Singapore Telecommunications Limited’s Latest Earnings

Singapore Telecommunications Limited (SGX: Z74) reported its fiscal third-quarter earnings for the year ending 31 March 2016 (FY2016) this morning. The reporting period was for 1 October 2015 to 31 December 2015.

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

SingTel’s business can be divided into three major divisions. The Group Consumer division is made up 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.

Group Enterprise is the second in line and it mainly covers SingTel’s 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.

You can read more about SingTel in here and here. You can also catch up with the company’s results from its previous quarter here.

Financial highlights

The following’s a quick summary of the latest financial figures from SingTel:

  1. Revenue for the reporting quarter was up 1% year–on-year, coming in at S$4.47 billion. On a constant currency basis, revenue was up 6% year-on-year instead.
  2. Despite the top-line growth, SingTel’s quarterly net profit had declined by 1.7% to S$954 million from a year ago.
  3. Consequently, earnings per share (EPS) slipped by 1.6% year-on-year. SingTel’s EPS for the third-quarter of FY2016 was S$0.0597 cents.
  4. For the reporting quarter, cash flow from operations came in at S$1.0 billion with capital expenditures clocking in at S$422 million. The lower capex gave SingTel S$585 million in free cash flow. This was lower than the S$669 million in free cash flow (S$1.22 billion in cash flow from operations and S$549 million in capex) recorded in the same quarter in the previous year.
  5. As of 31 December 2015, the global telecommunications outfit had S$685.9 million in cash and equivalents and S$10.2 billion in debt. This is down from the $629 million in cash and equivalents and S$8.74 billion in debt recorded on the same date last year.

In all, SingTel’s revenue had managed to inch up slightly but its profit slipped. The telco continues to generate positive free cash flow, though the figure came in lower compared to the year before.

It’s important for SingTel to keep its free cash flow strong due to the higher level of debt on its balance sheet. In the last quarter, SingTel had acquired 98% of the share capital for Trustwave for S$1.08 billion. The new acquisition had been consolidated into SingTel with effect from 30 September 2015.

Operational highlights

The Group Consumer division’s revenue fell 3% year-on-year for the reporting quarter. On a constant currency basis, revenue would have gone up by 3% instead. The division ended the third-quarter with S$2.68 billion in sales.

SingTel’s Australian Optus arm recorded a 6% year-on-year increase in revenue in constant currency terms (down 2.7% in Singapore dollar terms). Optus gained 41,000 new mobile handset customers from a year ago and subsequently benefited from a 3% year-on-year increase in outgoing mobile service revenue in constant currency terms.

SingTel’s share of pre-tax earnings in the reporting quarter from its regional mobile associates was more or less unchanged from a year ago, coming in at S$647 million. Pre-tax profit contributed by AIS was up 9% year-on-year, but was held back by weaker profits from Airtel and Globe.

On the Group Enterprise side, revenue rose 8% compared to the same quarter last year. 5 percentage points of that growth came from Trustwave, which contributed S$75 million in revenue for the third-quarter. Overall Group Enterprise revenue came in at S$1.68 billion for the third-quarter.

Last but not least, the Group Digital Life division’s revenue leapt by 23% to S$135 million, boosted by strong revenue growth at Amobee. The division, though, still posted EBITDA (earnings before interest, taxes, depreciation, and amortisation) losses worth S$33 million for the reporting quarter. To be sure, that’s an improvement from the EBITDA loss of S$40 million seen a year ago. Revenue from HOOQ, the division’s online video streaming service, and Dataspark remained lackluster with only $2 million generated for the quarter.

Management’s guidance for SingTel’s results in FY2016 remained unchanged from that seen in the previous quarter. Chua Sock Koong, SingTel’s Chief Executive Officer, added a few words on the quarter in the earnings release:

“Innovations and investments in our core Consumer and Enterprise businesses continued to deliver. We focused on giving customers the best mobile data and entertainment experience by offering a mix of flexible data plans and differentiated content. This has seen more mobile customers in Singapore and Australia trade up to higher-tier plans.”

Foolish summary

At its opening price today of S$3.58, Singtel traded at 14.8 times trailing earnings with a trailing dividend yield of 4.9%.

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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.