Singtel first-half profit up 23% but flags challenging environment ahead

Profits were mainly boosted by Singtel Group’s partial divestment of its stake in its regional associate Bharti Airtel. PHOTO: ST FILE

SINGAPORE  - Singtel on Thursday reported $1.17 billion in net profit for the first half of the year ended September 2022, a 23 per cent increase compared with the same period a year ago.

But the group noted stronger macroeconomic headwinds going into 2023, citing challenges such as rising interest rates as a curb to growth.

Profits were mainly boosted by Singtel Group’s partial divestment of its stake in its regional associate Bharti Airtel.

Operating revenue fell 5 per cent to $7.26 billion due to adverse currency effects and the absence of revenue from national broadband network migration and digital marketing unit Amobee, the telco said.

The group’s core telco business saw improvements driven by a recovery in its mobile roaming business, as travel rebounded from its pandemic lows. Net debt was also lowered by nearly a third from a year ago.

Mr Yuen Kuan Moon, Singtel Group chief executive, said: “There was a major rebound in our core business as the resumption in travel lifted roaming revenues across both our consumer and enterprise businesses.”

The partial divestment of its direct stake in Airtel raised $2.5 billion, which means the telco recycled some $6 billion in the past 18 months by monetising its assets for better capital efficiency, said Mr Yuen.

Pre-tax profit contributions from Singtel’s regional associates rose 15 per cent to $1.16 billion due to Airtel’s standout performance in India, as demand grew for its enterprise and home broadband solutions.

The picture was less rosy in Australia, where rapid and successive interest rate hikes, a weaker Australian dollar and softer consumer and business sentiment due to a slowing economy resulted in a non-cash impairment charge of $1 billion on Optus’ goodwill. Goodwill is the premium over book value that is paid when a business is acquired.

This impairment does not affect the group’s cash flow or its ability to pay dividends, nor does it impact Optus’ operational performance, said Singtel. It said the overall effect on net profit remains positive with the Airtel stake sale.

Domestically, Singtel’s consumer operating revenue was up 1 per cent as higher revenues from mobile service and broadband were partially offset by lower equipment sales and pay-TV revenues. 

In its outlook for 2023, Singtel said a more challenging macroeconomic environment with persistently high inflation and rising interest rates is likely to constrain economic growth. The group will remain focused on executing its strategic reset, which includes growing 5G market share and expanding the footprint of its new digital businesses, it added.

While the recent cyber attack on Optus is expected to impact its near-term performance, Singtel said it remains confident that it will rebound given its strong business fundamentals. It noted that the Australian telco has taken concerted action to support customers and rebuild trust.

Singtel’s board of directors has approved an interim ordinary dividend of 4.6 cents per share representing about 76 per cent, or $760 million, of the group’s underlying net profit for the first half of the year. A special dividend of 5 cents per share, totalling $826 million, will also be given. It will be paid in two tranches of 2.5 cents each, together with the ordinary dividends.

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