H1 FY2024 Financial Results Briefing

Good morning to everyone and a warm welcome to Singtel’s results briefing for the half year ended 30 September 2023. I’m Adrian and I lead investor relations at Singtel. Before we start the briefing proper let me introduce management who are on the call today.

With us today are Mr Yuen Kuan Moon, Group CEO, Mr Arthur Lang, Group CFO, Ms Kelly Bayer Rosmarin, CEO Optus, Mr Bill Chang, CEO Digital InfraCo, Mr Ng Kuo Pin, CEO NCS, Mr Ng Tian Chong, CEO, Singtel Singapore and Ms Anna Yip who is Deputy CEO of Singtel Singapore.

Before we start taking questions, I would like to invite Moon to share some quick thoughts and highlights from this set of results. Moon, please.

Thank you, Adrian. Good morning, everyone. Thank you for joining us. Let me start with the key highlights for the half year.

We faced a number of headwinds as macro-economic uncertainty and inflationary pressures weighed on consumer and business sentiment. Despite these challenges, the Group put in a resilient performance with EBIT stable on continued momentum of our mobile business and strong performance of our growth engines.

This helped offset softness in the enterprise space from structural declines in the legacy fixed business in Australia and lower ICT carriage spend by enterprises in Singapore.

Regional associates’ PBT grew 9%, boosted by improving dynamics in their respective markets. This helped us deliver a 16% growth in underlying NPAT. If we strip out the impact of strong Singapore Dollar, NPAT surged 83% mainly from Telkomsel dilution gains. Importantly, we continued to execute to our strategic reset.

In the last few months, we have further simplified our business structure by integrating the consumer and enterprise businesses in Singapore, unlocking another S$1.1 billion from a 20% stake sale of our data centre business to global investment firm KKR to use as growth capital and completed the

H1 FY24 Results Briefing Conference Call 9 November 2023 divestment of Trustwave. This puts us in a strong position to drive ROIC improvements and shareholder returns. With that in mind, we have raised our interim dividend by 13% to 5.2cents as well as increased our payout ratio to between 70% and 90% of underlying net profit.

On to key financial highlights. Our results for the half year were impacted by the strong Singapore dollar, affecting revenues and underlying net profit by S$338 million and S$42 million respectively. Excluding currency movements, revenue and EBIT both increased 2% on continued mobile growth and strong performance from our growth engines. Our regional associates’ pre-tax contributions increased 9% on improving market dynamics and strict cost control.

Substantial cash from a asset recycling also generated S$58 million of interest income resulting in an overall 16% higher underlying net profit. A key tenet when I launched the strategic reset two and a half years ago was the need to reorganise our structure to reposition the Company for growth. Today, I’m pleased to say that we have realigned the business and simplified our structure to drive growth, synergies and productivity. Consumer and enterprise businesses have been consolidated into one operating entity for both Singapore and Australia, giving them more operational autonomy and direct accountability.

NCS and Digital InfraCo have also been carved out as standalone businesses, better positioning them to capture new growth.

We’ve also completed a strategic review of our digital investments, divesting both Amobee and Trustwave for S$500 million, as well as closed down HOOQ. More importantly, we’ve taken out EBIT drag of over S$200 million a year.

With our simplified structure, our focus is now on taking out costs in our core operations. We will also actively support our regional associates as they build out new growth engines, particularly in the enterprise and the fibre broadband space.

With all these initiatives, we remain on track to deliver low double digit ROIC in the mid-term.

Let me elaborate on how we intend to take costs out of our core business. We have launched a cost- out programme to drive a 15% or S$600 million reduction in indirect costs over the next two and a half years. It hinges on two key pillars – eliminating operational inefficiency, harnessing the power of digitalisation to drive productivity. I assure you that our cost-out programme will not come at the expense of our network. We will continue to invest in network resilience and security.

The Group’s strong balance sheet also provides a buffer against economic uncertainty. We have divested S$5 billion of assets in the last two years, and expect to receive another S$2 billion which has already been secured with another S$4 billion to be unlocked in the mid-term. Proceeds from asset recycling has placed us on a firm financial footing, reducing gross debt by $S1.6 billion while boosting cash balances to S$3.1 billion. It has also provided necessary funding for our growth investment. With the improvement in our financials, successful asset recycling and firm financial footing, we are increasing our interim dividend by 13% to 5.2cents per share. We are confident of the future of our business and are revising our dividend payout range towards between 70% and 90% of underlying net profit, so shareholders can share in the Group’s improving prospects.

With that I conclude my presentation and hand over to Adrian for Q&A.

Thank you, Moon. We will now be taking questions. A gentle reminder to everyone to use the raise hand to indicate your interest and I will call your name shortly. We would also greatly appreciate if you could turn on your video when asking your questions.