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(Bloomberg) — Singapore Telecommunications Ltd’s shares rose 2% after the company said it expects to book a higher operating profit for the full year after posting strong results in the first half.
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The company, popularly known as Singtel, now sees operating company earnings before interest and tax to grow as much as in the low-double digits for the financial year ending March. The forecast comes as the company awaits the outcome of a probe into the deadly emergency service outage of its Australian unit Optus that could result in major financial penalties.
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The company is “taking into consideration the strong first-half growth and uncertainties in Australia as a result of the outage,” it said in a statement on Wednesday. Singtel’s previous guidance called for high-single digit growth.
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Optus has been in turmoil since a September botched network upgrade prevented customers from calling emergency services and led to multiple deaths.
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Singtel said it has not set aside money for possible liabilities tied to the outage.
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“If ever we think there is some certainty to the penalties and to other types of expenses that are related to the incident, we would definitely take provisions,” Arthur Lang, its group chief financial officer, said in a Bloomberg Television interview on Wednesday. “We have taken what we can and what we need to do at this point in time.”
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Lang said it was too early to comment on news that the company, along with KKR & Co., was reported to be in talks with banks for a loan of around S$5 billion ($3.8 billion) to support its proposed purchase of ST Telemedia Global Data Centres.
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“Taking on a bit of debt for an acquisition to optimize our capital structure, it’s something that we will do,” he said. “Nevertheless, we have, time and again, said that we will always maintain a very strong investment grade rating as a group.”
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Singtel’s operating Ebit climbed 13% in the first half, while underlying profit was up 14% to S$1.35 billion driven mainly by its regional associates and operating companies, according to its latest financial report.
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Singtel’s net income also more than doubled to S$3.4 billion, supported by a net exceptional gain of S$2.05 billion, mainly from the sale of a partial stake in Bharti Airtel Ltd. in May and the merger of Gulf Energy Development Pcl and Intouch Holdings Pcl.
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The company is in a comfortable position to deliver more than 4% yield, which has yet to factor in the benefit of its share buy-back program, after its first-half dividend per share improved 17% year-on-year, according to Arthur Pineda and Luis Hilado, analysts at Citi Research. “This potential growth in dividend remains a key focus point for investors,” they wrote in a note.
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—With assistance from Nurin Sofia, Anand Menon and Bernadette Toh.
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(Updates throughout.)
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English (US)