Singtel launches $2b share buyback as full-year profit swells to $4.02b on one-off gains

SINGAPORE – In its first such move, Singtel on May 22 announced it will buy back up to $2 billion in shares over three years, as it reported net profit of $4.02 billion, more than five times that of the previous year.

However, in announcing its full-year results for the financial year ended March 31, the telco noted that underlying net profit rose by a more moderate 9 per cent to $2.47 billion.

The big boost to net profit came from a net exceptional gain of $1.55 billion, mainly from the partial divestment of its Comcentre headquarters, compared with a net exceptional loss of $1.47 billion a year ago.

It also noted that net profit would have increased 11 per cent year on year if currency fluctuations were taken out of consideration.

It said that underlying net profit – which the group’s core dividend is based on – was driven by robust performance from its Optus unit in Australia, technology consultancy NCS and regional associates Airtel and AIS.

Operating revenue remained steady, while earnings before interest, taxes, depreciation and amortisation (Ebitda) grew 5 per cent.

Earnings before interest and taxes at Optus saw a 55 per cent increase from improvements in its mobile business and cost management, Singtel said.

Continued improvements in delivery margins and cost optimisation also drove NCS’ earnings before interest and taxes up 39 per cent.

It proposed a final dividend of 10 cents per share, comprising 6.7 cents in core dividend, and 3.3 cents in a value-realisation dividend, introduced in May 2024 to return excess capital to shareholders.

This brings the full-year dividend payout to 17 cents, up from 15 cents in the previous financial year, amounting to some $2.81 billion set aside for disbursal.

Singtel said funding for the share buybacks will be underpinned by excess capital from the group’s asset recycling proceeds.

Having recently divested a 1.2 per cent stake in its Indian associate Bharti Airtel for $2 billion in mid-May, the group has achieved more than half of its $6 billion mid-term asset recycling target announced in May 2024, and is now raising this target to $9 billion.

Singtel group chief executive Yuen Kuan Moon said: “The progress we’ve made in our ongoing capital management puts us in a position to return more to shareholders via our value-realisation share buyback programme.

“Having achieved a more optimal capital structure, this share buyback, together with our enhanced dividend policy, underlines our commitment to improving total shareholder returns.” 

Singtel shares peaked at $3.99 on May 22 before closing 2.6 per cent higher at $3.95.

In a media briefing held at its SingPost Centre office, Singtel’s group chief financial officer Arthur Lang noted that the company has progressively increased its dividends since the 2021 fiscal year, and that it intends to maintain this momentum.

On the buyback programme, Mr Lang said: “Shares will be bought back in the open market depending on market conditions.

“Once acquired, these shares will be cancelled, increasing both the earning per share and the dividend per share on a sustained basis.”

He also underscored Singtel’s intention to pay a value-realisation dividend of three cents to six cents per share annually for the medium term of the next four to five years, as well as a core dividend of between 70 per cent and 90 per cent of the underlying net profit after tax.

Asked to elaborate on the intent of the buyback, Mr Lang said it is meant to send a signal to the market that Singtel believes in its own long-term value, especially in times of elevated share price volatility.

Responding to questions from The Straits Times on how funds freed up from capital recycling are allocated, group CEO Mr Yuen noted Singtel’s continued uplifting of its returns on invested capital as a sign of the company’s success in deploying an optimal amount of capital to generate “the right return for all shareholders”.

This metric – a measure of the effectiveness with which capital is deployed – had risen from 7.3 per cent in the 2022 financial year to 9.6 per cent in the latest results.

Mr Yuen reiterated Singtel’s target to reach a low double-digit figure in this regard.

With capital expenditure-intensive businesses such as data centres, private equity can have a role to play, too, Mr Yuen added, citing the example of a 20 per cent stake sale in its regional data centre business to investment firm KKR.

Mr Lang also highlighted Singtel’s strong balance sheet despite prevailing economic uncertainty, with over $4 billion in cash following the sale of the Bharti Airtel shares, a low net debt to Ebitda ratio of 1.5 times, and an interest coverage ratio of 18 times.

In response to another question on how Singtel decided on reducing its stake in Bharti Airtel, Mr Lang said the company is in no hurry to sell those shares as its Indian associate is doing exceptionally well, and Singtel maintains a significant stake of over 20 per cent despite the sale.

Mr Lang said: “What we want is to make sure we do it responsibly... We also don’t want the value to go down. Number two is we only do it if we have a better alternative return on that we’ll be allocating.”

Asked about the potential impact of export controls on advanced semiconductors on Singtel’s businesses, Mr Yuen said Singtel provides services rather than manufacturing, delivering or shipping goods.

Mr Bill Chang, CEO of Digital InfraCo, Singtel’s stand-alone infrastructure unit, added that most of the South-east Asian countries that the regional data centre arm of the unit operates in have seen export caps on advanced chips under the Biden administration lifted.