"SingTel's Earnings Plummet Over 50% on $2.3B Setback"

SingTel's annual profits undergo a substantial decline of more than fifty percent, primarily attributable to a $2.3 billion impairment setback.

May 23 (Reuters) -Singapore Telecommunications' (STEL.SI) annual net profit decreased by more than fifty percent on Thursday, impacted by a previously disclosed S$3.1 billion ($2.30 billion) impairment charge, predominantly associated with its Australian subsidiary, Optus. Optus, the second-largest telecommunications operator in Australia, represents one of Singtel's major foreign investments. 

However, it has recently faced criticism due to legal issues, a cyber attack in 2022, significant network disruptions, and declining revenue amidst rising operational expenses.

The top telecom company in Southeast Asia reported an annual net profit of S$795 million, marking a 64% decrease from S$2.23 billion in the previous year. The S$3.1 billion charge consists of a S$2 billion provision for Optus' goodwill and S$470 million for Optus' enterprise fixed access network assets. Singtel emphasized its efforts to improve performance in Singapore and Optus, anticipating earnings growth ranging from high single digits to low double digits in the next fiscal year.

Singtel will issue a final dividend of 9.8 Singapore cents per share, an increase from 5.3 cents in the previous year. Yuen Kuan Moon, Group CEO, remarked, "We acknowledge that our market capitalization does not fully reflect the Group's value," indicating plans to boost the dividend payout ratio to between 70% and 90% of underlying net profit. 

Following a strategic reset in 2021, the company has intensified efforts to enhance shareholder returns and is presently engaged in a three-year cost reduction initiative.

According to RHB analysts, the three-year cost reduction program is expected to generate savings of up to S$600 million in indirect operating expenses by fiscal 2026, consequently enhancing return on invested capital. 

RHB also anticipates the possibility of Singtel paying higher dividends in addition to the increased payout ratio. Singtel has introduced a new "value realization dividend" of 3-6 cents per share annually, supplementing the core dividend, aimed at bolstering returns over the medium term.

Source: Reuters‍