The Good And The Bad: What Investors Should Know About M1 Ltd’s Latest Second Quarter Earnings

M1 Ltd  (SGX: B2F)  is currently the smallest operational telco in Singapore’s telecommunications industry.

In mid July, M1 released its 2017 second quarter earnings. There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:

1. The overall numbers

Here are the income statements for M1 for the second quarters of 2017 and 2016:

Source: M1 2017 second quarter earnings announcement

During the quarter, operating revenue was up 4.7% year-on-year for M1. But, the telco’s expenses grew at a faster pace, resulting in a 20.8% decline in net profit compared to a year ago.

M1 has four segments, namely, Mobile services, International call services, Fixed services, and Handset Sales. The first two delivered lower revenue compared to a year ago, while the latter two saw revenue growth.

2. The negatives

Firstly, M1’s average revenue per user (ARPU) for the second quarter of 2017 declined across the board when compared to the same quarter a year ago. The largest percentage decline occurred in the prepaid monthly ARPU, which fell by 14.6%.

Secondly, overall expenses grew faster than revenue, as already mentioned. This resulted in a decline in M1’s EBITDA margin from 40.3% a year ago to 37.5%. Higher handset costs and higher fixed services costs drove the increase in M1’s expenses.

Thirdly, M1’s balance sheet weakened significantly from a year ago with its net debt position up 29% from S$326.8 million to S$420.5 million.

Lastly, the company’s interim dividend per share was cut by 25.7% from 7 cents in the second quarter of 2016 to 5.2 cents.

3. The positives

Firstly, M1’s customer numbers were up for both its prepaid and postpaid mobile services. The postpaid customer base grew 45,000 from the second quarter of 2016 to 1.267 million, while the prepaid customer base increased by 19,000 to 777,000. As a result, M1’s mobile market share inched up from 23.7% a year ago to 24.2%.

Secondly, the Fixed services customer base (which is essentially M1’s fibre customers) continued to grow, up by 21.3% year-on-year, and up 4.8% sequentially. M1 ended the second quarter of 2017 with 176,000 fibre customers.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.