Singtel’s share price tumbles as profit falls to 27-year low

Shares of the telco tumbled to a two-month low as its full-year net profit plunged by 65%.

Share price of Singapore Telecommunications (Singtel) opened 4.6% lower on Thursday 28 May 2020, after the group reported lower profits for its final quarter of the 2020 financial year.

As at 15:30 SGT on Thursday 28 May 2020, Singtel shares are trading at S$2.52 per share, based on live IG data.

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Full-year net profit down by 65%

Singtel recorded an operating revenue of S$3.9 billion and a net profit after tax of S$571.5 million for the quarter ended 31 March 2020, representing a year-on-year decline of 10.2% and 34.2% respectively.

Across the full year, operating revenue declined 2% in constant currency terms to S$16.54 billion, which it attributed to lower mobile service revenue and equipment sales aggravated by the onset of Covid-19 pandemic.

Post-tax net profit (attributable to shareholders) plunged 65% to S$1.08 billion for the full financial year – the lowest since 1993, largely due to its associate Bharti Airtel’s exceptional charges for regulatory costs owing to the Indian Supreme Court’s January ruling.

Singtel, which owns a 35.2% stake in Airtel as of October 2019, had to take a net exceptional charge of S$302 million this quarter, mainly arising from Airtel’s provision for the spectrum charge.

Singtel’s Board proposes lower dividend per share

The Board of Directors has recommended a lower final ordinary dividend per share of S$0.0545 per share, which it views as ‘prudent to conserve financial headroom to cope with uncertainties in the current COVID-19 operating environment and the capacity to invest in 5G’.

This amount brings the final ordinary dividend per share for the year to S$0.1225, bringing the total payout this year to approximately S$2 billion. The final dividend rate of S$0.1225 is 30% lower than 2019's cumulative payout of S$0.175 per share.

Chua Sock Koong, Singtel Group CEO, said in the earnings press release: ‘This has been a challenging year, given structural shifts in the industry, already soft economic conditions, adverse regulatory outcomes in India and the onset of Covid-19 in the fourth quarter.’

Consequently, travel and movement restrictions have led to significant reductions in roaming and prepaid revenues, while slowing economic growth has impacted business expenditure, she further noted.

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Singtel’s FY2021 outlook: ‘some months before impact can be ascertained’

While the group stated in the press release that it will not provide any official guidance for the 2021 financial year given the uncertainty of Covid-19’s impact on economic activity, Chua said that it ‘will be some months before the full impact of COVID-19 on our business can be ascertained’.

For now, the group is focused on investing for longer term growth and ensuring that it has the capacity and financial headroom to weather the industry and economic headwinds.

Importantly, Singtel says it will continue its multi-year 5G capital expenditure programme to strengthen its network and market leadership, and to create new revenue opportunities.

Finally, it said that it will continue to review its financial outlook and shareholders’ returns, and will update the market when there are material developments or when there is greater clarity in the operating environment.

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