SINGAPORE – Telco Singtel said the strategic reset it launched around 2½ years ago is bearing fruit in the form of enhanced earnings.

The firm reported on Thursday that it posted an 83 per cent increase in earnings to $2.14 billion for the six months to Sept 30, although a substantial chunk of this was due to a one-off gain after Indonesian associate Telkomsel integrated the operations of fixed broadband provider IndiHome.

Even if this gain is excluded and the adverse impact of the strong Singapore dollar is factored in, the group’s underlying net profit still rose at a decent clip of 12 per cent to $1.12 billion.

Singtel chief executive Yuen Kuan Moon told a briefing in Sydney on Thursday: “Our underlying performance was resilient in the first half despite a challenging macroeconomic backdrop and inflationary pressures.”

The firm’s balance sheet has strengthened steadily since the start of the reset, with cash holdings at a healthy $2.6 billion.

Mr Yuen said the group’s “financial position remained robust”, and it is well poised to continue to invest for growth.

This follows the streamlining of Singtel’s portfolio of assets, which has simplified the business.

The initiatives Mr Yuen set in motion included the freeing up of $7 billion of capital, with another $4 billion waiting in the pipeline over the medium term.

He also cleared out a slew of loss-making and non-core businesses, ploughing the freed-up cash into divisions with better growth potential.

The latest was the sale of threat-detection platform Trustwave, which will be completed in December and will mark the end of the group’s strategic review of non-core digital businesses.

This divestment alone is likely to result in the company posting more than $100 million in cost savings annually.

Mr Yuen noted: “Half the job is done; the hard part is behind us.

“We’ve simplified our organisation, so our businesses have greater agility to pursue growth, divested non-core digital businesses and strengthened our financial position.

“We’re in a stronger position to improve our return on invested capital and returns to shareholders.”

However, the challenge now is to show investors what Singtel’s share price ought to be after the reset, given that the stock has barely moved despite the group expanding the value of the sum of its parts significantly.

However, Mr Yuen believes that savvy investors will recognise the positive changes he has implemented.

DBS analyst Sachin Mittal noted that Singtel’s sale of loss-making businesses will help the upward re-evaluation of the stock price, but added that what matters more is increasing the operating profits of its core businesses.

Another analyst, who declined to be named, said further cost savings would help, and Singtel’s move to merge its consumer and enterprise divisions across both Singapore and Australia was a good start.

“However, we have to wait and see if this translates into meaningful margin expansion,” he added.

Meanwhile, Singtel’s ability to scale its growth engines – multinational information technology subsidiary NCS and the data-centre business under Digital InfraCo – will also help, as both are relatively small contributors to group earnings, he said.

Overall, the analyst felt that Singtel has made good effort in realising cost synergies and trying to drive non-telco revenues.