Singtel’s first half net profit rose 83% to S$2.14 billion, boosted by an exceptional gain from regional associate Telkomsel’s integration of IndiHome, the largest fixed broadband provider in Indonesia. Group operating revenue was down 3% to S$7.03 billion while EBIT was stable at S$580 million. On a constant currency basis, both Group operating revenue and EBIT would have been up 2%, led by strong showings from growth engines NCS and Digital InfraCo which offset weakness in the enterprise business across Singapore and Australia. Underlying net profit increased 12% to S$1.12 billion, and would have risen 16% excluding a S$42 million impact from the strong Singapore Dollar. The higher underlying net profit was driven by sustained growth momentum in mobile, NCS and Digital InfraCo, along with higher contributions from the regional associates and interest income from capital recycled.
“Our focus now is on rapidly scaling up our growth engines and we expect our new strategic partnership with KKR to accelerate the expansion of our regional data centre business in ASEAN. In our core business, we will continue to take costs out and improve efficiency.” Yuen Kuan Moon,Singtel’s Group CEO
Mr Yuen Kuan Moon, Singtel’s Group CEO, said, “Our underlying performance was resilient in the first half despite a challenging macroeconomic backdrop and inflationary pressures. Like the last financial year, we faced significant currency headwinds which impacted earnings. Nonetheless, we maintained positive momentum in NCS, Digital InfraCo and across our mobile business in Singapore and Australia despite the softness in the enterprise business. Our regional associates’ contributions also grew, boosted by improving market dynamics. With a simplified organisational structure and successful asset recycling, we’re in a stronger position to improve our return on invested capital and returns to shareholders.”
“Over the past two and a half years, we have made steady progress in our strategic reset, creating a strong foundation for the future. We’ve simplified our organisation so our businesses have greater agility to pursue growth, divested non-core digital businesses and strengthened our financial position with S$5 billion received from the capital recycled. Our focus now is on rapidly scaling up our growth engines and we expect our new strategic partnership with KKR to accelerate the expansion of our regional data centre business in ASEAN. In our core business, we will continue to take costs out and improve efficiency. We will also actively support our regional associates as they drive growth particularly in the enterprise and fixed broadband space,” he added.
Global investment firm KKR’s recent acquisition of a 20% stake in the regional data centre business for up to S$1.1 billion is part of a S$6 billion capital recycling programme planned for the medium term. KKR’s investment will fully fund data centre projects already planned for the next two years and provide growth capital for future projects as the business continues to scale.
Singtel entered into a conditional share purchase agreement to sell all of its equity interest in Trustwave. The divestment of Trustwave concludes the Group’s strategic review of non-core digital businesses, and completion is expected by December 2023.
The regional associates’ pre-tax profit contributions grew 9% on a constant currency basis due to improved performances from Airtel and AIS which partially offset Globe’s weaker results. But Singapore dollar strength against weaker regional currencies resulted in a S$66 million currency impact. As a result, contributions only increased 3% to S$1.19 billion. Airtel reported double-digit increases in operating revenue and EBITDA led by its operations in India. Airtel Africa, however, was negatively impacted by the devaluation of the Nigerian Naira in June 2023 and inflationary cost pressures. AIS’ performance was driven by higher service revenue and effective cost management, coupled with lower depreciation. For Telkomsel, first-time contributions from IndiHome largely offset the impact of Singtel’s reduced stake. Globe reported higher operating revenue but faced higher costs from network investments.
The Group’s financial position remains robust. With a healthy cash balance of S$2.6 billion and highly favourable leverage ratios, the Group is well-positioned to navigate economic uncertainty and the inflationary environment. This is despite net debt rising 10% or S$839 million in the past half year due to higher funding needs for the Group’s operations. Free cash flow fell 26% to S$1.19 billion, primarily from a decline in operating cashflow due to lower EBITDA and working capital movements.