December 24, 2024
SINGAPORE – The termination of the employment of Singapore Post’s group chief executive, Mr Vincent Phang, could delay ongoing efforts to ensure the long-term commercial viability of the postal service business, given that he had been instrumental in leading its restructuring, some analysts said.
They are uncertain of whether his departure will have any impact on SingPost’s new plans to focus on logistics for future growth and divest non-core assets to pare debt and return excess capital to shareholders.
Those plans also include the proposed sale of SingPost’s Australian freight management business to a private equity firm for A$776 million (S$656 million) in cash, which would substantially improve the company’s financial position and make way for a potential special dividend.
Given that the Australian business is a major contributor to the company’s overall profits, the sale had also raised questions about SingPost’s long-term growth potential – doubts that Mr Phang would have been well placed to address.
SingPost had also been finalising an operating model with the Infocomm Media Development Authority that includes plans to transition away from post offices to alternative locations and channels where customers can interact with the postal system to send, receive or manage mail and parcels, among other things.
Mr Phang had announced SingPost’s three-year transformation plan in March. For the six months ended Sept 30, the company’s revenues rose by 20 per cent year on year to $992.4 million, while earnings increased 65.6 per cent to $22.2 million.
With no further clarity on these plans, OCBC analyst Ada Lim warned in a Dec 23 report of greater corporate governance risks and uncertainty, and expects SingPost’s stock to be worth less than initially forecast.
Mr Phang, group chief financial officer Vincent Yik and the CEO of a SingPost international business unit, Mr Li Yu, were sacked with immediate effect on Dec 21 after investigations stemming from a whistle-blower’s report received in February were concluded.
The report alleged that some employees of the international business unit manually updated the delivery status codes for certain parcels of one of its largest e-commerce customers to “delivery failure”. However, investigations revealed that no delivery attempts had been made.
The investigations also found that Mr Phang, Mr Yik and Mr Li had accorded undue weight to misrepresentations made by employees directly involved in the breach of conduct without any independent substantiation or evidence. The three were also found to be “grossly negligent” in their handling of the internal investigations.
SingPost’s board of directors subsequently noted that it had lost confidence and trust in the judgment and ability of Mr Phang, Mr Yik and Mr Li to perform their duties to promote and protect the interests of the company, resulting in their dismissal.
Mr Phang and Mr Yik are contesting that decision, saying that the reasons provided for their termination are without substantive grounds and that the process leading to the move was not conducted fairly.
In the meantime, Mr Isaac Mah, who is currently chief financial officer of SingPost’s Australian subsidiary, will be appointed the new group CFO, subject to the necessary regulatory approvals.
However, the group CEO’s position has yet to be filled. In the interim, board chairman Simon Israel will provide increased guidance to and exercise greater oversight of the SingPost senior management leadership.
SingPost said postal services in Singapore will not be affected, and that each of the group’s businesses has its own CEO and leadership team and will continue to operate normally.
An acting CEO will be appointed to replace Mr Li at the international business unit.
When contacted, SingPost said the recent disciplinary actions and leadership changes, while significant, will not materially impact its future plans.
It referred to the company’s Dec 2 announcement for the proposed divestment of its Australian business, where it was stated that it will review and reset its strategic plan once the transaction is completed.
Maybank analyst Jarick Seet expects the company’s strategic direction to remain unchanged, and the potential sale of the Australian business and other non-core assets, including the SingPost building in Paya Lebar, to be ongoing.
“We do not expect any delays, and in fact we believe now without the key management, the board will double down on its initiatives to dispose of non-core assets and return value to shareholders at a faster pace.”
He added that SingPost’s share price, which fell 10.7 per cent to 50 cents on Dec 23, should recover over time.
- Kang Wan Chern is deputy business editor at The Straits Times.