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Singapore Telecommunications Limited’s Latest Earnings: Dividends up 4.1% for the Year

Singapore Telecommunications Limited (SGX: Z74) reported its fiscal fourth-quarter earnings earlier today. The reporting period was for 1 January 2015 to 31 March 2015.

The company, which is more popularly known as Singtel, is one of the largest telecommunications companies in Asia with operations mainly in Singapore and Australia.

The telco’s business can be divided into three major buckets. The first, the Group Consumer division, is made out of its mobile, mio TV, fibre broadband, ADSL and fixed voice services. This division also has contributions from Singtel’s regional mobile associates such as Telkomsel, Airtel, AIS and Globe.

The second bucket is the Group Enterprise Division which mainly covers infocomm technology (ICT) solutions for corporate clients.

The final and smallest division is Group Digital Life. This division focuses on new growth opportunities and revenue platforms in a mobile-led internet world.

With that, let’s get going with Singtel’s latest earnings release. You can also catchup with the telco’s fiscal third-quarter earnings here.

Financial highlights

Here’s a rundown on the latest financial figures:

  1. Singtel’s quarterly revenue came in at S$4.34 billion, up 5.1% from a year ago. For the full financial year ended 31 March 2015 (FY2015), revenue for the telecommunications outfit was up 2.2% to S$17.2 billion.
  2. Net profit also expanded by 4.5% year on year to S$964 million partly due to a higher contribution from associates and joint ventures. For FY2015, net profit was up 3.5% year on year to S$3.78 billion.
  3. Earnings per share (EPS) for Singtel followed suit with a 4.4% jump from 5.64 cents per share in the fourth quarter of FY2014 to 5.89 cents per share in the reporting quarter. For FY2015, Singtel’s EPS stepped up by 3.5% to 23.73 cents per share.
  4. For FY2015, cashflow from operations came in at S$5.79 billion with capital expenditures clocking in at S$2.24 billion, thus giving rise to a healthy free cash flow of S$3.55 billion. That’s an improvement from a year ago with Singtel ending FY2014 with S$5.35 billion in cashflow from operations, S$2.10 billion in capital expenditures, and S$3.25 billion in free cash flow.
  5. The board of directors had proposed a final dividend of 10.7 cents per share (up 7% from the final dividend of 10 cents per share a year ago), thus bringing Singtel’s annual dividend for FY2015 to 17.5 cents per share (up 4.2% from the annual dividend of 16.8 cents per share for FY2014). Singtel’s annual dividend of 17.5 cents per share also represents a 74% payout ratio based on its underlying net profit for the year.
  6. As of 31 March 2015, the global telecommunications outfit had S$563 million in cash and equivalents and S$8.98 billion in debt. The selfsame figures a year ago were S$622.5 million and S$8.04 billion respectively; from this, you can tell that Singtel’s balance sheet has weakened.

In all, Singtel’s revenue and profit had inched up nicely during the fiscal year. More importantly, free cash flow for FY2015 was up 9.2% year on year to S$3.55 billion. This may give investors some confidence that Singtel’s S$8.98 billion in debt might be manageable.

Operational highlights and a future outlook

Singtel’s Group Consumer division sales benefited from higher sales of equipment and mobile data. It ended the fourth quarter with S$2.6 billion in revenue (up 6% year on year) and the year with S$10.56 billion (up 1.4% year on year).

During the quarter, the Group Consumer division’s Singapore segment saw revenue grow by 11% while the Australia segment enjoyed a 12% increase in revenue (in constant dollar terms). The Australia Consumer arm gained 59,000 new mobile handset customers during the quarter, which played a hand in driving up mobile service revenue there by 6%.

To round off the discussion on the Group Consumer front, Singtel’s share of pre-tax earnings in the quarter from its regional mobile associates grew a good 12% to S$623 million. The main contributors were Telkomsel (from Indonesia) and Globe (from the Philippines).

On the Group Enterprise side, revenue grew at a tepid 1% pace compared to the same quarter last year. Revenue growth was partly hampered by currency headwinds and came in at S$1.6 billion for the fourth quarter.

Last but not least, quarterly revenue from the Group Digital Life division leapt 136% to S$126 million, boosted by contributions from its acquisitions (Adconion and Kontera). The division, though, widened its losses as its EBITDA (earnings before interest, taxes, depreciation, and amortisation) declined from –S$56 million a year ago to –S$72 million.

For an outlook for the current financial year FY2016, Singtel commented in its earnings release that it expects its core business revenue to increase at mid-single digit levels. Its free cash flow, though, is expected to be lower due to higher working capital requirements for the expansion of its business.

Foolish summary

At its opening price today of S$4.38, Singtel traded at 18.4 times its trailing earnings and had a historical dividend yield of 4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.