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Singtel's FY2024 earnings down 64% y-o-y to $795 mil, boosts full year dividend to 15 cents; announces new growth plan

The Edge Singapore
The Edge Singapore  • 6 min read
Singtel's FY2024 earnings down 64% y-o-y to $795 mil, boosts full year dividend to 15 cents; announces new growth plan
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Singapore Telecommunications has reported a net loss of $1.34 billion for its 2HFY2024, as it took a hefty impairment on the value of its Australia subsidiary Optus and the Australia arm of its enterprise tech services unit NCS.

In contrast, the telco recorded earnings of $2.1 billion in the year-earlier ended March 2023. This brings full-year earnings to $795 million, down 64% y-o-y.

If the exceptional items are excluded, Singtel's underlying net profit for the year was up 10% y-o-y to $2.26 billion.

Revenue for the full year was down 3.4% y-o-y to $14.1 billion.

Despite the lower bottom line, the company plans to increase its total FY2024 payout to 15 cents, an increase of 52% over what was paid for FY2023. This will be the third increase in dividends.

On top of an interim dividend of 5.2 cents already paid, Singtel plans to pay a final dividend of 6 cents per share, plus, a so-called value realisation dividend (VRD) of 3.8 cents. This VRD, to be maintained at between 3 and 6 cents a year, is drawn from the excess cash from Singtel's asset recycling efforts, minus off capex required to invest for new growth.

See also: Cordlife posts net loss of $11.57 mil for 1QFY2024 due to refund fulfilment

The so-called core dividend will continue to come from Singtel's operations, and to be paid at a range of 70-90% of underlying earnings. 

Group CEO Yuan Kuan Moon says Singtel's market capitalisation does not fully reflect its value.

"Through lifting our core performance and returning excess capital from our capital recycling programme, we aim to share the rewards with shareholders through increasing the total dividend payout."

See also: Changi Airport Group reports FY2024 earnings of $431 mil, 13.1 times higher y-o-y

Through its various asset recycling since 2021, including the partial sale of stakes in its regional associates such as Bharti Airtel, Singtel has raised $8 billion.

It has a further $6 billion monetisation target for the coming three years.

In the face of higher rates, Singtel has been actively paying down borrowings too, with net debt 7% lower to $7.78 billion. Cash, meanwhile, has reached $4.63 billion.

In FY2024, Singtel's various regional associates contributed $2.33 billion in pre-tax profit, up 3%, thanks to cost control and better industry dynamics.

Singtel's new growth engine Digital InfraCo generated 8% higher revenue, driven by its Nxera data centre business, which was up 10%.

Singtel expects tough economic conditions to persist in this financial year.

It remains focused on improving its domestic business, and that of its Australia unit Optus, while driving new growth.

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“As our strategic reset draws to a close, we are now primed for the next phase of growth," says Yuen.

More growth

Alongside its results release, Singtel announced its new growth plan to deliver enhanced customer experiences and sustained value realisation for shareholders - Singtel28 (ST28).

"Three years ago, the reset was a strategy for transformation amid accelerated digitalisation brought on by Covid-19. Today, ST28 is a strategy for growth and sustained value realisation. Having sharpened the group’s business focuses, made significant operational improvements and executed to a proven capital recycling programme, we have built a strong foundation for the Group to move into its next phase of growth. While the transformational work is behind us, there is still more to do to deliver value for our customers and shareholders and we intend to exercise the same financial discipline and governance to get there,” says Yuen. 

Building on the business transformation of the reset, the group will lift business performance by reaping more synergies from the integration of the consumer and enterprise businesses of Singtel Singapore and Optus. This will involve simplifying product offerings to remove complexity for customers and utilising AI to improve customer experiences while driving leaner cost structures to better compete and strengthen market leadership.

For the growth engines, NCS will continue executing to its strategy, capitalising on its leadership in technology services. It will improve margins by scaling up its global delivery network and investing in AI and tech resiliency for clients.

Nxera is poised to expand its operational data centre capacity from the existing 62MW to over 155MW in the region, leveraging the fast-growing adoption of AI. It is currently developing three next-generation AI-ready data centres in Singapore, Indonesia and Thailand. Bolstered by support from private capital partners, it is aiming to scale its platform to more than 200MW across the region in the next three years.

The group plans to scale up Paragon, its industry-leading one-stop orchestration platform for 5G and edge cloud computing, with greater adoption by telcos, enterprises and satellite operators globally. In addition, the Group intends to leverage Nxera’s capabilities and Paragon’s orchestration to explore GPU-as-a-Service as a new growth area with the private and public sectors looking to deploy AI at scale in Singapore and the region.

The regional associates will focus on capturing the opportunities in the under-penetrated fixed broadband space with their sizeable mobile base providing cross-selling potential and cost synergies. The enterprise sector is another significant growth area given the associates’ capabilities in digital, 5G and other emerging technologies. The group will be working closely with them to explore the divestment of non-core assets and ways to illuminate the value of their digital portfolio.

Under ST28, the group will also pursue smart capital management, building on the capital recycling programme of the previous strategic reset that saw $8 billion raised. The group has identified a further pipeline of around S$6 billion in monetisable assets. The group will also continue tapping external capital partners to jointly fund capital-intensive growth engines.

"This strategy of recycling assets and working with capital partners is designed to help us deploy capex sustainably – whether for our core or growth businesses. Asset monetisation will give us funding flexibility. As we keep scaling our capital-intensive growth businesses, attracting the right investors and the smart money will bring a critical external lens to our businesses and help illuminate their true value.

"Additionally, working with partners who want to grow with us will not only bring patient capital for longer term projects, but valuable strategic expertise,” says Singtel Group's CFO, Arthur Lang. 

At the FY2024 results, Singtel’s proven capital recycling programme allowed the group to revise its dividend policy to boost shareholder returns. This came in the form of a new value realisation dividend of 3 to 6 cents per share per annum in addition to the core dividend which had its payout range increased to 70% and 90% of underlying net profit last November.

Lang says: “Given the strategic transition of our business, we are changing our dividend policy to reflect the importance of lifting the core performance of our businesses as well as rewarding shareholders with our successful capital management initiatives. The value realisation dividend will be funded by current excess capital, as well as future excess capital from the group’s identified asset recycling pipeline of around $6 billion, part of which will be set aside to fund growth opportunities."

"Furthermore, core dividend growth will track improvements in business performance. This demonstrates confidence in our performance and outlook for cashflow and will allow us to return capital to shareholders in a sustained manner even as we continue investing in growth,” he adds. 

Singtel shares closed May 21 at $2.40, down 0.41% for the day and down 2.04% year to date.

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