Singtel (SGX: Z74) is the next blue-chip company to report its earnings.
Its peer StarHub Limited (SGX: CC3) reported a strong result in the same week while Keppel Ltd’s (SGX: BN4) business update saw the asset manager announce a robust performance.
Singtel also did not disappoint, with the telco upping its interim dividend and handing in a strong financial report card.
Here are five highlights from Singtel’s fiscal 2024 first half (1H FY2024) earnings announcement.
1. A higher underlying net profit
For 1H FY2024, Singtel’s operating revenue dipped by 3.2% year on year to S$7 billion.
Revenue was impacted by weak regional currencies and the telco’s revenue would have risen by 2% year on year on a constant currency basis.
Operating profit inched up 2.2% year on year to S$1.8 billion.
Net profit for the group shot up 82.6% year on year to S$2.1 billion, boosted by an exceptional gain on Singtel’s associate Telkomsel’s integration of IndiHome.
Excluding this item, underlying net profit would have risen by 11.6% year on year to S$1.1 billion.
The telco generated a positive free cash flow of S$1 billion, although this was 30.5% below the S$1.5 billion that was generated in 1H FY2023.
2. Increase in customer base for Singapore offset by lower ARPU
Looking at Singtel’s Singapore division, operating revenue dipped by 3.3% year on year to S$1.9 billion.
Although mobile service revenue grew by 2% year on year following the travel recovery and customer growth, this was offset by lower ICT sales and a drop in TV revenue.
Operating profit for the division slipped by 3.8% year on year to S$442 million.
Singapore’s customer base grew by 3.4% year on year to 4.4 million but average revenue per user (ARPU) fell by 2.7% year on year to S$25.
Singtel saw its mobile customer market share shrink from 46.6% a year ago to 44.9% as of 30 September 2023.
Fixed broadband put up a respectable performance with revenue rising 3.9% year on year to S$125 million with the number of broadband lines inching up 2% year on year to 676,000.
Over at the Pay TV segment, revenue continued its decline, falling by 11.4% year on year to S$36 million.
3. Higher customer base and data usage for Optus
Optus, Singtel’s Australian unit, reported a mixed performance for 1H FY2024.
Revenue increased slightly by 1.4% year on year to A$4 billion, lifted by strong growth in prepaid net connections, higher postpaid ARPU, and cable TV sports uptake due to the FIFA Women’s World Cup.
Operating profit, however, declined by 13.9% year on year to A$141 million.
Optus saw weakness in its enterprise fixed business while inflation also resulted in higher operating expenses.
Australia’s mobile customer base grew by 2.8% year on year to 10.5 million while ARPU remained constant at A$31 per month.
Like Singapore, Australia also saw data usage jump by 16.7% year on year to 17 GB.
Optus’ mobile customer market share held steady at 31.2%.
4. A strong performance from Digital InfraCo
Digital InfraCo, previously known as Singtel’s enterprise business, provides regional data centre (RDC) and satellite carrier services.
It also offers Paragon, an all-in-one digital acceleration platform for 5G multi-access edge computing and cloud orchestration.
This division pulled off a commendable performance with operating revenue increasing by 12.6% year on year to S$203 million.
Operating profit for Digital InfraCo climbed 24.3% year on year to S$39 million.
RDC enjoyed price uplifts on its existing 99%-filled capacity while the satellite sub-division recognised project-based revenue.
Together with lower depreciation, the division managed to report a higher operating profit.
There could be more to come with RDC in expansion mode.
Revenue growth for RDC is expected to track inflation till FY2026 when 58 MW of new capacity come online.
The division, however, could see EBITDA (earnings before interest, tax, depreciation and amortisation) margins come under pressure from a ramp-up in investment capabilities.
Potential growth capital may be raised for future RDC projects after a successful capital injection from KKR for a 20% stake in RDC.
5. Increased dividend payout ratio
In line with the good results, Singtel raised its interim dividend from S$0.046 in 1H FY2023 to S$0.052 in 1H FY2024.
This was a 13% year-on-year increase and represented a payout ratio of 77%.
In addition, the telco also revised its dividend policy to between 70% and 90% of underlying net profit.
This is up from the previous payout range of between 60% to 80%.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
