The Good And The Bad: What Investors Should Know About Singapore Telecommunications Limited’s Latest Earnings

Singapore Telecommunications Limited (SGX: Z74) is the largest operational telecommunications company in Singapore at the moment.

In mid-August, Singtel reported its first quarter results for its fiscal year ending 31 March 2018 (FY2018). The reporting quarter was for 1 April 2017 to 30 June 2017. There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:

1. The overall result

Here’s a table showing some important numbers from Singtel’s income statements for the first quarters of FY2018 and FY2017:

Source: Singtel FY2018 first quarter results announcement

The telco’s overall revenue was up a strong 8.3% year-on-year. But, underlying net profit was down by 3.5% due to lower contributions from its regional associates and exceptional charges from a workforce restructuring at Optus, Singtel’s wholly-owned Australian telco.

2. The positives

Firstly, all three of Singtel’s business segments, namely, Group Consumer, Group Enterprise, and Group Digital Life experienced revenue growth during the reporting quarter. Group Digital Life was the standout performer with its 109% increase in revenue.

Secondly, Singtel’s EBITDA (earnings before interest, taxes, depreciation, and amortisation) grew 2.7% year-on-year in the reporting quarter. This is a positive performance compared to the telco’s peers, StarHub Ltd (SGX: CC3) and M1 Ltd (SGX: B2F). In the same quarter, StarHub and M1’s EBITDA were down by 6% and 11%, respectively.

Thirdly, Singtel’s free cash flow was up 5% to S$1.29 billion as compared to the same period a year ago. If the telco can keep up with this improvement in its free cash flow, it will be useful in helping sustain its dividend payments.

3. The negatives

Firstly, EBITDA margins were down for both the Group Consumer and Group Enterprise segments. This was mainly driven by operating expenses growing faster than revenue.

Secondly, Singtel’s share of its associates’ pre-tax earnings was down year-on-year, mainly due to weakness in Airtel, AIS, and Globe.

Thirdly, Singtel’s balance sheet deteriorated when compared to the first quarter of FY2017, with the net debt position increasing from S$7.86 billion to S$10.55 billion.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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