Singapore Post Limited (S08) Earnings Call Transcript & Summary

I'm Selena from SingPost Investor Relations. Welcome to SingPost results briefing for our first half [indiscernible] call. Allow me to introduce the management here today. We have Group CEO, Vincent Phang; Group CFO, Vincent Yik; our CEO for our businesses, our CEO for Singapore, Neo Su Yin; CEO for International, Li Yu; and our Australian colleagues, our CEO for FMH, Simon Slagter; CEO for CouriersPlease, Richard Thame; and also Head of Strategy, Eng Keat. This session is webcast live and will be recorded. So we will just hand over to Vincent now to start the session.

I'll start with some key highlights for the first half results and update also on our strategic development. And in a bit, I will ask Simon to speak about the latest acquisition that we made [indiscernible] before Vincent Yik runs through the financial performance. So we continue to see the fruits of our transformation with the strong operating performance in Australia and the international cross-border businesses. This was despite the headwinds in the operating environment, the post-pandemic adjustments in the logistics sector worldwide. You would know volumes across logistics operators globally have been weak as trade flows moderated with the economic slowdown. I would first like to provide some color on 2 major movements so that you can have some context to reading our financials. The first is the slowing freight forwarding market, and the second is the strength of the Singapore dollar given the globalized nature of our business [indiscernible]. So freight rates have continued to come off the highs during the pandemic, affecting everyone in this market and no doubt us as well. This normalization of sea freight rate has reduced our freight forwarding contribution [indiscernible]. And with the Singapore dollar strengthening considerably against the regional currency, this has had a significant impact to our finance. It does not reflect accurately the underlying strength of the business and more global [indiscernible]. So we will narrate through how those movements are. So from a revenue standpoint, of the top line, we were impacted by about $100 million and $50 million, respectively, due to the softening freight rates and currency movements. So you take that into consideration. You also have seen that our underlying net profit coming in slightly above last year at $13.4 million. However, adjusting for currency movements, we are pleased to report that the underlying net profit would show an increase of 52% over the same period last year. Clearly, the financial results will be covered in greater detail by [Audio Gap] Okay. We are advancing well with our strategic plans for our growth and with the acceleration of strategic initiatives across the group. The strategic review that we commenced in May is in advanced stages. And the next slide provides an interim update of our key principles. In our last results briefing in May, we said that a review of the postal services for commercial sustainability was necessary. And the domestic postal business indeed recorded a loss in the first half. We have since announced a substantial adjustment of domestic postage rates, with effect from October 2023 effectively in the second half. This quantum of increase was necessary to put the domestic postal business on a stable footing. With this change, we expect that this business will be profitable barring unforeseen circumstances. The focus is now on charting a sustainable future for postal services. And this is an important progress point for us as far as the strategic review is concerned. So that's the first one. Over the last 4 years, we have transformed our business to focus on high-growth logistics areas, specifically into Australia and the cross-border market. We continue to build and drive the growth engines that we have put in place and M&A remains to grow to our strategy. The acquisition of Border Express announced yesterday is strategic to our drive to further build scale in Australia. As we continue to transform into a global enterprise with our portfolio of businesses, the corporate structure of the group will also move. We have reorganized the businesses into the strategic pillars of Australia, Singapore and international represented by the CEOs [indiscernible], with each business expected to drive their own operational decisions with greater efficiency. At the same time, we are reshaping the corporate center to add and drive value across the businesses and maximize the performance and valuation of the group. At the same time, we will strive to be leaner and more effective. We are investing heavily in digital transformation to reengineer operations across the businesses and functions, leveraging technology for efficiencies and underpinning our logistics services offerings for growth. This entails harmonizing our back-end systems, digitalizing our customer experience and implementing a new techniques like generative AI to facilitate business operations. Finally, with the group's transformation and changing business and market circumstances, we are reviewing the capital structure as part of our strategic plan. This will include capital recycling opportunities where appropriate. I shared this key guiding principle here to show the methodology behind the work that is currently being done. Certainly, more details will be said when the review is finalized. A shift in the revenue and earnings profile over the last few years reflects the repositioning of the group's global logistics and price. With the expansion in Australia over the last few years and now with the inclusion of Border Express, revenues from Australia are expected to contribute more than half of the enterprise book. The Singapore Postal business brings to the table a reputation of excellent service, standard [indiscernible]. It is a utility business in a regulated environment providing a national [indiscernible]. As I mentioned before, we fully expect this business to contribute a positive yield to the enterprise, must be commercially viable. From a financial contribution standpoint, as we grow to be a truly global enterprise, [indiscernible] business will remain important but will not be core to earnings. More importantly, it cannot be a financial drag to the group. With the financials stabilized, we are now working on a sustainable postal business. We are working closely with the regulator on a fundamental review of Singapore's postal service, which includes a review of the costs and operations such as optimizing and automating post office services for greater cost expected. Meanwhile, there are some good results from our efforts to drive further eCommerce volumes. This remains our focus and strategy given the competitive advantage [indiscernible]. E-commerce volumes picked up in the second quarter with higher customer volumes and new customer trumps, offsetting the lower volumes in the first quarter. As the logistics landscape becomes more e-commerce driven and more environmentally conscious and customer experience [indiscernible], we continue to innovate and transform this business. You have heard about the POPDrop, smart posting box and pop stock e-commerce stations, for example. We received good acknowledgment. This showcases our efforts, and we will continue to further digitalize all these services. We will partner with this industry in progressing new retail channel forward. And move on to the international business. Margins and profitability in the cross-border business have improved significantly with a decline in conveyance costs, new product offerings, new markets and [indiscernible]. Conveyance costs were down 24% over the first half and 42% year-on-year as average rates continue to trend downwards, still higher than pre-pandemic but certainly coming down. The greater focus on commercial offerings versus postal solutions growing results with new revenue growth of nearly 60% year-on-year, offsetting the reduction in postal [indiscernible]. In the face of a slump in global demand, which has resulted in China exports contracting over the last half year, with a sector-wide recurring in volume, this business has been able to hold daily volumes on the back of new customers. So we are quite pleased with that. In addition, we are growing complementary synergistic benefits between the international business and both the Singapore and Australian markets where we run the last mile operation. For instance, over the first half, we have increased cross-border volumes into Australia by over 5x year-on-year. As we revamp the cross-border network, we have set up a new Shenzhen operation as part of the China hub to strengthen market activities on the ground. We continue to expand partnerships in various markets. Some of these announced previously through the MOU with them. We are implementing a digitally enabled 4PL model. The intent is to offer a digitally enabled end-to-end value proposition for shippers and customers in otherwise highly fragmented e-commerce book, characterized by profitable market cross-border network points and partners. Cross-border for PR digital platform is currently being built and tested, and we will share more [indiscernible]. Move on to Australia, where we have some recent news. We continue to build and scale our B2B2C integrated logistics network and the acquisition of Border Express, which we announced yesterday for up to AUD 210 million, is a transformative effort for us. It is strategic to our Australian ambition and offers significant synergistic value to our business. This transaction is also immediately earnings accretive to SingPost. And at this junction, I would invite Simon to share a bit more on the acquisition. Simon, would you like to share a little bit about what we did yesterday?

Thanks very much, Vincent, and good morning to everyone. So yes, we're very excited with the strategic move in our journey of growth. Border Express is the sixth largest pallet and parcel distribution operator in the market with very strong B2B capabilities. The company operates in every state and territory in Australia, enabling interstate distribution efficiency and serving businesses in not just metropolitan areas but very importantly, in remote regions as well. Infrastructure includes warehouses, regional centers as well as its own fleet of vehicles. The addition of Border Express significantly expands and adds scale to our network, providing nationwide coverage with meaningful, sizable footprint across the landscape. The company generated revenues of approximately AUD 418 million in the recent financial year with a pretax profit of approximately AUD 38 million. In a highly fragmented integrated logistics industry that is estimated to be over AUD 120 billion in annual revenue -- annual revenues of our combined Australian business would be in excess of AUD 1 billion. This brings us up the league to be amongst the top 5 operators in the integrated logistics market. We are confident about the multiple synergies that can be achieved from the combination of our capabilities, networks and services. There are significant customer synergies and opportunities for operational efficiency and cost savings immediately to both FMH as well as Border Express. The pursuit of revenue and cost synergies will continue with greater pace, and we will focus on integrating all of our B2B and B2C businesses to drive growth. Thank you.

There are 2 other points to make before I hand over to Vincent. First, I'll give a quick update on sustainable -- sustainability. So we continue to advance on our sustainability goals with a balanced focus on all aspects of ESG. It is a core to our business operations, and we continue to embed our sustainability principles and efforts in operations across all our markets. So for example, in Australia, we have just recently added another facility to achieve a 5-star Green Star ratings for a total of 4 such a property. Yes. And finally, moving on to the outlook and summary. I'll offer some comments, bring you through what we see going forward. The economic and business trend conditions across the markets continue to be challenging [indiscernible] and the uncertainty in the Middle East situation currently also present a risk to supply chain and conveyance costs in that region. While the strategic review is being finalized, we will provide more updates when [indiscernible]. We have our strategic plan for growth, and we'll continue to execute them. We are committed to growth and creating shareholder value with profitable businesses doing a domestic postal business that offers us [indiscernible] growth in Australia and [indiscernible] much our overview [indiscernible] for the financial.

Good morning, everyone. Good to see everyone again. So I'm happy to report a pretty strong set of operating numbers to you this morning. With the group's [indiscernible] to logistics and to the overseas market, the last few years, the shift in revenue and earnings has been significant. So about 85% of revenue is now generated out of Singapore. Hence, you can see the increased currency impact on the financials now. So with this, while this increase has increased our currency exposure, it has also provided us with additional new and diversified engine of growth. And you will see these new areas given new opportunities and far outweigh the challenges that we face. So the operating performance of our growth areas of Australia, international market, international cross-border businesses are strong. So the international cross-border business is now back to profitability this half, including the loss from last year. There were a couple of factors that did impact our business over the last 6 months. So aside from the currency movement, the post-pandemic normalization of freight forwarding revenue and profits were significant. So this was expected, and we did highlight this in our earlier briefing as well. So in addition, there was a wider loss in the domestic postal business that has now been stemmed, and you have heard the CEO talk about this earlier. I'd like to highlight a few lines in the group's P&L. So while group revenue and operating profit showed a decline, the currency adjusted figures did increase. And if you exclude the impact from the freight forwarding business, then our revenue have increased by 2% and operating profit by as much as 45%. So if you take out the currency impact, that's what -- take out freight forwarding impact, that's what it is. I'll talk a little bit more about that later. So exceptional loss was significantly lower compared to the first half last year, which recorded a $21 million increase in the redemption liability, FMH put option. So those arose last year with the higher valuation of FMH as a result of the strong performance. So at the bottom line, we recorded a net profit of $11.5 million versus last year's loss. And in constant currency terms, underlying net profit was actually up 52%, and this is despite the decline in Famous Holdings earnings and a wider postal loss. So going to segment breakdown now. So the segment breakdown helps to illustrate the significant impact of the freight forwarding revenue decline of Famous Holdings. So the year-on-year swing here was about $100 million. We look at revenue, the year-on-year swing is about $100 million. So the freight forwarding business remains profitable. Other earnings have also -- has now contracted in tandem with the revenue decline. And because of this impact, we have separately reflected this to give some color to the strong underlying performance of the other businesses. So the currency impact amounts to approximately $15 million to revenue. So that's $50 million decline and about $8 million to operating profit. So the relevant key currencies here are the Australian dollars as well as Chinese yuan depreciated by about 8% to 9% against the Sing dollar over the last 6 months. So moving on to the segments. Constant currency terms, the logistic revenue and operating profit, excluding the impact from freight forwarding business, where they're higher by about 4% of revenue and 26% for operating profit. The sea freight rates that volume in the industry are undergoing a period of adjustment following the pandemic period, and this has had an impact on Famous Holdings, which did record exceptional revenue and profits over the last 3 years. But that is now normalizing. So sea freight rates and volume has fallen significantly year-on-year. So the operating performance of Australia business continues to be strong despite some softening in the logistic markets there. So there were revenue pressures from lower fuel surcharges following the decline in fuel levies across the logistics industry over this period. So we are starting to see that reverse recently with the Middle East development. With the new acquisition of Border Express, as you have heard, we can expect this market to continue to show significant growth potential. So FMH continue to grow with new customer wins in the 4PL business, and this helped to buffer the weaker performance of the 3PL segment. CouriersPlease also did well, outperforming the wider last mile delivery market with some good volume growth from new customer wins and a larger share of wallet. So now move on to the Post and Parcel segment. The international business did deliver a nice comeback this half as we recovered from a loss in the first half of last year and back to profitability this half. This would have been significantly higher on a constant currency basis, but it was subject to some adverse currency movements, particularly the Chinese yuan. So still there were some strong improvements in the business. The improvement in margins and profitability was largely due to the decline in air conveyance costs, which [indiscernible] 42% year-on-year and the shift in product mix to a more commercial offering, giving us better margin, better outcomes. So this helped to offset a wider loss in the domestic postal business. So volume of letter mail continue to decline, and was down by another 3% in the first half. So operating costs of this postal infrastructure, such as the postal network continues to be high and have dragged the domestic postal business into the risk. As mentioned earlier, with the postage upgrade now implemented, the domestic business is now expected to be profitable for the second half onwards. Moving on to the financial position. So the group's financial position remains healthy. Liquidity ratios, such as current ratio, quick ratios are stable. All the businesses are generating positive cash flows, so that's good. And as part of the strategic review, the capital structure, the dividend policy are concurrently being reviewed at the same time as we continue to transform and invest in this strategic initiative. So we'll continue to explore capital recycling opportunities with potential divestments of non-core businesses and assets. So for the first half, interim dividend is maintained at $0.018, equivalent to 30% of our underlying net profit, so similar to last year. So thank you, and I'll hand this time back to Selena.

Thank you. So we will now open the floor for Q&A. You raise your hand, we will pass you the mic.

Just 2 from me. Firstly, can you help us understand the magnitude of operating profit changes in domestic post and parcel business on a year-on-year basis? How has the volume impact been since the implementation of new postage rates? And how should we think about the overall Post and Parcel segment profitability in the second half? Second question is on the acquisition of Border Express. How should we be thinking on the revenue and cost synergies here in Australia after the acquisition. And looking at this particular entity's margin level, it seems quite high, mainly at the high single-digit EBIT margin. Can you explain a bit more on the business model here? And is this level of margins sustainable? Or is it posted by COVID period? [Audio Gap]

We were -- we reported losses in H1. So likelihood is based on the kind of update that we're seeing and without -- based on some degradation of [indiscernible] per CAGR in the last couple of years, we do see that this upgrade will give us an uplift that will bring us into profitability. The scale of that, I think, at this point in time, it's not only to say, but I want to just share with you is that we do see ourselves at least minimally breaking even or at least coming profitable next couple of -- in H2. I think what will also help is that the e-commerce business, based on the whole post and parcel business that we have as well as a strategy to attain financial sustainability with the new customers coming onboard that we've had in the last couple of months. I think this will also help to elevate some of the current [indiscernible] decline that we have anticipated. So I think looking at H2, we do see a positive outlook for H2. I think what is important here is H2 is generally our stronger half given this is the campaign season, especially for Q3. So we do think that we will end up pretty strongly for H2. [Audio Gap]

[indiscernible] clearly, having a postage adjustment is not a be all and all to the sustainability question we have around the postal business. There is much needed to address the right cost of the business and the ability to get the approval around such a large quantum of increase to how important it is to us. So as we mentioned, it is a much needed -- is a relief both on the postal side. We continue to work on cost levers that we have and the discussions continue with the government around the fixed cost network on running post offices, what help can we do to make this relevant and [indiscernible] for the population, while addressing the cost effectiveness. We also will be looking at the growth in the e-commerce segment, which [indiscernible] COVID last year volumes were a bit soft, hopefully, this time around, there will be better on making some road that we wallet share and market share. Hoping that will be very helpful for what we do in the second half. So a lot remains to be seen, but it's a show of the commitment side to get to what I said before in this business [indiscernible]. That's not to be financial reason, doing everything we can to make sure that is the case. And as we acknowledge this, this is also not just one sided. It's something we work together with the rest of ecosystem [indiscernible]. Simon, over to you.

Yes. Okay. So the question regarding Border Express was -- so around, obviously, the synergies within the group. And I think as a standing -- as a starting point, we need to acknowledge that Border Express stand-alone is a very successful business. It's -- it has really benefited from a strong management team that's extremely disciplined and has got deep expertise in the transport space. So I think that when you look at the business, even without potential synergies across the remainder of the group are still very attractive to us. They could have sold their business. There were multiple parties that were interested in the business. But the founder, he's 93 years old, he obviously -- his legacy is very important, and he wanted to ensure that the business was left with -- or sold to a party that had a broader strategic plan that was going to take the business to the next level, and he really bought into our plan, which is a lot of the reason why we were successful in the acquisition. What it gives us and our strategic rationale behind why we are -- have been interested in Border Express is the 4PL business being asset light. As we continue to grow, we need -- we've always got 2 key risks that need to be managed. One is the risk -- our technology obviously needs to be secure and stable and scalable, which obviously, we've done a -- we've invested heavily behind that. But secondly, as we continue to grow, we are soaking up more and more capacity in this market. So we definitely need to have a network where in the event that any one of our existing carrier partners was to cease operations going to administration, et cetera, et cetera, we've always got a place to put our volume. So we can ensure that we're meeting our customers' KPIs. And Border Express gives us -- as I mentioned, they're in every state and territory, deep regional capability, strong management team. So it gives us this key risk mitigants. But then there's obviously the synergy. So currently, the 4PL business probably has about 2.5% of its volume with Border Express. We anticipate that -- well, strategically, we never want more than 20% of volume in our existing transport companies to come from the 4PL business. They need to sustain in their own rights. So there's obviously quite a bit of growth that we can see going from 2.5% to about 20%. And that's obviously going to unlock quite a bit of synergies. So we anticipate that can happen pretty quickly. There's all the other obvious synergies across suppliers and tires and fuel, et cetera, et cetera, et cetera. So there's -- it's really quite exciting for us from that perspective. And yes, it's definitely going to be a very key part of our broader group and how we grow moving forward. Hopefully, that gives you some color.

Simon, did you get the question from [indiscernible]. The question was about the margin from Border Express is pretty attractive right now. And do you expect that to be going forward?

Yes. So sorry. I missed that one. The -- so from our perspective, I mean, we see that as appropriate. That margin for a well-run transport company, that's what we think is around benchmark. So I think saying that it's very strong, I think, is -- I mean, as I said, it's probably on par with where well-run transport companies are. specifically when you have regional capabilities, so capability into country. You can command a higher yield and Border Express certainly has that. If anything, we will look to obviously improve upon that through leveraging spend across the group, across supplies, as I mentioned, but we don't certainly see this as being something that's emerged out of COVID. This is just from a very well-disciplined management team that prices accordingly and has great service and can charge for it.

So hopefully, that gives some color. So if I can just add a bit more comments to what Simon said. So we clearly didn't -- clearly, the strategy for us in Australia isn't to buy just independent businesses and run it as they are. Clearly, the strategy is to create and to integrate the business that we have. And the way we see it is, as Simon has goodly mentioned, the Border Express piece is probably the biggest sizable 3PL that we have acquired to date. That then allows us to look at the integration prospects across the group. So synergies are -- every way you look, you see some synergies, not just the revenue synergies and cost synergies. Given the procurement synergies, when you run a fleet, there's a lot upwards of $1 billion of combined revenues. It does give us a lot of ability to start to restructure some of the things that we do when they are otherwise run very independently. So moving forward, there's a lot more of that prospect for us. There's also this completeness of the supply chain capabilities across the whole value chain that we are starting to put together, as you can imagine, between the different formats of delivery. There's truckload, there is a truckload. There's pallet. There's carton, even down to even CouriersPlease. Now with the regional network that Border Express provides us, that completes a pretty strong solution. If I may, just to maybe give a bit more color around how that even impacts the CouriersPlease, if I can get Richard. Do you want to say a few words between -- now? How do you see Border Express and CouriersPlease creating those synergies as well? So give color please to everybody about what we're doing here.

Yes. Thanks, Vincent. I think as Simon has identified, there are terrific synergies across the businesses that we've already got. Specifically, that last point about being able to extract a better price and ultimately, a better margin, delivering into regional areas, I think in the Australian market from a parcel perspective, that's certainly where Australia Post has been the default carrier and had that space for a long time. So it gives us an opportunity to cost effectively expand our footprint into those areas and also leverage on the success that we've had in the first half in building share in the parcel market. So we've seen a significant uplift in share, and we're very keen to expand that footprint more nationally into some of those regional areas where Border Express has already got a very good presence and a very good service.

Just 3 questions from me. Just on the Border Express. Were there an existing user or customer of the FMH platform? And related to Border Express, again, just from the customer's perspective, do they see this as this is going to help my business more? Or you [indiscernible] since you mentioned your strategic acquisition? But just from the customer's perspective, how important is it or how helpful is it to them? The other question is on Famous Holdings. Can you just give some color of the profitability compared to pre-pandemic, whether your cost structure is up a little bit, the weakness in profit may linger a bit longer as revenues taper down? Just some sense of the trajectory. And the last one is just on the noncore -- where do [indiscernible] noncore in your balance sheet or like just give some flavor what kind of noncore related.

Thank you. So I will have Simon speak to the question on the existing relationship that Border Express has with FHM and what customer value it brings to the offering. [indiscernible] I'll cover the noncore. So Simon, you want to go first?

Yes. So certainly, Border Express has been well known to our business for probably over a decade. We've had a great relationship with them as has CouriersPlease. So they supply services across a myriad of customers. They supply regional services, so regional deliveries for the CouriersPlease business. So it's been a deep relationship over many, many years. I think to your point about customer outcomes, that's definitely what we intend delivering on because we will put our technology into their customers. And as a result, we'll create better visibility across the supply chain as well as more efficiency, which obviously we can then pass on appropriate amounts of that in terms of cost savings to our customers. So the whole -- just because of the geographic dispersion of the Australian population getting density in terms of any lane is pretty difficult. So the more scale you have, the easier that is to achieve. That makes you more efficient if you manage it properly, which obviously drives down your costs, which means that you can offer a price point which is more competitive. So -- and then couple that with the technology, the visibility creates better service for customers. So that's part of the plan. Absolutely [indiscernible] with that question. [Audio Gap]

[indiscernible]. The revenue is down almost half to about down [ about ] 40% to $100 million. That is largely predicated on [indiscernible]. So at its peak, I think we'll use moving container by about 10x [indiscernible] [ 1,005 ] per container per [ tonne ] is now north of 100 to 150. So the fleet now is 90%. So that is back to close to pre-pandemic levels. And the good thing working for us is 2 things. One is we are continuing to see very strong volume in there. So we have been able to maintain the increased volume [indiscernible] from the pandemic. But that obviously meant that the rate then that while we maintain volume, the absolute dollar amount we make down. So we are impacted -- while we maintain volume, we also maintain margin. So for every container truck, we typically -- for every container, we typically make 10x to the dollar. So we do maintain that margin throughout both pre, during and after pandemic, but the absolute number is now down. In terms of absolute dollar terms, we are actually better off than pre-pandemic. So we do see that normalize back downwards, but it is still outperforming pre-pandemic level. It's probably at the lower end of where we see it now really, so coming -- probably coming to normalizing, stabilizing. There is probably a little bit more downward pressure, but probably not going to be as significant as well as seen over the last 12 months. Volume are better. The margins are constant. So our net return compared to pre-pandemic, we are better off at this point, and we are seeing that stabilizing.

Finally, on your last question of the -- what is noncore to [indiscernible], you will not find us in [indiscernible]. But if I can ask everyone to maybe be a bit more patient with our strategic review, that will become quite obvious, get to the end of it. However, as I said today, and I took the time to share a little bit about the key principles that guide us in the strategic review, understanding of some color on how we go. And if you look at the kind of segmental reporting that we are putting out, it is very clearly focused on the market that we're operating in for international cross-border market and a market, which is now very, very sizable. So there will be one key principle that guides us in how we define our logistics offering as we go forward. The second is our -- the management team's commitment to working towards network business. So in the sense, as I alluded earlier -- alluded to earlier, the international cross-border business has working very closely with the 2 key markets that we have, Singapore and Australia, to make sure that we flow goods through those markets, and we are especially pleased with the progress that we've made in Australia, hence, the year-on-year volumes have grown 5x. Now we are offering a lot more value through that network. So the way we see it is how do we put the [indiscernible] of our capability together to form that network of what we want to be going to the future. So clearly, that expression, that definition will come at the end of that strategic review. That will be a lot clearer, but you can start to see this. But even within the Australian market, we do not intend to run these businesses that we have separately. There will be some integration effort to get the pieces all come together, and then we create all those revenue synergies, the cost synergies we spoke about. So that's how we intend to run. In a sense, we would like to be a pure-play logistics company. So if that's the expression and that is -- and I say once again, a bit of the guiding principles I share here. But towards the end of the strategic review, this becomes a lot clearer. Anything that's not within that universe will then be classified as noncore. And then we'll look at those opportunities. Hopefully, that gives some color.

So how is the restructuring going on, especially for the property segment side? Are you considering to dispose it?

Well, as I said earlier, when we get to the other end of the strategic review and we are very clear about what is core and noncore, then I think we get to that. But it's all part of the consideration right now.

Just a very basic question. Do you mind to explain very briefly on 3PL and 4PL, like the difference?

So given that the biggest 4PL business we have is in the Australia business, I will ask Simon to give you a view of the 4PL business or business as a description. What we have in Australia is a very large core business for the 4PL business. But at the same time, we have collection of 3PL businesses and the synergies. So I'll ask Simon to talk about it. After that, maybe I'll ask Li. Probably, you can share a bit about in the international cross-border business. How do you see 4PLs that you're creating play to the advantage? So Simon, over to you.

Perfect. I think I'll start with 3PL because that's pretty easy to understand. So a 3PL operation is either a warehousing or a transport -- warehousing operator or a transport operator that essentially services multiple customers through its facility. So if you think about it in simple terms, if you've got a warehouse and you've got 20, 30 customers that you service out of 1 or multiple shares, that would classify as a 3PL. So third-party logistics, same applies to transport operator. When you're talking about a 4PL, a 4PL will use technology to essentially connect multiple 3PLs to a customer. So essentially, you could have 3, 4, 5, 6 different carriers or 3PLs to use the other terminology connected to a single shipper through a technology solution. And that would be a 4PL. So within the FMH group, UFM Logistics is the 4PL. So it's our core business. It's our biggest by revenue and profit. It has grown by doing exactly that, having deep expertise in terms of understanding the different carriers and warehouse providers in the market, integrating them from a technology perspective and then connecting them up to different customers and then managing the service throughout in an asset-light manner. So does that answer the question?