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Singtel's Stellar FY25: Growth and Capital Returns · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Okay, get ready for a really interesting deep dive today, because we're looking
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  at a set of financial results that show, well, one of the most dramatic swings you'll probably see.
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  We've been digging into the latest reports and statements for Singapore Telecommunications
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  Limited, you know, Singtel.
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  And the documents cover the second half of their financial year and the full
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  year that just wrapped up on March 31st, 2025.
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  That's right. So these reports give us a really comprehensive view.
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  You get the recent performance over six months, but also the complete annual picture for FY 2025.
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  And we can compare it directly against the previous year, FY 2024.
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  And honestly, the headline numbers are just staggering. The company's reported
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  net profit after tax for the full year absolutely soared. It really did.
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  Jumping from $803.5 million in FY 2024 all the way up to $4,028.4 million on FY 2025.
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  That's what, a five-fold increase? Pretty much, yeah, a huge leap.
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  And this massive jump flow directly down to shareholders, you see profit attributable
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  rising from $795.0 million to $4,017.4 million.
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  And just look at the basic earnings per share it rocketed from just $0.482 to
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  a really significant $0.2434.
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  So the big question we need to unpack is.
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  What really happened here? What drove this, well, this colossal shift in reported profit?
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  And what does it tell us about Singtel's year? Well, what's fascinating here
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  is that while that reporting net profit figure is incredibly eye-catching to
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  truly understand the year, you really have to look beyond it.
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  These financial statements clearly highlight the impact of what they call exceptional items.
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  Exceptional items. And these are significant, often one-off events.
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  And they had a really profound influence on that headline number.
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  Ah, okay. Okay. So the reported profit isn't just about the day-to-day running
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  of the business. It includes these exceptional items. Exactly.
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  So how do we see the performance of the core business then away from these one-offs?
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  Right. So the documents provide a clearer picture of the core operations through
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  the underlying net profit figure.
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  This number is basically calculated by stripping out those exceptional items.
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  And the underlying net profit also showed growth, increasing from S2,261 million
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  dollars in FY 2024, test $2,470 million in FY 2025.
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  Now, that's a healthy 9.2 percent increase year on year. Okay. 9.2 percent.
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  Much more normal, I guess. Yeah, exactly. This 9.2 percent is a much better
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  indicator of the operational trend, which was positive, but is clearly not the
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  enormous jump you see in the reported figure.
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  Okay, right. So the core business grew steadily, a solid 9.2 percent,
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  but that five-fold reported profit increase came from somewhere else entirely.
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  Where did that big jump in the reported profit originate if the underlying profit
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  only grew 9.2%. What made the difference?
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  The difference lies squarely in that exceptional items section of the accounts.
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  The reports show that in FY 2025, the group recorded a net gain of F-984.9 million
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  dollars from these items. A gain. Okay.
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  Nearly a billion dollars. Yes. And this is a huge swing compared to FY 2024,
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  which included a substantial net loss of S-150.3 million dollars from exceptional
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  items. A loss of over a billion last year. Wow.
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  So the absence of those large losses and the presence of these large gains in
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  the current year are the primary drivers of that reported profit surge you saw.
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  All right. This is where it gets really interesting.
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  What were these significant gains in FY 2025?
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  What assets did they sell or what happened that added almost a billion dollars
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  in these exceptional gains? Okay. So the documents detail several key items.
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  The largest single gain was S1,291 million dollars from the partial disposal
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  of the comm center property right here in Singapore.
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  Ah, comm center. Very big. Then they also recorded a gain of $178 million from
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  selling a partial stake in InTouch. That's one of the regional associates. Right.
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  And $22 million from selling a partial stake in Indara, which is a towers business.
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  Plus, there's also a $65 million dilution gain related to Airtel,
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  another major associate investment.
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  Okay. So several asset sales piling up. Precisely.
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  Now, contrast that with what happened in FY 2024, which the sources also highlight.
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  The prior year included some very significant exceptional losses.
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  Critically, there was a massive S-2,604.2 million dollars for impairment of goodwill. 2.6 billion.
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  Ouch. Yes. And another S-512.8 million dollars for impairment of property, plant, and equipment.
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  Essentially, these were huge write-downs on the value of assets or maybe past
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  acquisitions. So recognizing things weren't worth as much as they thought. Pretty much.
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  And FY 2024 also included some operational costs they classified as exceptional,
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  like $53.5 million related to that network outage they had in Australia. I remember that.
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  So when you compare the two years, FY 2025 benefits not only from the gains
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  from selling assets, but also, crucially,
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  from the absence of those multi-billion dollar impairment losses that really
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  hammered FY 2024's reported profit. Wow.
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  OK, that really does put the reported number in perspective.
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  So just to make sure we're crystal clear for everyone listening,
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  the huge reported profit surge wasn't driven by some dramatic improvement in
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  their core business operations this year.
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  No, it was primarily driven by significant gains from selling assets and maybe
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  even more importantly, the fact that they didn't have those massive write downs
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  they took the year before.
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  That's the key takeaway on the reported number. But the core operational business
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  did grow at a solid pace. That 9.2% underlying profit increase we mentioned,
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  it just wasn't the engine for that five-fold reported jump.
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  Exactly right. Okay, so let's peel back another layer then. We know the underlying
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  profit was up 9.2%. What were the operational drivers within the core business
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  that achieved that growth?
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  You know, looking at things like revenue and profitability measures like EBITDA and EBIT.
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  So if we connect this to the bigger picture of their day-to-day performance,
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  well, the group's operating revenue for the full year was actually quite stable.
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  It only increased by 0.1% to $14,146.1 million.
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  Flat revenue, basically. Pretty much. However, they saw improved profitability
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  below that revenue line.
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  Group EBITDA increased by 5.4% to $3,792 million. Now, for listeners who might
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  not, you know, live and breathe financial reports, EBITDA stands for Earnings
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  Before Interest, Taxes, Depreciation, and Amortization.
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  It's a key measure of a company's operating profitability before you factor
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  in financing costs, taxes, and non-cash stuff like depreciation. Good clarification.
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  And Group EBIT, which is Earnings Before Interest and Taxes,
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  rose even more strongly, up 11.1% to S3,880.2 million dollars.
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  OK, so better margins even on flat revenue. Yes.
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  And the reports also note that in constant currency terms, meaning stripping
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  out the effect of foreign exchange rate movements, which is important for a
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  company like Singtel with big international operations, the operational growth
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  for EBITDA and EBIT was actually slightly higher.
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  Right. Good point. Now, looking at the performance of the individual business
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  segments gives us more detail on where that improvement came from.
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  The documents attribute this operational improvement mainly to strong performance
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  from Optus in Australia and their technology services arm, NCS.
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  Okay, Optus and NCS driving it. Yeah.
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  For Optus, measured in Australian dollars, operating revenue grew 1.4%,
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  EBITDA grew 6.1%, and EBIT saw a very substantial jump of 52.3%.
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  52% jump in EBIT for Optus. That's strong. Very strong.
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  And this was driven primarily by improvements in their mobile business.
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  Specifically, they saw price increases in postpaid plans, which boosted average
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  revenue per user, or ARPU.
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  Ah, higher prices helping the bottom line. And it's also higher home revenues
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  from NBN and fixed wireless access.
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  They did see declines in wholesale and enterprise fixed revenue within Optus,
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  but the core mobile and home areas were strong. Okay.
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  And NCS. Then there's NCS, their digital transformation and tech services business.
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  Operating revenue for NCS grew 1.9%, so similar top-line growth to Optus,
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  but their profitability just soared.
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  EBITDA increased sharply by 38.5 percent, and EBIT grew strongly by 38.2 percent.
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  The documents explicitly state this reflects improved profitability at NCS.
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  So they're getting much better returns there.
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  Interesting. A big turnaround in profitability for NCS. It seems so.
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  However, it wasn't growth across the board. The reports do show declines in
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  Singapore's operating revenue, NANGUS 2.1 percent, EBITDA made it 0.6 percent,
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  and EBIT made it 0.6 percent.
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  So the home market was a bit softer. A little bit, yeah.
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  And their digital Infroto segment, which includes things like data centers and
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  other infrastructure, also saw a decrease with both EBITDA and EBIT down 9.4%.
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  Okay, so it sounds like that underlying operational growth,
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  that 9.2% in underlying profit, was really propped up by strong performance
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  in Optus' core mobile and home services, driven by those price increases and
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  customer uptake and significant improvements in profitability at NCS.
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  And these gains managed to offset some weaker performance in their domestic
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  Singapore business and that newer digital infracost segment.
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  That's a good summary of the operational drivers.
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  What does this tell us about where the momentum is or perhaps maybe isn't right
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  now in the core business?
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  Well, it definitely highlights Optus and NCS as key performers this year.
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  But it also raises an important point about another major component of their
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  overall financial performance, the contributions from their investments in associates
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  and joint ventures. Ah, yes, their regional holdings.
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  Exactly. The share of results they get from these companies significantly increased in FY2025.
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  Came in at $2,569.6 million compared to S1,361.5 million in FY 2024.
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  It's a big jump too, almost double. It's a substantial part of their overall income, yeah.
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  And do the sources tell us which associates were the main contributors to that
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  increase? Was it across the board or specific ones?
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  Yes. The documents specify that the increase in pre-tax contributions,
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  which were up 6.9% overall, or 9.8% if you look at it in constant currency terms,
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  was largely due to strong performances from the Airtel Group.
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  Their big investment in India and Africa. Right, and AIS in Thailand.
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  However, the strong growth was partially offset by lower contributions from
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  Telcumsul in Indonesia and Globe in the Philippines. Okay.
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  So their regional investments, particularly Airtel and AIS, were significant
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  positive drivers for the underlying profit this year.
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  It really does look like their strategy of holding substantial stakes in these
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  regional telecom players like Airtel and AIS paid off handsomely this year.
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  They contributed significantly to that overall positive underlying profit trend.
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  Definitely. It's a key part of their earnings mix.
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  And just briefly touching on other aspects of their financial health mentioned
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  in the reports, group-free cash flows saw a slight decrease year-on-year.
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  Down 3.6%. However, the documents add an important note.
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  If you exclude a significant one-off tax payment made to the Australian Taxation
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  Office, the ATO, Free cash flow actually increased by a healthy 3.2%. Oh, okay.
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  So underlying cash flow was still positive if you adjust for that tax payment. Seems so.
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  Also, the net asset value per ordinary share, which is kind of a measure of
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  the company's underlying book value per share, increased slightly from $51 to
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  $1.57, Biss and Furn. Okay.
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  Their debt levels also saw a slight increase relative to their size.
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  The net debt gearing ratio increased from 23.8% to 26.7%. Bit more leverage. A little bit, yeah.
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  And the net debt to EBITDA ratio went from 1.31 times to 1.50 times.
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  These ratios basically indicate how much debt the company is using compared
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  to its assets and operating earnings.
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  A slight increase suggests they've taken on a little more leverage,
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  which the documents seem to relate to a decrease in their cash balance reported
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  in the cash flow statement. Right.
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  So, wrapping up the performance side then, FY 2025 for Singtel was really a
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  year defined by that huge reported profit recovery, driven overwhelmingly by
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  those one-off gains from selling assets and, crucially,
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  avoiding the massive write-downs of the previous year.
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  Below that headline number, the core operational business showed solid improvement
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  thanks to stronger performance in Optus and NCS and a healthy boost from their
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  regional associates like Airtel and AIS. A good summary.
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  Now, the big question looking forward is, what do the sources hint at about
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  what's next for Singtel? Where do they go from here? Does it give us an outlook?
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  Well, while the financial reports don't contain a dedicated sort of forward-looking
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  outlook section in the traditional sense, the notes to the statements and various
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  strategic mentions do provide some clear signals about their priorities.
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  Okay. What clues are there?
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  For instance, note 24 is quite significant.
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  It mentions a planned S2.0 billion dollar share buyback program extending over
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  the next three years, running until FY2028.
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  Two billion in buybacks. That's substantial. It is.
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  And crucially, the documents state, this program is planned to be funded by
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  excess capital from asset recycling proceeds.
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  Asset recycling proceeds. So, money from selling more assets.
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  That seems to be the direct implication, yes.
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  This S2 billion dollar buyback, funded by asset sales, really reveals Singtel's
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  core strategy right now.
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  They're looking to return capital to shareholders from monetizing non-core or
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  mature assets. It implies that further portfolio management or asset sales are
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  likely anticipated as a way to fund this.
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  It's a clear move to optimize their capital structure and reward shareholders.
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  So potentially more sales like CommCenter or the InTouch stake down the line?
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  That's what it suggests.
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  The documents also highlight strategic activities within specific business lines
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  that point to future focus areas.
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  For example, at Optus, they mentioned extending their wholesale mobile partnership
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  with Aussie Broadband and also fast-tracking their 5G rollout through a network-sharing arrangement.
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  Okay. Investing in the core network and partnerships in Australia.
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  Exactly. These are specific investments and partnerships aimed at strengthening
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  their core mobile network and market position there.
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  Makes sense. What else? Furthermore, the very way they define and report on
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  their segments now signals where they see future growth.
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  The reports clearly define digital InfraCo. Right, the infrastructure arm.
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  Yeah, and they highlight Nixera data centers, the Paragon platform,
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  and REAI for AI cloud services.
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  And NCS is defined by its focus areas in digital, data, cloud,
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  and cyber capabilities.
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  So they're carving out these specific growth areas. Exactly.
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  These defined segments aren't just reporting categories. they feel like strategic
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  pillars, indicating where the company intends to invest and build capabilities
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  for future revenue and profit growth. Okay.
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  So piecing together these hints from the documents, the path forward for Cintel
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  seems to involve strategically selling assets to return capital to shareholders.
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  Funded by asset sales. Continuing to invest in and strengthen a core network
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  capabilities like 5G, maybe through partnerships.
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  Yes. And placing significant bets on building up capabilities in these newer,
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  potentially higher growth areas like data centers, AI services,
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  and cybersecurity through segments like Digital InfraCo and NCS.
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  Yeah, it's a picture of refining the existing portfolio while simultaneously
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  investing for the future in these specific digital areas.
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  That wraps up our deep dive into Singtel's financials for the year ended March 2025 then.
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  It was certainly a year defined by that huge reported profit surge. Definitely a headline.
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  Heavily influenced by those one-off gains from asset sales in the absence of
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  the large write-downs they took the year before, but also alongside that.
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  Solid underlying operational improvements driven by Optus and NCS and that strong
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  boost from their regional associates. Absolutely.
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  We saw how those strategic asset sales contributed substantially to this year's
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  bottom line and are now explicitly planned to fund significant capital returns
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  to shareholders over the next few years.
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  We also got a clear glimpse into the specific areas where they are focusing
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  their investments for future growth,
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  from improving core mobile services and network infrastructure through partnerships
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  to expanding into potentially higher growth digital infrastructure and technology
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  services through their specialized segments.
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  Which leads us to a final provocative thought for you, the listener.
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  Given how much this year's massive reported profit relied on those asset sales
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  and the absence of prior year impairments, what does that tell us about where
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  the company's true, sustainable operational growth is expected to come from in the coming years?
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  Will the underlying operational improvements we saw in Optus and NCS,
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  combined with the strategic investments in new digital areas,
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  be enough to drive significant future profits without relying on selling off more parts of business?
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  That's the key question, isn't it? Sustainability. It really is.
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  That raises an important question for you to consider as you evaluate the future
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  prospects based on these kinds of financial reports. You need to look beyond the headline.
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  And that's our deep dive for today. Thanks for joining us.
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  Thank you.