Annual Report 2018

Management Discussion and Analysis

Group

Financial Year ended 31 March
2017
(S$ million)		 2016
(S$ million)		 Change (%) Change in
constant
currency (1)
(%)
Operating revenue  17,532 16,711 4.9 4.7
EBITDA  5,089 4,998 1.8 1.5
EBITDA margin 29.0% 29.9%
Share of associates' pre-tax profits (2) 2,461 2,886 -14.7 -13.5
EBIT (2) 5,210 5,645 -7.7 -7.2
(exclude share of associates' pre-tax profits) 2,749 2,759 -0.4 -0.7
Net finance expense (345) (260) 32.8 32.1
Taxation (2) (1,343) (1,536) -12.6 -12.4
Underlying net profit (2) (3) 3,544 3,871 -8.4 -7.8
Underlying earnings per share (S cents) (2) 21.7 24.1 -9.8 -10.0
Exceptional items (post-tax) (2) 1,908 (18) nm nm
Net profit 5,451 3,853 41.5 42.2
Basic earnings per share (S cents) 33.4 24.0 39.4 38.8
Share of associates' post-tax profits (2) 1,823 2,048 -11.0 -9.6
‘’Associate’’ refers to either an associate or a joint venture as defined under Singapore Financial Reporting Standards.
“nm” denotes not meaningful.
Notes:
  • (1)Assuming constant exchange rates for the Australian Dollar, United States Dollar and/or regional currencies (Indian Rupee, Indonesian Rupiah, Philippine Peso and Thai Baht) from the previous year ended 31 March 2017 (FY 2017).
  • (2)Comparatives have been restated to reclassify AIS’ 3G/4G handset subsidy costs from exceptional items of the Group to share of associates’ results to be consistent with FY 2018.
  • (3)Underlying net profit refers to net profit before exceptional items.

The Group performed in line with its guidance for the financial year ended 31 March 2018.

Net profit for the year hit a new high, rising a robust 42% to S$5.45 billion. This was due to exceptional divestment gains from NetLink Trust and a strong performance from the core business.

Operating revenue surged 4.9% and EBITDA rose 1.8%, reflecting strong execution in Australia Consumer and the digital businesses following the acquisition of Turn in April 2017. Revenue from ICT and digital businesses increased a strong 19% to S$4.18 billion and contributed 24% of the Group’s revenue, up from 21% last year.

Depreciation and amortisation charges increased on higher investments in mobile infrastructure network and spectrum across the Group.

Consequently, the Group’s EBIT (before the associates’ contributions) was stable.

In the emerging markets, the regional associates continued to win new customers and drive data growth with investments in network and spectrum. The customer base of the Group and its regional associates reached 706 million in 21 countries as at 31 March 2018, up 11% or 68 million from a year ago. Singtel has strengthened its collaborations with the regional associates to build an ecosystem of digital services by leveraging the Group's strengths and customer base across these countries.

The associates’ post-tax underlying profit contributions declined by 11% on weaker earnings from Airtel and Telkomsel as well as lower contribution from NetLink NBN Trust following the reduction in economic interest of 75.2% in July 2017. The decline was partly mitigated by higher contribution from Intouch (acquired in November 2016).  

Airtel’s results were impacted by continued intense competition with aggressive pricing led by a new player and further aggravated by mandated cuts in mobile termination rates in India, partly mitigated by continued positive growth momentum in Africa. Telkomsel’s earnings fell on softer revenue growth amid heightened price competition in data and steep declines in voice and SMS revenues, coupled with higher depreciation charges and a weaker Indonesian Rupiah against the Singapore Dollar.

Including the associates’ contributions, the Group’s EBIT declined by 7.7% to S$5.21 billion.

Net finance expense increased 33% on lower dividend income from the Southern Cross consortium, decline in net interest income from NetLink Trust with the repayment of unitholder loan in July 2017, as well as higher interest expense on increased average borrowings.

With lower associates’ contributions, higher depreciation and amortisation charges as well as increased net finance expense, underlying net profit declined by 8.4% for the year.

The Group has successfully diversified its earnings base through its expansion and investments in overseas markets. Hence, the Group is exposed to currency movements. On a proportionate basis if the associates are consolidated line-by-line, operations outside Singapore accounted for three-quarters of both the Group’s proportionate revenue and EBITDA.

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