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Singapore Telecommunications Limited’s Latest Earnings: Sales is Up, But Profit Lags

Earlier this morning, Singapore Telecommunications Limited (SGX: Z74) reported its first quarter earnings for its fiscal year ending 31 March 2018 (FY2018). The reporting period was from 1 April 2017 to 30 June 2017.

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. a global technology firm with a presence in Asia, Australia, Africa and the United States.

Singtel’s business can be divided into three major divisions. The group consumer division is made up of Singtel’s mobile, mio TV Singtel TV, fibre broadband, ADSL, and fixed voice services businesses. This division also has contributions from the company’s regional mobile associates such as Telkomsel, Airtel, AIS, and Globe.

Group enterprise division 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 catch up with the results of Singtel’s previous quarter here.

Financial highlights

The following’s a quick rundown on the financial figures for the fiscal first quarter:

1. Revenue was up 8.3% year-on-year to S$4.23 billion.

2. Net profit was down 5.6% to S$891.6 million. Underlying net profit was also down 3.5% to S$910 million.

3. Diluted earnings per share (EPS) was down 7.8% year-on-year to $0.0545.

4. Cash flow from operations was S$1.89 billion with capital expenditure coming in at S$592.1 million. Singtel generated S$1.29 billion in free cash flow, up from S$1.23 billion a year ago (S$1.74 billion in cash flow from operations and S$504.5 million in capex).

5. As of 30 June 2017, Singtel had S$632 million in cash and equivalents and S$11.5 billion in debt. A year ago, the telecommunications giant had S$965.7 million in cash and equivalents and S$9.2 billion in debt, so it’s clear that Singtel’s balance sheet had weakened.

In all, Singtel’s revenue rose but its underlying profit fell. But, the telco continues to generate steady free cash flow which would be important as it took on more debt on its balance sheet compared to a year ago.

Operational highlights

Revenue from the Singapore Consumer segment was up 2% year-on-year to S$567 million. Singtel’s Australian Optus arm had 6% more in revenue in constant currency terms; Optus recorded A$1.72 billion in revenue.

Singtel’s share of pre-tax earnings from its regional mobile associates was down 3.8% year-on-year to S$673 million. The fall in profit before tax (PBT) was caused by fierece declines at Airtel (42%) and AIS (24%).

On the group enterprise side, revenue rose 1% compared to the same quarter last year. ICT drove the bulk of the increase. In all, group enterprise revenue came in at S$1.60 billion for the first-quarter.

Last but not least, group digital life saw a 91% spike in revenue to S$293 million. The inclusion of Turn revenue (an adtech company) was behind the rise in sales. The division, though, posted EBITDA (earnings before interest, taxes, depreciation, and amortisation) losses of S$24 million for the reporting quarter, an improvement from the S$36 million in losses suffered a year ago. Singtel also noted that Amobee achieved EBITDA break-even for the quarter.

Elsewhere, Singtel said that NetLink NBN Trust (SGX: CJLU) was successfully listed last month. The telco expects to record a S$2 billion gain in the second quarter of fiscal 2018 due to the sale of its stake in NetLink NBN Trust during the IPO.

Chua Sock Koong, Singtel’s chief executive had a few words to share in the earnings release on the reporting quarter:

“We’ve had a good start to the year with a more challenging business environment. This speaks to the resilience of our core consumer business and the investments we’ve made in the digital space in our efforts to grow new businesses. We are encouraged by their performance as they scale up to capture the opportunities in the new economy.

The growth potential of our regional associates’ markets remains strong despite the headwinds, and strategic investments in networks and customer experience will lay the foundation for future growth. The Group’s customer base grew another 3% in the quarter to 655 million customers across the region.”

At its opening share price of S$3.76 today, Singtel traded at 15.4 times earnings with a dividend yield of 4.7%.


Editor’s note: Two amendments were made to the original article on the request of the Singtel’s Group Strategic Communications and Brand. The description of Singtel has been updated. Also, Singtel’s mio TV has been updated to Singtel TV.


 

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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.