Singtel (SGX: Z74) is one of the last few blue-chip stocks to report its earnings.
Fortunately, the telco did not disappoint.
For its fiscal 2023 (FY2023) ending 31 March 2023, Singtel pulled off a commendable performance as both underlying revenue and net profit improved.
A recovery in roaming revenues along with higher 5G take-up rates helped the group to report a better FY2023 even though the fiscal year started on a rocky footing.
Here are five highlights from Singtel’s latest earnings that investors should take note of.
1. A better financial performance
Singtel saw its operating revenue dip by 1.7% year on year to S$14.6 billion but this figure included Optus’ NBN migration revenue and contributions from Amobee, which was divested earlier during FY2023.
Excluding these items, Singtel’s underlying revenue would have risen by 1.9% year on year instead.
Operating profit rose 6.9% year on year to S$3.4 billion while net profit climbed 14.2% year on year to S$2.2 billion.
Excluding exceptional items, the telco’s underlying net profit would have risen by 6.8% year on year to S$2.1 billion.
The better performance was because of robust mobile growth accompanied by price increases as international travel boomed, boosting roaming revenue.
In addition, 5G adoption also increased, growing from 480,000 in FY2022 to 760,000 in FY2023.
Higher demand for ICT services also played a role in helping to lift Singtel’s fortunes, and the telco managed to generate a positive free cash flow of S$2.5 billion for the fiscal year.
For FY2023, Singtel has parked S$1.37 billion into Singapore Treasury Bills to earn a better yield on its cash.
2. Stronger Singapore consumer numbers
For the Singapore consumer division, it saw an 11% year on year increase in mobile service revenue to S$1.26 billion.
Postpaid roaming revenue more than tripled year on year as travel demand surged.
Prepaid revenue also improved with more inbound tourists and foreign workers flocking back to Singapore
As a result, operating profit for the division climbed 18% year on year to S$331 million.
The number of mobile customers has increased by 4.4% year on year from 4.13 million to 4.31 million.
However, management estimates that Singtel’s market share has fallen from 48% to 45.6% over the same period.
The good news is that the average revenue per user (ARPU) improved by 9.7% year on year to S$26 on a blended basis.
Data usage also continued its upward climb, rising by 16% year on year to 9 GB.
3. Improved broadband performance offset by weaker Pay TV
Over at the Fixed Broadband division, revenue for FY2023 inched up 2.2% year on year to S$492 million as Singtel increased the number of fixed broadband lines from 658,000 a year ago to 668,000.
Despite the increase, the Infocomm Media Development Authority (IMDA) published statistics that showed a slight decline in broadband market share from 43.2% to 43.1%.
As for the Pay TV division, revenue continued its downward trend, falling by 22.2% year on year to S$153 million.
The number of residential TV customers fell by 9.7% year on year to 322,000 while ARPU for the division declined by 14% year on year to S$34.
4. NCS weighed down by acquisitions and investments
Singtel’s NCS division reported a mixed set of numbers.
Revenue improved by 16% year on year to S$2.7 billion as the group expanded its enterprise business and enjoyed contributions from new acquisitions.
Operating profit, however, plunged by 35% year on year to S$139 million as the division spent on digital investments and paid out higher wages in line with inflation.
Despite the weaker profit, the division reported bookings of S$3.2 billion which should set up a strong foundation for a better FY2024.
5. A higher overall dividend
Singtel declared a final dividend of S$0.053, slightly higher than the prior year’s final dividend of S$0.048.
Together with the interim dividend of S$0.046, the total core dividend declared for FY2023 comes up to S$0.099, higher than FY2022’s S$0.093.
The telco had also declared a special dividend of S$0.05 arising from the group’s asset recycling initiatives during its fiscal 2023’s first-half earnings announcement.
Note that the first tranche of this special dividend of S$0.025 was already paid out along with the interim dividend.
Hence, Singtel will pay out the remaining S$0.025 along with the final dividend of S$0.053, bringing the total dividend payable this round to S$0.078.
Combining all these dividends, FY2023’s total dividend comes in at S$0.149, 60% higher than FY2022’s total dividends of S$0.093.
Get Smart: Setting goals for FY2024
Singtel has set its priorities for FY2024 as it continues with its strategic reset.
It will work on integrating consumer and enterprise businesses to drive growth while scaling its various growth engines to expand its market share.
The telco is targeting to achieve a low double-digit return on invested capital (ROIC) in the medium term, though it did not give a specific timeline.
FY2023’s ROIC came in at 8.3% (excluding Optus’ goodwill), higher than the 7.3% reported in FY2022.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.