Transport operator ComfortDelGro C52 delivered a set of “reasonably resilient” earnings for 1HFY2024 ended June 30. The group’s earnings for the six-month period stood at $95.1 million, up 21.4% y-o-y, marking the fifth straight quarter of y-o-y earnings growth.
Revenue for the period rose by 13.7% y-o-y to $2.12 billion due to growth from the group’s existing businesses, new acquisitions and favourable foreign currency translation mainly from the stronger British pound.
Although ComfortDelGro’s bottom line stood slightly behind the $209.5 million FY2024 adjusted estimate forecasted by Bloomberg consensus, group CEO Cheng Siak Kian noted that the group has made “very good progress” in all its key operating areas.
“If you look at what we have achieved in the first half, it’s really about navigating the uncertainties that we’ve seen around the world,” says Cheng, referring to the higher inflationary environment as well as the conflicts in Ukraine and Gaza.
In an interview with The Edge Singapore on Aug 14, ahead of the group’s results briefing, Cheng stresses that ComfortDelGro will continue to build scale and recurring income across its markets. “One of the things that we have seen, and have done pretty well, at least [in] the first half, is that now we continue to expand and defend the key territories that we’re in.”
In Singapore, ComfortDelGro’s 75%-owned subsidiary SBS Transit won the contract for the Seletar bus package in July, which was estimated to be at a total fee of $526 million over the five-year contract period. The contract, which was previously won by SBS Transit, will commence in 1Q2025. According to Cheng, the new contract had similar margins to its previous contract, helping the group maintain its scale.
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The group has also seen returns from measures such as the higher commissions charged to ComfortDelGro’s cabbies. As of Jan 1, ComfortDelGro cabbies pay 7% of their fares collected from rides booked via ComfortDelGro’s app, Zig, and via the phone, up from 5% previously.
In 2023 and 2024, ComfortDelGro made several strategic acquisitions overseas including UK private hire business Vedamain, Australian personal transportation provider A2B Australia and UK-based ground transport management specialist CMAC Group. The group won several bus and rail contract tenders including the Stockholm Metro tender that was clinched with its joint venture with Go-Ahead in January this year.
ComfortDelGro, through its subsidiary, Metroline, was also awarded contracts to operate four bus franchises in Greater Manchester in the UK. The Stockholm Metro contract will see operations starting in May 2025 while the Manchester bus contracts will commence in January 2025.
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The Manchester win, which will increase ComfortDelGro’s bus fleet in the UK by some 30%, is “significant”, as it provides the group with a new income and revenue stream from 2025. CMAC, which benefits from transport disruptions such as plane delays and cancellations, has done well in the 2QFY2024 and more so in the 3QFY2024, says Cheng. For instance, the group saw an increase in volume when flights were affected by a defective software update by CrowdStrike in July.
In Australia, ComfortDelGro’s acquisition of A2B, which has the largest taxi fleet in the country, expanded the group’s total fleet in the group to 29,000 from 21,000. “Again, that is about putting ourselves in a leading position in the key markets that we’re in,” says Cheng.
Driver shortages
However, the group continues to grapple with an industry-wide shortage of drivers. The manpower challenges are “reasonably under control” in Singapore and the UK so far, but they are more pronounced in New South Wales, Australia.
While the challenge is not unique to ComfortDelGro, the group says it is keeping a close watch on the situation.
Drivers are crucial to ComfortDelGro’s business, serving as the backbone of its operations. A sufficient driver pool is necessary to run an efficient schedule and manage costs effectively, says group deputy CFO Chris White at its results briefing on Aug 14.
“When we’re sharing drivers, we either have to have overtime expenses or emergency drivers, for example, or in very extreme cases, we have to cancel trips,” he adds.
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Australia’s rural regions, in particular, are areas where the group faces a bigger challenge with the manpower shortage as the population in these places is smaller. And after people retire, they are not likely to rejoin the workforce, shares Cheng at the briefing.
Although the shortage is likely to persist through the rest of this year, Cheng is hopeful that the slowing Australian economy may lead to a seasonal uptick in drivers joining the group. “At this point, the situation doesn’t look like it’s improved significantly, but it looks like we are going to get some help [on the back of the] economic slowdown and more people will join us. So hopefully the situation will improve in the second half of the year.”
In Singapore, group deputy CEO Derek Koh says that the group has implemented programmes aimed at making taxi-driving more appealing and effective for younger drivers. In January, ComfortDelGro introduced a trial employment scheme where taxi drivers can sign on as full-time employees where they will receive a base salary, receive CPF contributions, medical perks and so on — unlike the traditional model where a taxi driver rents a taxi and keeps his or her income net of commission and fuel costs.
According to Koh, the group will also focus more on the private hire vehicle (PHV) sector, because that is where the younger drivers come from.
Noting that life has “different seasons” where people explore different careers throughout, Cheng sees taxi driving as an attractive alternative for the more senior members of the workforce in Singapore. He points out that some of ComfortDelGro’s drivers in Australia are retired lawyers and doctors working part-time jobs, which is not uncommon.
Autonomous vehicles and future focus
On July 31, ComfortDelGro announced that it had signed a memorandum of understanding with global autonomous mobility company Pony.ai for large-scale commercial robotaxi operations.
“Going into autonomous vehicles (AVs), learning about AV operations — that is actually one key thrust that we have set ourselves to [do] because we believe that is a really good use of technology in the future,” says Cheng during our interview. “We don’t think that it will replace drivers all together, but we think that this is really a good option to alleviate the shortfall of staff across many of the areas that we’re operating in.”
ComfortDelGro will also remain focused on growing its rail operations, says Cheng. “We have won two key contracts, as we have announced early this year and last year — one in Stockholm [and] one in Paris. And there’s still ongoing tenders in Singapore for the [upcoming] Jurong Region Line and Cross Island Line, which we are participating in,” he notes.
He adds that the group is currently pursuing two train contracts in Australia.
For bus contracts in the UK, Liverpool is adopting models similar to Manchester’s, which will be “interesting” for ComfortDelGro. Additionally, there is potential for Yorkshire to follow suit, Cheng adds.
Having portfolios in several key markets means the group is not only able to share its resources internationally, it is also able to observe and apply best practices in each of its markets.
For instance, Singapore, which is implementing the electrification of its public buses, can learn a thing or two from London, which is “quite a few years ahead”.
“In London, we have something close to 200 electric buses, compared to what we have in Singapore. How do you operate them? What are the infrastructure requirements? What are the challenges? What are the lessons learned? Those are the things that we learn and share across the whole business,” he says.
One industry, two components
On the review of the point-to-point (P2P) industry structure and regulatory framework, Cheng says the group has not heard beyond what the government has spoken about in Parliament. But he remains hopeful that there will be changes that allow a level playing field between the taxis and PHVs.
“Ultimately, it’s one industry, but the two components can co-exist. There is also a place for our taxis because we believe they can provide better reliability and quality especially during… underserved periods and underserved areas,” he adds.
On March 5, the Land Transport Authority (LTA) announced that it made several changes to address the key areas of feedback it received after engaging various stakeholders on the P2P review.
“A common piece of feedback from stakeholders during our engagements is that street-hail services, which are provided only by taxis, continue to play an important role in ensuring that P2P services remain accessible to all commuters,” reads LTA’s statement. “This includes seniors who may be less familiar with using ride-hailing apps, tourists, and commuters at locations with very high concentration of demand (e.g. airports, ferry terminals, large-scale events). However, the number of taxis plying the streets has almost halved compared to a decade ago.”
According to Cheng, ComfortDelGro’s fleet numbers have remained “quite stable” at 8,700 taxis since last year.
While he acknowledges that the proportion of street hails has come down, it is still a “sizeable” and “significant” number.
“I think in general, taxi drivers are also more used to using technology, so they’re also getting their bookings through the Zig app, which also minimises the time of them setting out, which is probably… more sustainable and more efficient for them,” says Cheng.
However, he adds that in places like Changi Airport, street hails still make up a “fair amount” of rides.
“I don’t think it’s the end [for street-hailing rides], but the numbers will come down slowly. And I think we will probably have a smaller number of both riders and drivers continuing to do street hail, but I think it’s still going to be material for us. I don’t think it’ll be zero for sure,” he says.
Shareholder returns
In 1HFY2024, ComfortDelGro proposed an interim dividend of 3.52 cents per share, representing a payout ratio of 80%. The group raised its minimum dividend payout to 70% of its patmi in 1HFY2023 from 50% previously. Its actual payout had been between 70% and 80% historically.
“If you look at the results and what we are giving out in terms of our dividend policy payout ratio, we continue to, for this round, give 80% of our patmi… because we believe that our balance sheet is strong… Notwithstanding the investments that we have, we can still afford to do so, and we will continue to give to the level that we can,” says Cheng.
“We want to treat our shareholders fairly. And where we believe that our balance sheet is healthy, we can sustain a little bit more borrowing, we will continue to borrow to invest in new businesses and new opportunities, while maintaining a good level of dividend payout back to the shareholders,” he adds.
“I think what you will see more of us doing will be looking into building the pipelines where we actually can get more recurring incomes. The building of pipelines would be things like looking at tenders for buses, [and] buying assets that we think provide good value in terms of recurring incomes.”
