Singtel Q1 gain drops 71% to S$818 million in absence of Airtel stake sale; Singapore business weaker

[SINGAPORE] Singtel on Thursday (Aug 13) reported a 71.6 per cent fall in Q1 net profit to S$818 million from S$2.88 billion a year earlier.

The group attributed the dip to exceptional gains from the sale of a partial stake in Airtel and the Intouch-Gulf Energy merger recognised in the same quarter last year.

Underlying net profit for the three months to Jun 30 was up 21 per cent at S$831 million from S$686 million previously, driven by Airtel, AIS, NCS, Optus and the group’s Digital InfraCo arm.

Singtel bases its core dividends on underlying earnings. It posts earnings per share figures only half-yearly and annually.

The group’s operating revenue grew 4.9 per cent to S$3.6 billion, from S$3.4 billion a year earlier, while earnings before interest, taxes, depreciation and amortisation (Ebitda) rose to S$1.1 billion, up 8.7 per cent from S$990 million.

Singtel attributed this to improved performances by NCS, Optus, Digital and InfraCo, as well as a stronger Australian dollar. It noted, however, that these were partially offset by weaker results from Singtel Singapore.

The group’s operating companies comprise Optus, Singtel Singapore, NCS, its Digital InfraCo arm, as well as its corporate operations.

Singtel also recorded net finance income – compared to net finance expense before – primarily due to a first-time dividend of S$153 million received from Gulf Development Public Co.

Continued price competition

Singtel Singapore’s operating revenue fell 3.1 per cent year on year to S$901 million, from S$929 million. Singtel attributed the dip to “continued intense price competition”.

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“The increase in data and Internet was offset by declines in mobile, information and communication technology, and legacy services,” it added.

Mobile service revenue was down 4 per cent on lower average revenue per user.

Singtel Singapore’s Ebitda fell 4.6 per cent to S$363 million, from S$380 million the previous year.

“While Singtel Singapore continues to face pricing pressures, it remains focused on executing its tri-brand strategy (Singtel, Gomo and Hi!) to serve different customer segments,” said Yuen Kuan Moon, group CEO of Singtel.

Citi analysts Arthur Pineda and Luis Hilado noted that the Singtel Singapore segment continues to face “intense price competition” in its consumer business.

However, they pointed out that its enterprise business is gaining momentum, driven by strong data demand.

On the other hand, contributions from regional associates grew at double digits, reflecting stronger performances from Airtel and AIS. Post-tax contributions of regional associates rose 16.1 per cent to S$543 million, from S$468 million a year earlier.

Airtel’s post-tax contribution rose 15.9 per cent, while that of AIS was up 32.7 per cent.

Singtel said that AIS’ improved performance “was driven mainly by higher mobile and broadband services, continued cost discipline, as well as lower depreciation and amortisation charges”.

Operating revenue of the group’s Digital InfraCo arm was up 18.9 per cent on higher contributions from its data centre arm Nxera, following the operational commencement of DC Tuas in Singapore earlier this year, as well as growth in its cloud services.

Ebitda of the Digital InfraCo arm was up 20.8 per cent year on year at S$70 million, from S$58 million previously.

In July, Singtel’s management did not rule out a potential Singapore Exchange and Nasdaq dual-listing of Nxera.

“We are beginning to reap contributions from our new growth investments in Digital InfraCo, with our data centre arm Nxera seeing good growth in contracted capacity in Singapore and the region from strong customer demand for artificial intelligence and cloud,” said Yuen.

The Citi analysts remain positive on the group’s outlook.

“While Singapore had remained challenging owing to intense competition, regional associates, Optus and its growth investments had all delivered year-on-year expansion even against ongoing macro concerns,” they noted.

In its earlier outlook, Singtel expected operating company Ebit growth rate to be “between low and mid-single digits”.

Operating companies’ Ebit rose 10.4 per cent to S$462 million, from S$418 million a year earlier.

“Singtel had so far exceeded its Ebit targets with limited business impact from the Middle East conflict,” Pineda and Hilado noted.

Shares of Singtel fell 0.9 per cent or S$0.04 to close at S$4.25 on Thursday, after the results were announced.