Singapore Telecommunications (Singtel) on Nov 9 announced that earnings in 1HFY2024 ended September increased 82.6% y-o-y to $2.14 billion, boosted by an exceptional gain from regional associate Telkomsel’s integration of IndiHome, the largest fixed broadband provider in Indonesia.
While earnings rose because of this one-off item, Singtel’s operating revenue dipped slightly by 3% y-o-y to $7.03 billion due to a stronger Singdollar against regional currencies, which caused a net forex hit of over $300 million. “Our underlying performance was resilient in the first half despite a challenging macroeconomic backdrop and inflationary pressures,” says group CEO Yuen Kuan Moon at the results briefing on Nov 9.
He points out that currency translation losses are something commonly felt by companies with significant overseas exposure but reporting in Singdollar. On a constant currency basis, revenue would have increased by 2% y-o-y instead, he adds. The currency headwinds will continue in the near term as Singapore maintains a strong Singdollar to temper the impact of imported inflationary pressures.
“Nonetheless, we maintained positive momentum in NCS, Digital InfraCo and across our mobile businesses in Singapore and Australia despite the softness in the enterprise business,” says Yuen, adding that contributions from the group’s regional associates have also grown, thanks to better market dynamics.
For the half year, Singtel plans to pay a higher interim dividend of 5.2 cents, compared to 4.6 cents for the same period a year ago. Yuen explains that this is not just a result of the group increasing its dividend policy, such that the payout ratio has increased to between 70% and 90% of underlying net profit from 60% to 80% previously but also because Singtel was able to grow its underlying net profit by 12% y-o-y.
Yuen says the improvement in results testament to Singtel’s “steady progress” in its strategic reset, which was announced over two years ago. “We’ve simplified our organisation so our businesses have greater agility to pursue growth, divested non-core digital businesses and strengthened our financial position with $5 billion received from the capital recycled,” says Yuen, adding that this does not include the additional $2 billion from the KKR investment and divestment of Trustwave, which brings the total value realised to $7 billion since the announcement of the strategic reset.
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Yuen adds: “These proceeds have placed us on a firm financial footing, reducing gross debt by about $1.6 billion while boosting cash balances to $3.1 billion. It has also provided us with necessary funding for our growth investments.”
Chiming in, Singtel’s group CFO Arthur Lang says: “We are clearly not out of the woods, we have a lot more things to do to realise more value for our shareholders.”
Looking ahead, Singtel is announcing phase two of unlocking value from its assets with a further $4 billion worth of assets to be monetised over the mid-term or two to three years. “We have the assets in our pipeline but we are not yet ready to announce the specific assets and businesses that we are doing to recycle …. But I can assure you that based on our track record, we have identified the $4 billion worth of assets and we will progressively unlock them over time,” says Yuen.
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On top of that, Singtel has also announced that it will be undergoing a programme to drive about 15% of reduction in its core costs over the next three years. Yuen explains that $600 million in costs in Singapore and Australia will be saved over the next two and a half years. “This hinges on two key pillars: eliminating operational inefficiency and harnessing the power of digitalisation to drive productivity. And I assure you that our cost-out programme will not come at the expense of our network, which we will continue to invest to expand its network, resiliency and security,” he adds.
