Singtel reports 49% lower earnings for FY21, announces new strategic direction

Singapore Telecommunications (Singtel) has announced that it plans to embark on a new strategic direction focused on three tenets – realigning its core business towards capturing 5G market share; developing new growth engines in ICT and digital services; and unlocking the value of its infrastructure assets.

For its push for 5G market share, Singtel will focus on rolling out consumer and enterprise solutions predominantly targeting Singapore and Australia. It will also double down on the digitalisation of its operations to drive productivity and cost-savings and “get even more digital”.

For new growth engines, Singtel’s ICT arm NCS will be repositioned to become “a B2B digital services champion in Asia Pacific”. NCS will set up two strategic business units to focus on government and telecoms, while part of Trustwave’s technology services will be reorganised into NCS. NCS will also target growth in the enterprise sector, particularly healthcare and transport, communications, technology and media and financial services in Singapore, Australia and Greater China.

Singtel states it is currently exploring options to leverage its infrastructure assets – including towers, satellites, subsea cables and data centres – to unlock latent value and drive growth. In this regard, it has begun a partial sale via auction of Optus’ towers in Australia.

Singtel also highlighted that the Group’s strategic reset included renewed commitments to advance the sustainability agenda while pursuing business growth.

The new strategic direction comes as Singtel reported a 92.7% y-o-y drop on earnings for the 2HFY2021 ended March to $88 million after it recorded net exceptional losses (post-tax) of $809 million due to non-cash impairment charges for the period. Underlying net profit, which excludes the exceptional losses, came in at $896 million for the period, down 21.7% y-o-y.

This brings full-year earnings to $544 million, a 48.5% decline y-o-y, which includes $1.2 billion in net exceptional losses recognised for the FY21. Underlying net profit came in at $1.7 billion, down 28.6% y-o-y.

To that end, earnings per share (EPS) stood at 0.53 cents for the 2HFY2021 and 3.38 cents for the FY2021 respectively.

While revenue for the 2HFY2021 remained relatively flat at $8.2 billion, ebitda dipped 12.2% y-o-y for the period due to the appreciation of the Australian dollar by 9%. In constant currency terms, operating revenue fell 4.8% y-o-y while ebitda fell 16%  y-o-y primarily due to lower NBN migration and legacy carriage revenues.

Associates’ post-tax profit contributions for the 2HFY2021 fell 5.1% y-o-y on profit declines from Telkomsel and Globe, partly mitigated by improved operational performance from Airtel.

For the FY2021, operating revenue and ebitda fell 5.4% and 16% y-o-y respectively, due to a steep decline in NBN migration revenues, and lower roaming and prepaid revenues as Covid-19 continues to impact Singapore operations. However, Singtel notes a “healthy growth” in ICT services led by NCS as customers accelerated their digitalisation efforts.

Associates’ pre-tax operating profit contribution grew 3.2% for the FY2021 while post-tax contribution was stable as reduced operating losses from Airtel, which reflected improved operating performance in India and Africa, were offset by declines from Telkomsel, AIS and Globe due to Covid-19 headwinds.

Singtel’s cash and cash equivalents stood at $754.7 million as at March 31, compared to $999.6 million in the corresponding period the previous year.

Singtel has proposed a final ordinary dividend of 2.4 cents per share, following the interim dividend of 5.1 cents per share announced during the second half of the year, which was partially settled via issuance of shares the is scrip dividend scheme. The scheme will not be applied to the final dividend.

To that end, the total dividends for FY2021 stand at 7.5 cents per shares, totalling $1.2 billion or a 71% payout ratio on underlying net profit. In comparison, FY2020 saw total dividends of 12.25 cents per share.

Shares in Singtel closed up 2 cents or 0.82% higher at $2.46 on May 25. The Edge Singapore