Singtel announced that it has reversed into profitability with 1HFY2021 earnings of $466.1 million from a loss of $127.0 million in 1HFY2020.
This came on the back of a 10.2% fall in revenue to $7.4 billion from $8.3 billion a year ago.
The Group’s revenue is mainly derived from Singapore and Australia which respectively accounted for approximately 39% and 52% of the consolidated revenue. The remaining 9% comes from the US and other countries that the group operates in.
The group attributes the fall in revenue to the declines in its Australian business, especially the consumer segment, amid structural changes in the industry. This was partially offset by the strong growth in its ICT business.
In its Singapore consumer business, revenue was adversely impacted by Covid-19, especially during the circuit breaker period, which imposed strict travel restrictions. Operating revenue for this segment fell 19% y-o-y, mainly due to lower mobile revenue. The decline in mobile revenue in turn was caused by lower roaming and prepaid revenues, as well as lower equipment sales.
Australia Consumer’s operating revenue declined 11% y-o-y as the business was severely impacted by headwinds in the fixed segment, the Covid-19 outbreak and the first economic recession in Australia in almost three decades. NBN migration revenue tapered off from the previous year’s high with the near completion of network rollout. Mobile service revenue declined on lower roaming and prepaid revenues due to global travel restrictions. Operating revenue was also lower from customer support measures including late payment fee waivers for customers and free credits for healthcare workers.
The group Enterprise’s operating revenue fell 2.5% on continued decline in carriage services which was partially offset by higher ICT revenue, due to weak business and investment spending amid the economic slowdown. Despite project delays and deferments in the first quarter, ICT revenue grew strongly driven by system infrastructure services, cloud and maintenance projects led by NCS and Australia Enterprise, as well as higher data centre revenue.
Group Digital Life’s operating revenue declined 30% due to a reduction in Amobee’s revenue and the deconsolidation of HOOQ from Mar 1. Amobee’s revenue was lower as a result of lower advertising spend amid COVID-19 mass lockdowns as well as a reduction in TV revenue following the licensing of its technology platform to ITV plc in July 2019.
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Pre-tax and post-tax contributions from the associates grew 11% and 6.1% respectively. If the regional currencies had remained stable from the corresponding period, their profit contributions would have increased 10% and 5.2% respectively on improved operational performance from Airtel, which mitigated the profit declines from Telkomsel, AIS and Globe.
The net exceptional losses (post-tax) of $371 million during the half year comprised mainly the group’s share of Airtel’s exceptional losses and a gain on dilution in Singtel’s effective equity shareholding in Airtel following Bharti Telecom Limited’s sale of its 2.75% stake in Airtel in May 2020. In the same period last year, the net exceptional losses of $1.44 billion was mainly from Airtel’s provision for the Adjusted Gross Revenue matter.
As at end-September, Singtel’s cash and cash equivalents stood at $673.0 million.
The board has declared an interim dividend of 5.1 cents per share, payable on Jan 15, 2021. This is lower than that of 6.8 cents interim dividend paid out in the same period a year ago.
The board has also approved the adoption of a scrip dividend scheme and the application of this scheme to the interim dividend.
The current 1HFY2020 financial statement has not reflected these dividends. The dividends will be accounted for in shareholders’ equity as an appropriation of ‘Retained Earnings’ in the next period ending Mar 31, 2021.
In view of the continued uncertainty in the economic environment, the group will not provide guidance on the outlook except that dividends from the regional associates will be approximately $1.3 billion and that the group’s capital expenditure including for 5G networks, will be around $2.2 billion, comprising A$1.5 billion for Optus and $700 million for the rest of the group.
Chua Sock Koong, Singtel Group CEO says, “The impact of Covid-19 was felt across the Group with significant reductions in roaming and prepaid revenues and weaker customer spend. The weak performance was further compounded by the structural challenges of the fixed line business in Australia, with the low margin NBN resale. However, ICT was the bright spot with strong growth from NCS and our cloud and cyber security services in Asia Pacific as more enterprises adopted and accelerated digitalisation.”
“While the challenging operating environment is expected to continue as uncertainties from the pandemic persist, we are seeing encouraging signs of modest recovery across our businesses with sequential quarter revenue growth of 10% in the second quarter, as lockdown measures ease and customer spending returns. We recognise that the services we provide are critical to keeping customers connected and productive and as economies reopen in phases, we remain committed to supporting them to eventual business and economic recovery,” adds Chua, who will be retiring on Jan 1.
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Shares in Singtel closed at $2.23 on Nov 11.
