Repositioned for growth
Dear Shareholders,
The improvement in the region’s economic fundamentals lent a resiliency to our underlying performance driven by higher contributions from our regional associates which also benefited from continued industry repair. Despite significant currency headwinds, our FY2024 underlying net profit was up 10% to S$2.26 billion, buoyed also by higher interest income. Net profit dropped 64% to S$795 million on an exceptional loss of S$1.47 billion due mainly to non-cash impairment charges on goodwill and Optus Enterprise’s fixed network assets. The Group will pay an ordinary dividend of 15.0 cents for FY2024 – the third increase since the strategic reset in FY2022. This includes a new value realisation dividend of 3.8 cents, introduced to share the rewards of our capital recycling programme, by returning excess capital to shareholders.
The Group will pay an ordinary dividend of 15.0 cents for FY2024 – the third increase since the strategic reset in FY2022. This includes a new value realisation dividend of 3.8 cents, introduced to share the rewards of our capital recycling programme, by returning excess capital to shareholders.
From strategic reset to Singtel28
As Asia’s economic outlook brightens, the stage is set for our next phase of growth, for which the Group has been well-primed. Three years ago, we embarked on a strategic reset to transform the company amid accelerated digitalisation brought on by COVID. Today, Singtel’s composition is radically different – sharpened to focus on the three key areas of connectivity, digital services and digital infrastructure. The Group has made significant operational improvements such as consolidating the consumer and enterprise business units in both Singapore and Australia, besides executing to a proven capital recycling programme that has unlocked S$8 billion to support this reset. Having restructured and delivered our transformation at pace, we have built a strong foundation from which to move into our next phase of growth.
Singtel28 – a new strategy for growth
While the reset was a strategy for transformation, Singtel28 is a strategy for growth that is premised on lifting business performance and smart capital management.
With the consolidation of the consumer and enterprise businesses of Singtel Singapore and Optus, the Group is simplifying product offerings and removing complexity for customers. It will also reap greater synergies by implementing leaner cost structures to better compete and strengthen market leadership. A recent network sharing deal between Optus and TPG will drive capital efficiency while improving services for customers in regional Australia. Enhancing customer experience remains key and our innovations in areas such as 5G network slicing, telco application programming interfaces and Networkas- a-Service present new opportunities for tangible differentiation.
Our digital services arm NCS has scaled meaningfully and secured S$3 billion in bookings this past year, having expanded its client base to the enterprise sector and into the region. To support this, it has grown its global delivery network while investing in AI and tech resiliency for clients as it continues to scale at pace. Our data centre business Nxera is poised to expand its operational capacity from the existing 62MW to over 200MW in the region in the next three years, leveraging the fast-growing adoption of AI. Bolstered by support from international investment firm KKR which took a 20% stake in the new business, Nxera was valued at S$5.5 billion in September 2023.
In the regional associates’ markets, the Group has repositioned for new opportunities in the emerging area of fixed broadband and mobile convergence by integrating IndiHome with Telkomsel in Indonesia and 3BB with AIS in Thailand. We expect them to continue capturing opportunities in this under-penetrated space with their sizeable mobile base providing crossselling potential and cost synergies.
Smart capital management
The Group will continue its smart capital management, building on the successful capital recycling programme that saw S$8 billion unlocked over the past three years. That was a key component of our transformation as the proceeds allowed us to fund growth, pay down debt and return some of that capital to shareholders. Going forward, a further pipeline of around S$6 billion in monetisable assets has been identified to further support our growth initiatives and new revenue streams such as GPU-as-a-Service and our Paragon edge-cloud orchestration platform. We will keep tapping external capital partners to jointly fund capital-intensive growth engines such as KKR’s investment in Nxera.
This strategy of recycling assets and teaming with capital partners will help us deploy capex sustainably – be it for our core or growth businesses. Besides the funding flexibility afforded by asset recycling, partnering the right investors on capital-intensive businesses will bring patient capital for longer term projects, valuable strategic expertise and also help illuminate the value of the ventures.
Changed dividend policy and sustained value realisation
The dividend policy has been changed to better reflect our new priorities. Core dividends will track improvements in business performance while a new value realisation dividend has been introduced to share the rewards from our capital management programme with shareholders after setting aside funds for growth. This demonstrates confidence in our performance and outlook for cashflow and will allow us to return excess capital to shareholders in a sustained manner even as we keep investing in growth. In November 2023, the Group raised the payout range of its core dividend to 70% and 90% of underlying net profit.
Championing people and sustainability
At the start of our strategic reset three years back, we deepened our commitment to put people and sustainability at the heart of our business. The Group has since accelerated its commitment to climate action, becoming Asia’s first telco to bring forward its net-zero goal to 2045 and renew its science-based targets with SBTi. Our interim target is to lower 55% of scope 1 and 2 carbon emissions and 40% of scope 3 by 2030. This will be achieved by reducing energy use, improving energy efficiency and increasing the proportion of electricity consumption backed by renewable energy sources. We remain committed to driving digital inclusivity in the communities where we operate. Our Singtel Touching Lives Fund has supported special needs students in Singapore for two decades, tracking their progress as we armed them with digital skills in recent years to better navigate the new economy. Our people are our most valuable asset and we will continue investing S$20 million a year to help them reskill and upskill for the digital economy.
Performing while transforming is never easy. We would like to extend our thanks to our staff and management for staying the course and delivering to the reset, readying the Group for changes in the dynamic digital economy. Our appreciation also goes to our fellow directors for their guidance during this time of transition. While the main transformational work is over, there is still more to do as we strive to deliver value for our customers and shareholders and keep doing good for our stakeholders. We look forward to everyone’s continued support on this journey.
