Singtel (SGX: Z74) is the next blue-chip company to announce its fiscal 2024 (FY2024) earnings for the year ending 31 March 2024.
The telco did not disappoint as it unveiled a new growth plan, Singtel28, while upping its total dividend to shareholders.
Although net profit plunged because of exceptional losses, the group’s underlying net profit and return on invested capital continue to head higher.
Here are five important highlights from Singtel’s latest earnings report.
1. A better underlying net profit performance
For FY2024, Singtel saw operating revenue dip by 3.4% year on year to S$14.1 billion, mainly because of a 6% depreciation in the Australian Dollar (AUD) along with slightly weaker operating revenue from Singtel Singapore.
Operating profit before associates’ contributions was up 3.7% year on year to S$1.2 billion in line with lower depreciation.
Net profit, however, plunged by 64.3% year on year to S$795 million because of net exceptional losses of S$2.5 billion booked in the second half of fiscal 2024 (2H FY2024).
These losses included a S$2 billion impairment of goodwill for Optus along with provisions for network outages in Australia.
Excluding these one-off and non-cash expenses, Singtel’s underlying net profit would have risen by 10.1% year on year to S$2.3 billion.
This increase marks the third consecutive year of underlying net profit growth for the telco, with FY2022 seeing an 11% year on year increase and FY2023 enjoying a 7% year-on-year uplift.
The group’s free cash flow remained stable at S$2.6 billion for FY2024.
Net debt was also 7% lower than the prior fiscal year at S$7.8 billion with almost 90% of debt locked in at fixed rates, thus helping to mitigate higher finance costs as interest rates continue to stay high.
Singtel’s return on invested capital (ROIC) has improved further to 9.3% for FY2024, up from 8.3% in FY2023.
2. Intense competition in Singapore
For Singtel Singapore division, operating revenue fell by 2.4% year on year to S$3.9 billion because of lower enterprise sales along with a dip in voice revenue, offset by higher mobile roaming revenue.
Operating profit for the division fell by 5.2% year on year to S$838 million.
Singtel Singapore saw its mobile customer market share rise to 46.3% from 45.5% in FY2023, although this was still lower than the 48% registered in FY2022.
The group has formed partnerships with industry leaders to develop solutions and help add more value for customers.
These include memoranda of understanding with Cisco (NASDAQ: CSCO), Fortinet (NASDAQ: FTNT), and Nokia (HEL: NOKIA) to provide quantum security solutions.
Singtel has also completed Singapore’s first trial of reduced capability technology on its live 5G network to help enterprises deploy a cost-effective and power-efficient solution.
3. Growth in mobile customer base for Optus
Although Optus faced structural headwinds in the form of declines in fixed enterprise and weak consumer sentiment, Singtel’s Australian division still delivered a commendable performance.
Operating revenue remained flat year on year at A$8.1 billion for FY2024, with higher mobile and home revenue offset by declines in wholesale, fleet and fixed enterprise revenue.
Operating profit for the division edged up slightly to A$288 million from A$287 million a year ago.
On a positive note, Optus’ mobile customer base grew by 116,000 with the main contribution coming from prepaid growth.
The number of postpaid customers also grew by 37,000 from FY2023.
4. Encouraging progress for the Digital InfraCo division
Singtel’s Digital InfraCo division provides regional data centre services under Nxera, satellite carrier services, and also offers Paragon, a digital acceleration platform for 5G multi-access edge computing and cloud orchestration.
The division saw operating revenue improve by 8% year on year to S$413 million, aided by a 10% year-on-year jump in data centre revenue to S$299 million.
However, a 19.3% year-on-year jump in operating expenses meant that operating profit slid by 1.2% year on year to S$72 million.
Nxera made important strides during FY2024.
It will collaborate with Nvidia (NASDAQ: NVDA) to make artificial intelligence (AI) adoption more accessible in Singapore and the region.
Nxera also plans to launch a co-innovation platform with technology partners to improve water and power efficiency along with operational resiliency.
Singtel’s GPU-as-a-service, which will commence operations in late 2024, will be powered by Nvidia’s H100 clusters and the latter’s new GB200 Grace Blackwell superchips will be introduced in 2025.
5. Higher dividends boosted by a value realisation dividend
Income investors should rejoice as Singtel announced a sharply higher overall dividend for FY2024.
A final core dividend of S$0.06 is proposed along with a value realisation dividend of S$0.038, taking the total declared dividend for this round to S$0.098.
Coupled with the interim dividend of S$0.052, the total dividend for FY2024 is S$0.15, 52% higher than the prior year’s S$0.099.
Investors should note that the value realisation dividend is now embedded into Singtel’s dividend policy and is not a one-off.
This new dividend will be funded from current excess capital resulting from S$8 billion of capital recycled since 2021.
Singtel has also identified a recycling pipeline of around S$6 billion after setting aside capital to invest in growth initiatives.
Get Smart: The launch of Singtel28
Singtel’s newly launched growth plan, Singtel28 or ST28, will focus on value creation from FY2025 to FY2027 by optimising its core and deploying capital expenditures sustainably.
From FY2028 onwards, management hopes to drive meaningful growth in business performance while delivering higher dividends.
Investors can look forward to better days ahead as Singtel executes this new plan.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
