Singapore's Service Industry Flourishes With Record Sales & Profits

This article is contributed by DP Information Group.

Large Services industry companies have enjoyed a bumper year with both their sales and profits flourishing, according to the 2014 Singapore 1000 released on 23 January.

The Singapore 1000 ranks the top 1,000 companies in Singapore by revenue and is published together with the SME 1000 and the Singapore International 100. Together these rankings are the most comprehensive financial audit of the performance of Singapore's corporate sector. DP Information Group is the ranking body and publisher of the Singapore 1000 family of rankings.

The Services sector recorded an increase in the number of companies that made the prestigious Singapore 1000 list, from 48 last year to 56 this year.

The combined revenue of the Singapore 1000 Services companies rose by 27.5 per cent from S$65.2 billion in 2013 to S$83.1 billion in 2014.

Even more impressive was the boost in the Services sector's profits - up 62.6 per cent to S$11.5 billion in 2014, from S$7.0 billion in 2013. This jump in profitability was more than double any other sector in the rankings. The Finance sector recorded the second highest increase in profitability, up 30 per cent from 2013.

Ms Chen Yew Nah said the Services sector was vital to Singapore as it generates employment for 70 per cent of the population.

"Services companies were among the most affected by the changes in manpower rules. Despite the tougher foreign labour laws, Services was the best performing sector in this year's Singapore 1000."

"There are more large Services companies delivering improved sales and larger profits. This is a good sign for the Singapore economy that has traditionally relied on wholesale trade and manufacturing to drive growth and employment,” said Ms Chen.

The strong performance of the Services sector was driven by healthcare/medical companies whose combined profits rose by 129 per cent compared to last year. Parkway Pantai Limited, Fortis Healthcare International Pte Limited and Alexandra Health Pte Ltd are some of the companies that bolstered the sales performance of the subsector.

“Healthcare and medical services companies are playing an increasingly important role with the growth of the silver generation in Singapore. The increasing number of affluent people within the region has also fuelled demand for better and more specialised health services in Singapore,” added Ms Chen.

RECORD SALES BUT MARGINS SQUEEZED
The collective revenue of Singapore's top 1,000 companies rose by 13.9 per cent to S$2.75 trillion in the 2014 rankings - S$1 trillion more than they were earning before the financial crisis of 2008.

While sales are booming, the combined profits rose by just 2.1 per cent to S$149.8 billion.

Eight of Singapore's 11 industries recorded a fall in their combined profits and it was the strong performance of the Services sector that kept the overall result positive.

The weak profitability can be seen in the declining margins across the majority of industries. The overall profit margin for the combined Singapore 1000 companies fell from 5.78 per cent in 2013 to 5.09 per cent in 2014.

Only the Finance and Services industries recorded improved profit margins compared to last year. The Property and Finance sectors maintained their position as industries with the highest profit margin levels, alongside the Hospitality/Food & Beverage sector.

Ms Chen Yew Nah, Managing Director of DP Information Group said Singapore’s largest companies are feeling the same cost pressures as smaller firms, with increases in rents and manpower biting into the bottom line.

"Smaller margins are the price many companies have to pay to stay competitive in the global marketplace."

"While profits are not rising as fast as revenues, the strong sales performance means Singapore's corporate giants are still achieving success internationally," Ms Chen said.

CREDIT STANDING OF TOP COMPANIES IMPROVING
The Singapore 1000 companies are among the most credit worthy companies in Asia. This year 75.9 per cent have an Investment Grade credit rating of DP1-4.

Of these, 198 have the highest possible credit rating of DP1 which means the probability they will fail to pay a debt is less than 0.1 per cent.

There has been a steady improvement in the credit standing of the Singapore 1000 companies since 2008, with more than 70 per cent of the nation’s most valuable corporations awarded an Investment Grade credit rating. The percentage of Investment Grade companies has steadily improved from 62.7 per cent in 2008 to 75.9 per cent in 2014.

Even more impressive is the jump in DP1 rated companies - from just 78 in 2008 to 198 this year. 

SME 1000 PERFORMANCE
The top 1000 SMEs in Singapore generated S$31.1 billion in combined sales, an increase of 5.5 per cent compared to the 2013 rankings. Their combined profit was up 1.5 per cent to S$3.4 billion, while the average profit margin was 9.73 per cent.

The Singapore SME 1000 companies are experiencing better profit margins at 9.73 per cent in 2014, slightly lower than the 10.06 per cent in the previous period.

There was a decrease in the number of loss making companies on the SME 1000 ranking, from 123 to 114, indicating that SMEs are generally performing better than last year.

SME property companies performed well, increasing their representation on the list from 78 to 83; improving their sales by 15.8 per cent to S$2.9 billion; and boosting their profits by 2.1 per cent to S$949.1 million.

SME companies in the Hospitality/F&B sector had a challenging year with their combined sales falling by 2.5 per cent to S$932.9 million while their profits fell 12.3 per cent to $S88.0 million.

SINGAPORE INTERNATIONAL 100
The amount of foreign revenue generated by Singapore 1000 companies has steadily increased during the last four years, from S$149.9 billion in 2011 to S$223.9 billion in 2014.

Similarly for SMEs, the 50 companies ranked as having the highest overseas turnover improved their international revenue from S$1.38 billion in 2011 to S$1.78 billion in 2014.

China and Southeast Asia remain as the two markets where both corporations and SMEs generate the most overseas revenue.

For full statistics in the full press release, please click here.

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