Singtel announces stronger underlying net profit for FY24, increases dividend by 52%: 5 highlights from Telco earnings

Singtel (SGX: Z74) is another blue chip company to announce its fiscal year 2024 (FY 2024) earnings for the year ending March 31, 2024.

The telco did not disappoint as it unveiled its new growth plan for Singtel28 while increasing its total dividend to shareholders.

Although net profit declined due to exceptional losses, the group’s underlying net profit and return on invested capital continued to grow.

Here are five highlights from Singtel’s latest earnings report.

1. Better underlying net profit performance

For FY2024, Singtel saw its operating revenue decline 3.4% year-on-year to A$14.1 billion, mainly due to a 6% depreciation of the Australian dollar (AUD) and slightly weaker operating revenues for Singtel Singapore.

Operating profit before associates’ contributions increased 3.7% year-on-year to A$1.2 billion, driven by lower depreciation and amortization.

Net profit, however, declined 64.3% year-on-year to A$795 million due to extraordinary net losses of A$2.5 billion recorded in the second half of financial year 2024 (H2FY24).

These losses included an A$2 billion impairment of Optus goodwill and provisions for network failures in Australia.

Excluding these one-off and non-cash expenses, Singtel’s underlying net profit would have increased 10.1% year-on-year to A$2.3 billion.

This increase marks the third consecutive year of underlying net profit growth for the telecom sector, with FY2022 registering an 11% year-over-year increase and FY2023 registering a 7% year-over-year increase.

The group’s free cash flow remained stable at A$2.6 billion in FY24.

Net debt was also 7% lower than the previous financial year at A$7.8 billion, with almost 90% of debt held at fixed interest rates, which helped mitigate higher finance costs due to persistently high interest rates.

Singtel’s return on invested capital (ROIC) improved further at 9.3% in FY2024, compared to 8.3% in FY2023.

2. Intense competition in Singapore

For Singtel Singapore, operating revenues declined 2.4% year-on-year to S$3.9 billion due to lower enterprise sales and a decline in voice revenues, offset by higher mobile roaming revenues.

The division’s operating profit fell 5.2% year-on-year to A$838 million.

Singtel Singapore’s mobile customer market share increased to 46.3% from 45.5% in FY2023, although it was still lower than the 48% recorded in FY2022.

The group has partnered with industry leaders to develop solutions and help customers add value.

These include Memorandums of Understanding with Cisco (NASDAQ:CSCO), Fortinet (NASDAQ: FTNT) i Nokia (HEL: NOKIA) to provide quantum security solutions.

Singtel has also completed Singapore’s first trial of reduced capacity technology on its operational 5G network to help enterprises deploy a cost-effective and energy-efficient solution.

3. Growth of Optus’ mobile customer base

Although Optus faced structural headwinds in the form of declining landline business and weak consumer sentiment, Singtel’s Australian arm still achieved commendable results.

Operating revenues were flat in FY2024 year-on-year at A$8.1 billion, with higher mobile and home device revenues offset by declines in wholesale, fleet and fixed-line enterprise revenues.

The division’s operating profit increased slightly to A$288 million from A$287 million a year ago.

A positive development is the growth of Optus’ mobile customer base by 116,000, with the main contribution being growth in the prepaid segment.

The number of subscription customers also increased by 37,000 compared to 2023.

4. Supporting the progress of the Digital InfraCo division

Singtel’s Digital InfraCo division provides regional data center services under Nxera, a satellite operator service, and also offers Paragon, a digital acceleration platform for multi-tenant 5G edge computing and cloud orchestration.

The division’s operating income saw operating income increase 8% year-on-year to A$413 million, supported by data center revenue growth of 10% year-on-year to A$299 million.

However, a 19.3% year-on-year increase in operating costs meant operating profit fell 1.2% year-on-year to A$72 million.

Nxera has made significant progress in FY2024.

Will work with Nvidia (NASDAQ: NVDA) to make artificial intelligence (AI) adoption more accessible in Singapore and the region.

Nxera also plans to launch a co-innovation platform with technology partners to improve water and energy efficiency as well as operational resilience.

Singtel’s GPU-as-a-service solution, which will go live in late 2024, will be powered by Nvidia’s H100 clusters, with the latter’s new GB200 Grace Blackwell superchips expected to launch in 2025.

5. Higher dividends enhanced by value realization dividends

Income investors should rejoice as Singtel announced a significantly higher overall dividend for FY2024.

A final base dividend of S$0.06 is proposed along with a value realization dividend of S$0.038, bringing the total dividend declared for this round to S$0.098.

Combined with the interim dividend of S$0.052, the total dividend for FY2024 will be S$0.15, a 52% increase from S$0.099 for the previous year.

Investors should note that the value-realization dividend is currently embedded in Singtel’s dividend policy and is not a one-off item.

The new dividend will be funded from the current A$8 billion recycled capital surplus from 2021.

Singtel has also identified a recycling plan worth around A$6 billion after setting aside capital to invest in growth initiatives.

Be smart: Singtel28 launch

Singtel’s newly launched growth plan, Singtel28 or ST28, will focus on creating value from FY2025 to FY2027 through optimizing its core and sustainably implementing capital expenditure.

Management hopes to achieve significant growth in business performance from fiscal year 2028 while delivering higher dividends.

Investors can look forward to better days as Singtel implements its new plan.

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Disclosure: Royston Yang has no shares in any companies mentioned.