Creating value and delivering to our strategy
We performed strongly in the second year of our strategic reset despite ongoing global economic uncertainty, elevated inflation and currency headwinds. Our proactive approach to capital management has led to a second successive year of over S$5 billion of cash generated(1), ensuring we are in good stead as we continue to execute to our strategy to increase shareholder value.
Proactive capital management supporting higher returns
Last year, we unlocked S$2.8 billion, mainly from divesting a 3.3% direct stake in our regional associate Airtel. This transaction not only illuminated the sizeable value of our holdings in Airtel, it also boosted our efforts to enhance total shareholder returns. We expect to recycle another S$6 billion in the mid-term to continue supporting our growth initiatives. Encouragingly, we are seeing our regional associates follow our lead in active capital management, as they sold towers worth S$3.2 billion to fund their growth.
As a result of our improved business performance and robust financial standing, we will be paying total dividends of 14.9 cents(2) – a 60% increase from last year. This is supported by higher ordinary dividends of 9.9 cents or 80% of underlying net profit, which is at the high end of our dividend policy, and an additional payout of 5.0 cents from the assets we have recycled. We will continue to take a holistic approach to shareholder returns, with payouts funded by operating cashflow and any excess proceeds from capital recycling, after funding growth initiatives and repaying debt.
Firing up our growth engines
We made good headway in our regional data centre strategy to capitalise on the growing demand for generative AI, digital and cloud services in ASEAN. We have commenced new builds that will more than double our capacity to 155MW within the next three years. They will be green, best-in-class hyperconnected data centres with state-of-the-art technologies. We look forward to collaborating with more like-minded partners to support the rapidly growing digital economy in this region.
Our digital bank venture with Grab, GXS, officially launched last year to serve the underbanked population in Singapore. It has introduced differentiated products such as a savings account that provides daily interest without requiring a minimum balance, and a fully customisable loan product based on customer insights from our ecosystem. We are not stopping at Singapore. Our upcoming digital banks in Malaysia and Indonesia can tap the regional technology architecture we have built, including our core banking system, as they prepare for launch later in 2023. Digital banking will make a tremendous difference for millions of Southeast Asians in the region and we’re excited about what’s to come.
After the spate of acquisitions by NCS in the last financial year, we have been working hard to ensure that the post-acquisition integration is completed as quickly as possible so that we can reap synergies to further expand our presence and supercharge our capabilities.
Associates charging ahead
Our regional associates have been charging ahead with their respective growth initiatives in 5G and fixed broadband to cater to the accelerated digitalisation across their markets. Airtel became the first telco in India to launch 5G commercial services last October, fortifying its position as a premium brand at the forefront of the latest technology. In Thailand, AIS will soon leapfrog in fixed broadband after requisite regulatory approvals are obtained to fully acquire internet service provider 3BB as well as a 19% stake in Jasmine Broadband Internet Infrastructure Fund. Meanwhile, Telkomsel in Indonesia signed a conditional spin-off agreement with parent company Telkom to integrate Telkom’s Indihome, the largest broadband operator. We believe these developments for AIS and Telkomsel will enhance their growth prospects and be accretive for us as a long-term investor.
Driving total shareholder returns
As part of our strategy, we have been working to maximise corporate value and increase capital efficiency across the Group. We have set a low double-digit(3) return on invested capital (ROIC) target for the Group in the mid-term from the current ROIC of 8.3%(3).
In FY2024, we will continue focusing on driving profitability in our core businesses, which includes Singtel and Optus operations as well as our regional associates, to support higher dividends. What this means is growing revenues, reducing costs and managing the capital intensity of each business. For growth engines such as NCS and our regional data centre business, we aim to improve their internal rate of returns, and establish capital partnerships to support growth and scale them up.
Investing in a sustainable future
We are deeply conscious of our responsibility to the environment and duty to create a sustainable future as we pursue business growth. Building on our foundations of a shadow carbon price last year, we intend to implement an internal carbon fee throughout the Group, as we step up efforts to make our operations greener and support our transition to net-zero emissions. We expect this decision to incentivise investments in energy efficiency and low-carbon innovation as well as help us make better informed decisions on capital expenditure and procurement, underscoring our commitment to put sustainability at the core of all of our businesses. At the same time, we are also looking to collaborate with our regional associates to amplify the impact of our contributions as one Group, such as sharing best practices.
Focusing on value creation
We’ve ended the year on stronger footing and built significant momentum behind our strategic reset. Our financial position is solid, underpinned by a proven capital recycling model. Given the prevailing climate of uncertainty, we will remain watchful and continue to emphasise agility, resilience and prudence in our financial approach as we accelerate Singtel’s transformation into a techco and drive growth and value for all our stakeholders.
