Singtel Group Financial Performance Analysis: A Comprehensive Report

Desklib provides past papers and solved assignments for students. This report analyzes Singtel's financial performance.

FINANCIAL DECISION MAKING
1

EXECUTIVE SUMMARY
Through this report, we have studied the financial statements of Singtel through its which
financial performance has been analyzed. Having a net profit of S$5,451M in the year 2018, the
analysis of its financial reports assisted in understanding the various areas upon which the
organization is required to work so that they can ensure higher productivity. Being a leader in
the telecommunications industry, Singtel group generated the net profits from 29% from
Singapore, 24% from Australia and 47% from Regional associates.
2

Contents
EXECUTIVE SUMMARY...................................................................................................................2
LIST OF FIGURES.............................................................................................................................5
LIST OF TABLES...............................................................................................................................6
INTRODUCTION............................................................................................................................. 7
VERTICAL ANALYSIS....................................................................................................................... 8
HORIZONTAL ANALYSIS................................................................................................................10
IDENTIFICATION OF PROFITS....................................................................................................... 13
ECONOMIC CONDITION...........................................................................................................13
PROFITABILITY RATIOS.............................................................................................................13
GROSS PROFIT RATIO...........................................................................................................13
NET PROFIT RATIO............................................................................................................... 13
OPERATING RATIO............................................................................................................... 14
RETURN ON INVESTMENT....................................................................................................14
DIVIDEND RATIOS.................................................................................................................... 15
DIVIDEND COVERAGE RATIO................................................................................................15
DIVIDEND PAYOUT RATIO....................................................................................................15
EARNING PER SHARE............................................................................................................16
PRICE EARNING RATIO......................................................................................................... 16
LIQUIDITY RATIO...................................................................................................................... 16
CURRENT RATIO...................................................................................................................16
QUICK RATIO........................................................................................................................17
3

DEBT TO EQUITY RATIO....................................................................................................... 17
INTEREST COVERAGE RATIO................................................................................................ 18
EFFICIENCY RATIO.................................................................................................................... 18
ASSET TURNOVER RATIO..................................................................................................... 18
INVENTORY TURNOVER RATIO............................................................................................ 19
CURRENT ASSET TURNOEVR RATIO.....................................................................................19
RETURN ON INVESTMENT....................................................................................................20
RETURN ON ASSETS............................................................................................................. 20
RETURN OF EQUITY..............................................................................................................20
ASSET VALUE PER SHARE..................................................................................................... 21
NON-FINANCIAL PARAMETERS................................................................................................21
IMPACT ON FINANCIAL PERFORMANCE......................................................................................23
ROLE OF BOARD OF DIRECTORS.................................................................................................. 23
VISION.......................................................................................................................................... 23
FINANCIAL GOALS........................................................................................................................ 24
CONCLUSION............................................................................................................................... 25
REFERENCES.................................................................................................................................26
APPENDIX.....................................................................................................................................28
4

LIST OF FIGURES
Figure 1: Singtel Group, 2019........................................................................................................ 5
5

LIST OF TABLES
Table 1: Vertical Analysis of Financial Statements.........................................................................7
Table 2: Horizontal Analysis of Financial Statements.....................................................................9
6

INTRODUCTION
Singtel is a common abbreviation used for Singapore Telecommunications Limited which is the
biggest mobile network operator based in Singapore (Singtel, 2019). Established in the year
1879, Singtel provides its services to about 700 million mobile customers across the globe.
Singtel Group is headquartered in Singapore and provides a wide range of services that include
internet, mobile, TV, fixed, digital solutions, etc. Being Asia’s leading group in communications,
Singtel Group has expanded its business by investing in numerous companies around the world.
The firm has about 23000 employees worldwide in the vast network of offices in the world.
Figure 1: Singtel Group, 2019
[Source: Singtel, 2019]
StarHub is a major telecommunications company established in Singapore. Officially established
in the year 2000, StarHub provides communications, digital solutions, mobile and fixed services
and entertainment to the customers (StarHub, 2019). The firm also provides solutions for
incorporating cybersecurity, artificial intelligence, robotics, Internet of Things and data analytics
to their corporate clients.
Through this report, the vision and the strategic financial goals of the company are being
defined. Using various financial and non-financial ratios, the assessment of the performance of
the Singtel Group is being done. Also, the impact of corporate governance on the reputation of
the Singtel Group is being evaluated.
7

VERTICAL ANALYSIS
Vertical analysis is a tool which is used for comparing the financial statements of a company. In
the vertical analysis, the items of the income statement are listed as a percentage of sales,
which is being considered as 100%. Vertical analysis is being done to determine the trend of
changes in the financial statement of the company over a period of time (Warren and Jones,
2018). Through this analysis, the annual figures of the previous periods can be measured to
determine the changes in the performance of the organizations.
Following is the vertical analysis of the income statement of Singtel Group which has been
depicted by the statement as the percentage of the total revenue (considering it as 100%).
Table 1: Vertical Analysis of Financial Statements
Particulars 2018
(in S$
MIL)
% 2017
(in S$
MIL)
% 2016
(in S$
MIL)
% 2015
(in S$
MIL)
% 2014
(in S$
MIL)
%
Revenue 17532 100% 16711 100% 16961 100% 17223 100% 16848 100%
Operating
Expenses
(12701) 72.4% (11929
)
71.3% (12096) 71.3% (12284
)
71.3% (11800) 70%
Depreciation (2340) 13.3% (2239) 13.3% (2148) 12.6% (2161) 12.5% (2132) 12.6%
Profit on
Operating
activities
4689 26.7% 2757 16.4% 2819 16.6% 2944 17% 3137 18.6%
Interest and
Investment
Income
45 0.25% 115 0.68% 98 0.57% 93 0.53% 125 0.74%
Tax Expense (701) 3.9% (684) 4.09% (723) 4.26% (679) 3.94% (691) 4.10%
8

Shareholder
s of the
Company
5451 31% 3853 23% 3870 22.8% 3782 21.9% 3652 21.6%
Earnings Per
Share
33 0.18% 24 0.14% 24 0.14% 24 0.13% 23 0.13%
Profit After
Tax
5430 30.9% 3831 22.9% 3858 22.7% 3785 21.9% 4345 25.7%
Through the above analysis, it could be seen that profit after tax for Singtel has been increasing
over the years with a constant rise in the earning per share of the shareholders. Though the
expenditure over tax has been fluctuating minutely, the operating expenses have been
increasing at a low rate (Grant, 2016). Also, it could be noted that the profit from operating
activities has been increasing but the income from interest and investment has been declining.
With the rise in revenue from S$16848 million in the year 2014 to S$17532 million in the year
2018, Singtel has been slowly growing its profitability.
9

HORIZONTAL ANALYSIS
Horizontal analysis, mostly referred to as trend analysis, studies the performance of the
financial statements over the years so that the relative changes can be highlighted. It indicates
the nature and behavior of assets and liabilities (Robinson et al., 2015). It is the measure for
absolute comparison through which examination is eased for the analysis.
Following is the horizontal analysis of the income statement of Singtel Group which has been
depicted by the statement as the percentage of the total revenue (considering it as 100%):
Table 2: Horizontal Analysis of Financial Statements
Particulars 2018
(in S$
MIL)
Rise/
Fall
2017
(in S$
MIL)
Rise/
Fall
2016
(in S$
MIL)
Rise/
Fall
2015
(in S$
MIL)
Rise/
Fall
2014
(in S$
MIL)
Rise/
Fall
ASSETS
CURRENT
ASSETS
Cash 525 -8 533 -71 462 -101 563 -60 623 -288
Inventories 397 45 352 32 320 31 289 120 169 -44
NON-
CURRENT
ASSETS
Trade and
other
receivables
5233 309 4924 558 4366 481 3885 330 3555 -125
Property
and Plant
11800 -93 1189 739 11154 471 1068 -413 11096 -628
10

Equipment 3 3
Intangible
Assets
13989 916 1307
3
105 12968 1020 1194
8
1209 10739 30
Deferred
Tax Assets
360 -298 658 -34 692 -112 804 -24 828 -117
Loan to
Associate
- -1100 1100 0 1100 -510 1610 280 1330 0
TOTAL
ASSETS
48253 -41 4829
4
4729 43565 6266 3729
9
-2021 39320 -663
LIABILITIE
S
CURRENT
LIABILITIE
S
Trade and
Other
Payables
5234 313 4921 327 4594 135 4459 663 3796 -425
Current Tax
Liabilities
351 55 296 -68 364 -55 419 53 366 -63
Net
Deferred
Gain
20 -48 68 0 68 0 68 10 58 0
NON-
CURRENT
11

LIABILITIE
S
Advance
Billings
225 -21 246 -19 265 0 265 -33 298 -34
Net
Deferred
Gain
357 -926 1283 -40 1323 -47 1370 815 1155 -31
Other Non-
Current
Liabilities
295 -55 350 72 278 -33 311 120 191 -58
TOTAL
LIABILITIE
S
18600 -1480 2008
0
1517` 18563 1265 1729
8
1871 15427 -567
From the horizontal analysis of Singtel done above, it could be depicted that cash and cash
equivalents maintained by Singtel are less than the previous accounting years, though is decline
is decreasing over the years with a difference of S$288 million in 2013 to S$8 million in 2018. It
could also be found that the properties held by Singtel have been declining but the firm is
increasing the value of its intangible assets (Beck et al., 2016). In the telecommunications
industry, firms have been noticed to increase their focus upon the creation of intangible assets.
Due to the rise in the tax liabilities implied by the government, most of the telecommunications
companies have been facing a decline in the deferred gains. Though loan gives to the associates
have also be received, there is a decline noted in the total assets of Singtel in the year 2018.
The trade payables for Singtel have been decreasing but the tax liabilities of the firm have been
increasing. Due to this, the net deferred gain of the firm has also been decreasing form being a
decrease of S$40 million in 2017 to S$926 million in 2018. However, the total liabilities of
12