Singtel (SGX: Z74) shareholders were surprised with a special dividend in its earnings release.
On top of that, the blue-chip telco reported a respectable set of earnings for its fiscal 2023’s first half (1H2023) ending 30 September 2022.
Here are seven things about Singtel’s latest 1H2023 earnings that investors need to need.
1. A drop in revenue but an improvement in core net profit
For 1H2023, Singtel saw its revenue dip by 5.1% year on year to S$7.26 billion.
The decline was because of the absence of NBN migration revenue along with contributions from Amobee, which was classified as a subsidiary held for sale six months ago.
Currency headwinds also led to a 4% depreciation in the Australian dollar, thereby negatively impacting revenue.
Stripping out these items, revenue would have increased by 4.3% year on year.
Net profit, however, climbed 23% year on year to S$1.17 billion, aided by an exceptional gain on the divestment of a 3.3% stake in Bharti Airtel.
Other exceptional items for 1H2023 included a S$1 billion impairment on Optus’ goodwill due to rapid interest rate hikes and slower consumer and business sentiment.
Excluding all these exceptional items, Singtel’s underlying core net profit would have inched up 2% year on year to S$1.01 billion.
2. Better performance for Singapore Consumer
The Singapore Consumer division saw revenue edge up 1% year on year to S$874 million, helped by mobile service revenue growth of 10% year on year as roaming revenue recovered along with border reopenings.
Operating profit for the vision rose 13% year on year to S$173 million.
Singtel sees further upside for the division’s revenue as the second quarter of FY2023 saw roaming revenue at 60% of pre-pandemic levels.
It also envisions improvement in margins by rationalising its content portfolio for its Pay TV segment.
3. Recovery for Optus offset by provisions
Singtel’s Australian division, Optus, had a decent performance with growth in both mobile and fixed-line revenue.
Total revenue, excluding NBN migration revenue, would have risen by 2% year on year to A$3.96 billion.
Operating profit excluding exceptional items rose by 184% year on year to A$164 million.
Unfortunately, Optus was hit by a massive data breach last month that affected close to 10 million people.
Singtel has estimated an amount of S$142 million that includes costs for an external independent review, credit monitoring services, and the replacement of customer identification documents affected by the hack.
However, there may be other penalties or claims arising from regulatory investigations into the breaches for which the group is unable to reliably estimate.
Hence, investors need to be mindful that Optus could incur further fines that may result in a future outflow of cash for the group.
4. A flat performance for Group Enterprise
For its Group Enterprise division, Singtel booked revenue of S$1.26 billion. The ICT sub-division saw revenue jump 18% year on year to S$317 million but this was slightly offset by Carriage’s 3% year on year dip in revenue.
Operating profit stayed flat at S$361 million but the group sees continued demand for cybersecurity and unified communications that should benefit the division.
5. Strong pipeline of projects for NCS
Singtel’s NCS division enjoyed a 16% year on year growth in revenue to S$1.28 billion, led by S$161 million of contributions from acquisitions.
However, the division’s operating profit plunged by nearly half year on year to S$53 million due to post-acquisition costs.
Stripping these out, operating profit would have fallen by 23% year on year to S$79 million.
The good news is that the division saw strong bookings of S$1.3 billion and is pursuing regional projects to boost its financial numbers.
6. Higher contributions from Airtel
It was a mixed bag of contributions from Singtel’s associates.
Telkomsel in Indonesia saw a 4% year on year fall in profit before tax (PBT) while Globe in the Philippines and AIS in Thailand also suffered year on year falls in PBT.
However, these small declines were offset by a more than doubling of Airtel’s PBT contribution.
Airtel saw its PBT jump by 129% year on year to S$336 million, helping to lift total associates’ contributions to S$1.16 billion, up 15% year on year.
Although the reopening of economies should benefit the group’s associates, rising inflation will also weigh on consumer spending.
7. A special dividend declared
Dividend investors should rejoice as Singtel is declaring a special dividend of S$0.05.
This dividend comes on top of the S$0.046 interim dividend and will be split equally into two tranches.
The special dividend will be paid in tranches.
The first S$0.025 will be paid along with the interim dividend while the remaining S$0.025 will be paid out together with Singtel’s FY2022 final dividend in August 2023.
This means that shareholders will receive a total of S$0.071 in dividends when shares of the telco go ex-dividend.
Coupled with last year’s final dividend of S$0.048, the trailing 12-month dividend stands at S$0.119, giving Singtel’s shares a trailing dividend yield of 4.5%.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.