Singapore Telecommunications Limited (Z74) Earnings Call Transcript & Summary

Hello, everyone. My name is Arthur Lang. I am the Group CFO of Singtel. Today, I'm very happy to share with you our growth strategy for the next few years, the Singtel28 strategy. Now before I do that, I think it's good for me to cover the strategic reset that we announced about 3 years ago in 2021. This strategic reset was birthed during the COVID period amid accelerated digitalization trends, which necessitate a transformation of our business. Over the past 3 years, we have successfully executed on this reset, which has now, for all intents and purposes, concluded. The key highlights of this reset included a simplification of our operating structure as well as our businesses, establishing growth engines in ICT services as well as our data center business. We have closed down or sold loss-making businesses. We have raised $8 billion from asset recycling, including bringing brand name investors like KKR into our growth businesses. We have retrained our people to bring a sense of purpose to the group. The focus now is to move from transformation to growth. Under Singtel28, we are firstly focused on lifting business performance. Having reorganized our businesses, we will now concentrate on execution to grow earnings, improve free cash flows and ultimately improve our return on capital in the medium term to maybe even low double digits. The second aspect of Singtel28 is smart capital management. As demonstrated with Nxera, our partnership with KKR, has significantly grown our data center business, and we intend to scale even further. We will continue to rely on private capital to expand this very capital-intensive business. So this allows us to keep the dividends and the cash flows from our other businesses to reward and pay our other public shareholders. Now finally, dividends are very important to us. I remember when I took over as CFO about 3 years ago, this was something that shareholders have consistently told us. We are focused on increasing returns, enabling shareholders to benefit from our capital recycling efforts. That's the reason why today, we are revising that capital management policy. Our current dividend policy states that we will pay out dividends between 70% and 90% of our underlying net profits. With a change in dividend policy, on top of this 70% to 90% payout, we are introducing what I call the value realization dividend of $0.03 to $0.06 per year. This will be funded from excess capital from an identified pipeline of about $6 billion in assets that we have identified for potential recycling in the next few years. This year's total ordinary dividend then adds up to about $0.15 because this includes our core dividend as well as our value realization dividend of $0.038. So this represents a 52% increase of our total dividend from last year. Now this value realization dividend is not just a one-off. It is embedded into our dividend policy. Hopefully, it improves and enhances our total dividend in the medium term, which is expected to increase if underlying profit grows. That's why operational improvements are very important to us. These 2 aspects that I mentioned are supported by our commitment to continue championing people, bringing in great people, retaining them and of course, focus on sustainability because that is the right thing to do for this company. This dual-pronged approach ensures sustainable shareholder value realization. We aim to ensure that you, our shareholders, will benefit from a share price uplift and at the same time, have improved dividends. All of you have been very patient and loyal to Singtel. You have time and again given us feedback in the last 3 years how important it is for capital return and a sustainable dividend policy. We agree that our share price does not reflect the group's intrinsic value. Rest assured that the management has been working diligently over the past 3 years to address this issue. And we will continue to work diligently for the next few years. And we believe the successful execution of Singtel28 will help us address the issue of our stock price. So finally, from the bottom of my heart, I'd like to express deep appreciation to all of you, our shareholders, for your continued support and patience. I look forward to sharing more as we progress on together with Singtel28. Thank you.