Singapore Telecommunications Limited and Subsidiary Companies
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Singapore Telecommunications Limited And Subsidiary Companies MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS FOR THE FOURTH QUARTER AND YEAR ENDED 31 MARCH 2014 The financial statements of the Group are prepared in accordance with Singapore Financial Reporting Standards, which are the same, in material respects, to International Financial Reporting Standards. The financial statements for the year ended, and as at, 31 March 2014 are audited. Numbers in all tables may not exactly add due to rounding. For all pages, "@" denotes more than +/- 500%, "*" denotes less than +/- S$500,000 or A$500,000 and “**” denotes less than +/- 0.05%, unless otherwise indicated. For all tables, a negative sign for year-on-year change denotes a decrease in operating revenue, expense, gain or loss. Singapore Telecommunications Ltd And Subsidiary Companies Table Of Contents Section 1 : Group Pg Financial Highlights………………….…………………………………………………………………1 Group Summary Income Statements……...……………………………………………………… 3 Business Segment Totals……………………………………………………………………………4 Final Dividend…………………………………………………………………………………….. 5 Review Of Group Operating Performance…………………………………………………………5 Sequential Quarterly Results…………………………………………………………………………8 Outlook For The Financial Year Ending 31 March 2015………………………………………… 9 Operating Revenue……………………………………………………………………………………12 Operating Expenses……………………………………………………………………………………13 Staff Costs……………………………………………………………………………………………. 14 Net Finance Expense…………………………………………………………………………………15 Exceptional Items………………………………………………………………………………………16 Tax Expense……………………………………………………………………………………………17 Summary Statements Of Financial Position…………………………………………………………18 Liquidity And Gearing…………………………………………………………………………………19 Cash Flow And Capital Expenditure…………………………………………………………………20 Section 2 : Group Consumer Financial Highlights……………………………………………………………………………………22 Group Consumer Summary Income Statements …..………………………………………………23 Operating Highlights…….……….…………………………………………………………………. 23 Singapore Consumer Summary Income Statements………...……………………………………25 Australia Consumer Summary Income Statements….………..………………………………… 28 Section 3 : Group Enterprise Financial Highlights……………………………………………………………………………………32 Group Enterprise Summary Income Statements…..………………………………………………33 Operating Highlights……..………...……………………………………………………………… 33 Singapore Enterprise Operating Revenue………..…………………………………………………36 Australia Enterprise Operating Revenue………….…………………………………………………37 Section 4 : Group Digital L!fe Financial Highlights……………………………………………………………………………………38 Group Digital L!fe Summary Income Statements…………...…………………………………… 39 Operating Highlights………..…..…………………………………………………………………. 40 Singapore Telecommunications Ltd And Subsidiary Companies Table Of Contents (continued) Section 5 : Associates/ Joint Ventures Pg Financial Highlights……………………………………………………………………………………42 Share Of Results Of Associates/ Joint Ventures……………………………………………………43 Proforma Information…………………………………………………………………………………49 Dividends Received From Associates/ Joint Ventures……………………………………………52 Key Operational Data…………………………………………………………………………………53 Section 6 : Product Information Singapore Mobile…………………..……………………………………………………………………54 Australia Mobile…………………………………………………………………………………………55 Singapore Consumer Home………………………………………………………………………… 56 Other Products……………………………………………………………………………………….. 57 Section 7 : Glossary…………………………………………………………………………………59 Appendix 1 : Group Summary Income Statements Appendix 2 : Group Statements Of Financial Position Appendix 3 : Cash Flow Statements of Singapore And Optus Appendix 4 : Optus Financials In Australian Dollars Appendix 5 : Currency Risk Management & Other Matters Singapore Telecommunications Ltd And Subsidiary Companies Page 1 SECTION 1 : GROUP FINANCIAL HIGHLIGHTS FOR THE FOURTH QUARTER ENDED 31 MARCH 2014 Results adversely impacted by currency movements with the steep weakening of the Australian Dollar, Indonesian Rupiah and the Indian Rupee against the Singapore Dollar. EBITDA declined 9.2%, while EBIT and underlying net profit declined 6.2% and 8.1% respectively mainly due to foreign currency weakness. Net profit after exceptional items increased 3.5%. In constant currency terms1, EBITDA declined 2.4% but EBIT grew 2.5% and underlying net profit was stable. Net profit after exceptional items grew 13%. Free cash flow of S$868 million was lower by S$397 million or 31% due to higher capital expenditure with phasing. FOR THE YEAR ENDED 31 MARCH 2014 EBITDA, EBIT and underlying net profit were stable amid adverse currency movements. Net profit after exceptional items increased 4.1%. In constant currency terms1, EBITDA grew 4.5%, while EBIT and underlying net profit rose 7.2% and 5.9% respectively. Net profit after exceptional items grew 10%. Free cash flow2 of S$3.39 billion was lower by S$368 million or 9.8% due to weaker Australian Dollar, higher cash taxes in Australia and working capital movements. 1 Assuming constant exchange rates for the Australian Dollar and/or regional currencies (Indian Rupee, Indonesian Rupiah, Philippine Peso and Thai Baht) from the corresponding periods ended 31 March 2013. 2 Adjusted to exclude payment of S$143 million to NetLink Trust during the quarter ended 31 December 2013 in consideration of tax benefits utilised by the Group. The S$143 million was subsequently applied by NetLink Trust towards its acquisition of OpenNet. Singapore Telecommunications Ltd And Subsidiary Companies Page 2 SECTION 1 : GROUP Quarter Year 31 Mar YOY 31 Mar YOY 2014 2013 Chge 2014 2013 Chge S$ m S$ m % S$ m S$ m % Operating revenue 4,128 4,481 -7.9 16,848 18,183 -7.3 EBITDA 1,297 1,428 -9.2 5,155 5,200 -0.9 EBITDA margin 31.4% 31.9% 30.6% 28.6% Share of associates' pre-tax profits 566 540 4.8 2,201 2,106 4.5 EBITDA and share of associates' pre-tax profits 1,863 1,969 -5.3 7,357 7,306 0.7 EBIT 1,330 1,418 -6.2 5,224 5,178 0.9 (excluding share of associates' pre-tax profits) 764 878 -13.0 3,023 3,072 -1.6 Underlying net profit 920 1,001 -8.1 3,610 3,611 ** Exceptional items (post-tax) (21) (132) -84.0 42 (103) nm Net profit 898 868 3.5 3,652 3,508 4.1 (1) Free cash flow 868 1,266 -31.4 3,391 3,759 -9.8 Underlying earnings per share (S cents) 5.77 6.28 -8.1 22.65 22.66 ** Basic earnings per share (S cents) 5.64 5.45 3.5 22.92 22.02 4.1 As at 31 Mar 31 Dec 31 Mar 2014 2013 2013 S$ m S$ m S$ m Total assets 39,320 38,970 39,984 Shareholders' funds 23,868 22,536 23,965 (2) Net debt 7,534 7,146 7,477 (3) Net debt gearing ratio 24.0% 24.1% 23.8% (4) Net debt to EBITDA and share of associates' pre-tax profits 1.02X 0.98X 1.02X Interest cover: (5) - EBITDA and share of associates' pre-tax profits/ net interest expense 28.7X 28.0X 24.5X Notes: (1) Adjusted to exclude payment of S$143 million to NetLink Trust during the quarter ended 31 December 2013 in consideration of tax benefits utilised by the Group. The S$143 million was subsequently applied by NetLink Trust towards its acquisition of OpenNet. (2) Net debt is defined as gross debt less cash and bank balances adjusted for related hedging balances. (3) Net debt gearing ratio is defined as the ratio of net debt to net capitalisation. Net capitalisation is the aggregate of net debt, shareholders’ funds and minority interests. (4) Net debt to EBITDA and share of associates’ pre-tax profits is calculated on an annualised basis. (5) Net interest expense refers to interest expense less interest income. Singapore Telecommunications Ltd And Subsidiary Companies Page 3 SECTION 1 : GROUP GROUP SUMMARY INCOME STATEMENTS For The Fourth Quarter And Year Ended 31 March 2014 Quarter Year 31 Mar YOY 31 Mar YOY 2014 2013 Chge 2014 2013 Chge S$ m S$ m % S$ m S$ m % Operating revenue 4,128 4,481 -7.9 16,848 18,183 -7.3 Operating expenses (2,860) (3,092) -7.5 (11,800) (13,100) -9.9 1,269 1,390 -8.7 5,048 5,083 -0.7 Other income 28 39 -26.7 108 117 -7.9 EBITDA 1,297 1,428 -9.2 5,155 5,200 -0.9 - EBITDA margin 31.4% 31.9% 30.6% 28.6% Share of associates' pre-tax profits - operating results 580 540 7.3 2,201 2,106 4.5 - exceptional items (14) - nm * - nm 566 540 4.8 2,201 2,106 4.5 EBITDA and share of associates' pre-tax profits 1,863 1,969 -5.3 7,357 7,306 0.7 Depreciation (491) (510) -3.8 (1,964) (1,971) -0.4 Amortisation of intangibles (43) (41) 5.7 (168) (156) 7.8 (534) (551) -3.1 (2,133) (2,127) 0.2 EBIT 1,330 1,418 -6.2 5,224 5,178 0.9 Net finance expense - net interest expense (60) (71) -14.5 (257) (298) -13.9 - other finance income 17 7 155.4 75 * nm (44) (64) -31.7 (181) (298) -39.2 Profit before exceptional items and tax 1,286 1,354 -5.0 5,043 4,880 3.3 Taxation (366) (352) 3.9 (1,428) (1,267) 12.7 Profit after tax 920 1,002 -8.2 3,615 3,613 ** Minority interests * (1) nm (5) (2) 113.0 Underlying net profit 920 1,001 -8.1 3,610 3,611 ** Exceptional items (post-tax) (21) (132) -84.0 42 (103) nm Net profit 898 868 3.5 3,652 3,508 4.1 Depreciation as % of operating revenue 12% 11% 12% 11% Unless otherwise stated, the presentation of income statements in this document is consistent with prior periods. For income statements presented in accordance with FRS 1, Presentation of Financial Statements, please refer to “SGX Appendix 7.2 Announcement”. Singapore Telecommunications Ltd And Subsidiary Companies Page 4 SECTION 1 : GROUP BUSINESS SEGMENT TOTALS From 1 April 2012, the Group is organised by three business segments, Group Consumer, Group Enterprise and Group Digital L!fe, to better serve the evolving needs of its customers and to exploit growth opportunities globally. Group Consumer comprises the consumer businesses across Singapore and Australia, as well as the Group’s investments, namely AIS in Thailand, Airtel in India and Africa, Globe in the Philippines, PBTL in Bangladesh, and Telkomsel in Indonesia. It focuses on driving greater value and performance from the core carriage business including mobile, residential pay TV, fixed, as well as equipment sales. Group Enterprise comprises the business groups across Singapore and Australia and focuses on growing the Group’s position in the enterprise markets.