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StarHub Ltd’s Latest Earnings: Profit Falls by 21%

Yesterday, StarHub Ltd (SGX: CC3) reported its second-quarter earnings. The reporting period was from 1 April 2017 to 30 June 2017.

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, namely mobile, pay TV, fixed network, broadband, and handset sales; the first four are collectively known as Service revenue.

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

Financial highlights

Here’s a quick take on the financials for the second-quarter:

1. Revenue was down 1% year on year, coming in at $579 million. Revenue growth was dragged down by weaker mobile, pay TV and broadband sales.

2. Services revenue was down 2% from a year ago, coming in at $542.6 million.

3. Net profit attributable to shareholders was down 21% year on year to $85.7 million.

4. StarHub’s diluted earnings per share (EPS) fell 19.4% from 6.2 cents in 2016’s second-quarter of 2015 to five cents in the reporting quarter.

5. Cashflow from operations was $130.9 million, and capital expenditure was $114.5 million. With that, StarHub had free cash flow of $16.4 million, down from the $137.1 million generated a year ago.  

6. As of 30 June 2017, the telecommunications outfit had $452.9 million in cash and equivalents while borrowings were at $987.5 million. This is a decrease compared a year ago when StarHub had $522.9 million in cash and equivalents and borrowings of $987.5 million.

StarHub’s service revenue fell as three of the four business segment lost ground.

The telecommunication outfit also lowered free cash flow and saw its balance sheet weaken. The board of directors proposed an interim dividend per share of four cents for the quarter, down from the five cents paid out a year ago.

The management team also reiterated its intention to maintain a quarterly dividend per share payout of four cents for 2017.   

Operational highlights

Mobile services’ revenue was down 0.9% year on year, ending at $302.7 million. StarHub lost 7,000 postpaid customers but gained 7,000 prepaid customers compared to the prior quarter. Churn rate (rate of customers leaving) for post-paid customers was 1.0%, up from the 0.9% churn recorded in the previous quarter.

Meanwhile, the pay TV segment’s sales were $87.9 million, a hefty 7.9% decline from a year ago. StarHub’s pay TV customer base shrank by 10,000 compared to 2017’s first-quarter. Pay TV churn rate was 0.9%.

Broadband services’ revenue fell 3% year on year to $52.8 million. The broadband customer base shrank by 3,000 quarter on quarter. Churn rate for broadband was 1.0%.   

Enterprise fixed services segment was the only services segment which saw sales rise. Revenue was up 0.7% year on year to $99.2 million.

Tan Tong Hai, StarHub’s Chief Executive Officer, added commentary on the current quarter’s results:

“In the quarter, we announced our acquisition of Accel to enhance our enterprise-grade cyber security offerings. This acquisition dovetails perfectly with our strategy to grow our enterprise business and demonstrates our push for inorganic growth.

In the consumer space, we are happy to see continual improvements in customer satisfaction levels as shown in CSISG 2017. We remain focused on addressing our customers’ digital lifestyle needs by offering them relevant products and services to enjoy a better StarHub experience.”      

Foolish summary

At its closing price of $2.70 yesterday, StarHub traded at 15.7 times trailing earnings and a dividend yield of 6.7%.

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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.