StarHub Ltd’s Latest Earnings: Service Revenue Declines 1% While Profit Falls Over 22%

Yesterday, StarHub Ltd  (SGX: CC3) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

As a quick background, StarHub is Singapore’s second largest telecommunications outfit, sitting in between M1 Ltd  (SGX:B2F) and Singapore Telecommunications Limited  (SGX: Z74). StarHub has five business segments: Mobile, Pay TV, Enterprise Fixed, Broadband, and Sales of equipment. The first four are collectively known as service revenue.

You can read about the StarHub’s previous quarter here.

Financial highlights

The following’s a quick take on some of StarHub’s latest financial figures:

1. Revenue for the quarter was $592.3 million, up slightly by 0.2% from a year ago.

2. Service revenue was $537 million, down 1.0% compared to a year ago.

3. Net profit attributable to shareholders was $73.1 million, down 21.3% year-on-year.

4. StarHub’s earnings per share (EPS) was 4.2 cents, down 22.2% from 5.4 cents in 2016’s first quarter.

5. Cash flow from operations was $150.2 million and capital expenditure was $33.7 million. With this, StarHub had free cash flow of $116.5 million, an improvement from the free cash flow of $90 million last year ($131.7 million in cash flow from operations and $41.8 million in capex).

6. As of 31 March 2017, the telecommunications outfit had $401.2 million in cash and equivalents while borrowings was $987.5 million. The company’s balance sheet had weakened from a year ago when there was $270.7 million in cash and equivalents while borrowings was $687.5 million.

In all, StarHub’s service revenue slipped and its profits sagged. At the same time, the telco’s balance sheet took on more debt. However, it managed to increase its free cash flow for the reporting quarter.

The board of directors proposed an interim dividend of four cents per share for the quarter, down from a dividend of five cents a year ago. Back in StarHub’s 2016 fourth quarter earnings, the company announced its plan to pay a dividend of 16 cents per share for the whole of 2017. It is currently on track with its plan.

Operational highlights

Starhub’s sales lowered due to declines in its Mobile and Pay TV segments.

Mobile revenue was down 0.6% year-on-year, ending with $296.2 million. The number of mobile subscribers declined quarter on-quarter from 2.307 million to 2.291 million (1.392 million postpaid subscribers and 898,000 prepaid subscribers). StarHub picked up 5,000 postpaid subscribers but lost 22,000 prepaid customers compared to the fourth quarter of 2016. A year ago in the first quarter of 2016, StarHub registered 2.198 million mobile subscribers.

Elsewhere, Pay TV sales was $88.4 million for the quarter, 6.8% lower from a year ago. StarHub’s Pay TV base shrank by 11,000 to 487,000 compared to the previous quarter. The decline is steeper if compared to the first quarter of 2016 when there was 528,000 Pay TV members.

For the first quarter of 2017, revenue from the Enterprise Fixed segment rose 2.9% year-on-year to $98.7 million. Finally, Broadband services revenue moved up 0.5% to $53.7 million. The number of broadband customers fell by 3,000 year-on-year to 470,000 customers.

StarHub’s chief executive officer, Tan Tong Hai, had the following comments on the telco’s performance:

“We have made the necessary investments in the recent spectrum auction to continue delivering quality mobile services to our increasing Mobile base. The acquired spectrum will also facilitate our roadmap towards 5G.

Driving growth in the Enterprise business remains our priority and we are on track to introduce new cyber security, IoT and smart retail solutions to the market. We will grow our Enterprise digital services offerings with our latest strategic management addition.

Underpinning our overall business strategy is our continued digital transformation drive to increasingly engage and service our customers via digital channels and self-help applications.”

At its closing stock price of $2.78 yesterday, StarHub traded at 15 times earnings and has a trailing dividend yield of 6.8%. Investors should note that StarHub plans to pay 16 cents in dividends for 2017, as mentioned earlier.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.