, like the domestic volume issues, and I will invite Su Yin to make a comment. And I'll also address your air conveyance question. So -- but before I hand over to Vincent, just a small point on the fair value charge. It's one of those things that you do well and you will have to pay more for it. So I guess that's the spirit of what we're talking about. And the reason why we have the obligation is because we do have the options to acquire more of the business, which is a good thing for the business. But it is the nature of the business, I suppose. So Vincent, do you want to take that question?

Sure. Thank you. This is a little bit of an accounting creating job for ourselves. So essentially, the concept is this. You have -- because we did not have 100% ownership of FMH. So for the 49%, we do not yet own. There is a liability on our books that we carry since inception. And as at every reporting cycle, we actually revalue the liability. So as FMH improves its performance, the value of average increases and the increase in value then becomes a charge to the P&L because now we need to pay more for the remaining 49% that we do not yet own. So that's the concept behind it. So to your question whether the number goes up or not, it is predicated largely on 2 things. One is the amount of shares that we do not yet own. So as the amount of -- as we increase our stake going forward, then the amount left on the liability becomes smaller. The revaluation then doesn't hit the P&L as we go on. so that's the first part. The second part is dependent on the FMH performance. So as Vincent Phang alluded to, as the performance increases going forward, then the number goes to the P&L. But I should note that it is always valued at a certain reporting date, okay? So the valuation is at a certain point in time. So we always value that at a certain point in time. So I hope that answers your questions.

On the other side, the investment value increases.

Yes.

Yes. All right. And on the SPC?

Okay. So SPC, I think that the asset itself, as you rightly pointed out, is a significant asset on our books. It continues to do really well. Occupancy is close to 97%, retail one is 100%. But it is still an operating asset for us. As part of our continuing review of operations, we do look at our entire footprint, we do look at our entire asset and what we can optimize with. It is an opportunity that we continue to explore, not just SPC. It is certainly the biggest asset. We are mindful that it is our biggest asset. It contributes a significant amount of operating profit to the group. So we do look at it carefully, and it is something that we are starting to take, I suppose, renewed interest to make sure that it is efficient and we are able to, at some point, have a good review and proposal at some point.

Yes. Thanks. And I'll talk a bit about the 2 other questions. Volume -- domestic volume growth. Frankly, the market, as we said, is softening. It is certainly pulling back as of general. And if you look at data across the globe, you will see that in most markets, it's not uncommon to see 20%, 30% drop in volume, you see that here in Australia as well, post a high base coming off the pandemic. What I'm very pleased about is that for us, excluding that one single major customer who has chosen a different strategy, we have actually grown volumes on the rest. Now the market in Singapore is quite organized in the sense that a few players are very dominant in terms of their influence on volumes and such, such as the [indiscernible]. But if you net the effect of what we have actually done is grow wallet share and grow market share based on what I just told you. And I think one of the strong reasons for that is clearly, the operating leverage that we continue to have with the postal network. It hit in Q1. You can see that very, very quickly. All the losses in Post and Parcel were in Q1. We are profitable albeit marginally, but certainly the needle is going the right way for Q2. The leverage that we have also means that once those volumes go is painful. But with that, it also means the opportunity for us from that point to get any volume becomes very significant. So I'm going to turn over to Su Yin for a quick update. If she can maybe give you a color about why her service, the service for Singapore as well as strategies, is yielding a that benefit. Su Yin, over to you.

Yes. I think Vincent has covered, I think, primarily the fact that we have a strong infrastructure strategy. So I think that's always the [indiscernible] performance. I think it's beginning to bear fruit, especially I think the strength of our delivery network with the letterboxes. It's able to reap a lot more benefits now. And I think even our customers are seeing the benefit of the efficiency and the service quality and [ delivery ] of this network. So I think we'll continue to stay focused in driving this strategy. We have acquired quite a lot of new customers along the way. And I think even the share of wallet has grown with the existing customers in view of the strong service quality that we continue to provide. So I think the continued investment in this area, and in addition, I think to the earlier question about manpower, I think this has always been very clear in our minds that in Singapore primarily, we will always be challenged by manpower. So this is the investment we're putting in terms of innovation for the future of Post. This continues to be a part of the core infrastructure strategy as we operate and build innovation to relieve ourselves of the over-dependency on manpower while upholding the higher service quality for Singapore.

Thanks, Su Yin. And finally, on the air conveyance, the costs. This is an interesting one. Our tickets to Australia were very expensive when we flew here, and I think it continues to be very expensive. And if we bought any travels for ourselves for December holidays, I think you'll be surprised at the cost so -- if you haven't already. So I think it's a function of supply and demand. Clearly, there's a lot of the demand even with the opening up of the supply base. That's the reason why the risk continue to be high. But it is moving the right direction. We see it moving in the right direction. And it's moved enough for us to actually improve margins adequately to start thinking about what we need to do in the future. So in a sense, margins have generally stabilized. It's going the right way. The needle is pointing the right direction. Give us a chance to work on revenue now. So for the analysts and for our investors, one of the challenges we had with the high cost is we had to trim our trade lanes because it was just not profitable doing those. And once the margins start to be rectified, stabilized and we're in the black again for some of these trade lanes, we expect that the revenues will come back, and it gives us a chance to go back at those trade lines. And that will add to the bulk revenue and profit growth again. Hopefully, that gives you a bit of color, Llelleythan.

Yes, yes. Very clear answers to the question. And yes, you're right. I'm going to Melbourne on December, and that's cost me $1,300. So yes, they're just basically robbing us. But yes, I'll stop here.

Okay. Thank you.

I should clarify that we booked our tickets a long time ago so it was much cheaper then.