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ComfortDelGro’s profits take a beating as taxi business slides

SINGAPORE — Faced with stiff competition from private-hire car operators, transport giant ComfortDelGro saw its full-year operating profit fall by 11.5 per cent. On Tuesday (Feb 13), the company said that the figure had dropped to S$409.2 million, attributing the weaker performance to a drop in taxi business.

SINGAPORE — Faced with stiff competition from private-hire car operators, transport giant ComfortDelGro saw its full-year operating profit fall by 11.5 per cent. On Tuesday (Feb 13), the company said that the figure had dropped to S$409.2 million, attributing the weaker performance to a drop in taxi business.

Announcing its results for the financial year ending on Dec 31 last year, the company also revealed that its revenue dipped by 2.2 per cent to S$3.97 billion, compared with S$4.05 billion in 2016, in part due to the decline in its automotive engineering services business.

However, operating profit for its public transport services — bus and rail operator SBS Transit is a subsidiary of ComfortDelGro — rose slightly by S$700,000 to S$179 million last year, driven largely by its bus services, as rail services suffered losses.

Highlighting the "increasingly competitive environment, particularly in the taxi business segment" which it expects to continue declining, ComfortDelGro said that its taxi operations suffered the biggest drop in operating profit compared with other business segments. The figure tumbled from S$167.5 million in 2016 to S$135.1 million last year.

As of the end of last year, its taxi fleet — comprising Comfort and CityCab taxis — shrunk to an all-time low of 13,244, data from the Land Transport Authority (LTA) showed, and 5 per cent of its cabs remain idle.

ComfortDelGro said that it has no plans to increase its fleet capacity. At its peak in 2015, the company had 16,997 taxis plying the roads.

Acknowledging that last year was a "very challenging year" for the company, most notably in the taxi business, its managing director and group chief executive Yang Ban Seng said: "The intense competition from ride-hailing apps has taken a toll on traditional taxi businesses everywhere.

"We, too, have not been spared, particularly in Singapore. But we have taken it in our stride and will continue to strengthen our relationship with our driver partners and find ways to improve their earnings."

Since the entry in 2013 of ride-hailing operators Grab and Uber, which started out by introducing their taxi-booking apps, taxi firms here have been reeling from the bruising competition.

Aside from ComfortDelGro, other players in the market include Trans-Cab, SMRT Taxis, Premier Taxis, Prime Taxi and HDT Singapore Taxi.

Figures from LTA showed that the total taxi fleet in Singapore stood at 23,140 as of the end of last year, which is about a 20 per cent drop from a high of 28,736 in 2014.

On the other hand, the private-hire car population has grown to twice the size of the total taxi fleet, with the figure reaching 46,903 as of end of last year.

MORE MRT LINES

At a media briefing on Tuesday, ComfortDelGro's chairman Lim Jit Poh said that the expansion of MRT lines has also affected the demand for taxis.

Over the last six years, the Circle Line and Downtown Line have come up, and new stations were added to the North-South Line. The network grew by 30 per cent lengthwise, with 41 new stations.

Dismissing the suggestion that the taxi business here is a lost cause, Mr Lim said that it still makes up a huge chunk of its overall taxi operating profit, at more than 70 per cent. Its overseas taxi business in countries such as China makes up the rest.

Mr Yang said that the company has a "big appetite" to expand its overseas taxi operations. Having acquired 217 taxi licences and vehicles in Shenyang, China, the firm now has a fleet of about 10,000 taxis in that country alone.

As part of efforts to grow its overseas revenue, the firm also recently acquired bus and coach operator New Adventure Travel from Wales, United Kingdom.

At home, the company might stand to benefit as well if smaller players fail to stay in the race, Mr Yang added: "What others lose, I can get."

Commenting on the financial year results, transport economist Walter Theseira from the Singapore University of Social Sciences believes that ComfortDelGro is still "not doing badly" since there is not much evidence that Grab and Uber have achieved operating profits.

Last December, in what was seen as an attempt to make up lost ground on the home front, ComfortDelGro announced its plan to partner Uber in what was the largest deal for the firm, valued at S$642 million.

Under this tie-up, it will acquire a 51 per cent stake in Uber-owned rental car business Lion City Holdings, which runs Lion City Rentals with a fleet of about 14,000 vehicles. Uber will retain the remaining share.

Mr Yang said that the partnership — which is still being reviewed by the Competition Commission of Singapore — shows that ComfortDelGro is not "running away" from the taxi business and this is just one measure to shore up its operations.

Dr Theseira said that the partnership could benefit ComfortDelGro if the acquisition of Lion City Rentals reduces the number of private cars for hire.

"The oversupply of (private-hire) vehicles poses the biggest threat to profitability in the taxi business. By cutting down its size, ComfortDelGro could stem the loss of revenue from its taxi rentals," he added.

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