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ComfortDelGro banks on acquisitions as profit shrinks

Reduced incentives by ride-hailing services to level playing field, company says

ComfortDelGro has seen profits shrink with the proliferation of ride-hailing apps such as Grab. (Photo by Keiichiro Asahara)

SINGAPORE (Nikkei Markets) --Transport operator ComfortDelGro's taxi business remains under pressure but the company expects recent developments in Singapore to level the playing field even as it ramps up acquisitions to scale up its operations.

In a statement announcing first-quarter results, group chief executive Yang Ban Seng described the period as "very eventful."

"We have inked several acquisitions," Yang said. The company has spent a total of 123 million Singapore dollars ($92.3 million) so far this year on M&As as compared to S$166 million in the preceding five years.

For example, in April it acquired London's Dial-a-Cab and Australian bus company Tullamarine Bus Lines.

The group will continue to seek acquisition opportunities, Yang said.

Once dominant in the taxi business, ComfortDelGro has seen profits shrink with the proliferation of ride-hailing apps such as Grab.

Revenue for its taxi arm fell by 14.8% in the quarter ended March due to increased competition and a reduction in the operating fleet. Net profit for the period fell 19.6%.

Although Uber's operations in Southeast Asia were acquired by Grab late in March, other companies are entering the Singapore scene, including local carpooling app Ryde. Indonesia's Go-Jek is also said to be planning to expand its services to Singapore.

Meanwhile, Grab is cutting back on discounts and incentives.

"For this quarter, we saw a slower decline in our local taxi business. With the reduced subsidy and incentives for drivers and riders by ride-hailing app operators...we believe that the competition will be on a more level playing field going forward," Yang said.

Early in May, ComfortDelGro said it would add 200 new hybrid Hyundai Ioniqs to its fleet, the first such addition in almost one-and-a-half years, a move that was read as signaling the company's confidence in the business.

At the time, the company said things were settling down with more drivers switching from private-hire cars as they found driving taxis relatively more stable.

The company said its recent acquisition of new taxi businesses in Australia, China and the UK would also help stabilize revenue in the segment.

ComfortDelGro's other operations cover train and bus services, car rentals, insurance broking and outdoor advertising.

In all, the company reported a 1% growth in first-quarter revenue.

While its public transport business grew as the completion of a new subway line boosted ridership and it earned higher fees from a bus contracting model, that was offset by decreases in other areas, including automotive engineering services and inspection and testing services.

Looking ahead, ComfortDelGro expects higher revenue from its public transport services business with the start of a new set of bus routes in March.

Whilst the operating environment is expected to remain challenging, it would manage costs prudently, the company said.

--Sumathi Vaidyanathan

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