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StarHub reports 14.2% lower 1Q earnings of $54 mil due to higher expenses

Michelle Zhu
Michelle Zhu • 3 min read
StarHub reports 14.2% lower 1Q earnings of $54 mil due to higher expenses
SINGAPORE (May 3): StarHub reported earnings of $54 million for the 1Q ended March, 14.2% lower compared to a year ago due to higher operating expenses. 
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SINGAPORE (May 3): StarHub reported earnings of $54 million for the 1Q ended March, 14.2% lower compared to a year ago due to higher operating expenses.

Revenue grew 6% to $597 million from a year ago driven by strong segmental revenue contributions from network solutions (+9%) and cyber security services (+41%), which mitigated 5% and 12% lower service revenues from the mobile and Pay TV businesses, respectively.

In terms of StarHub’s various segment performance, Enterprise Business revenue grew 14.1% to $134.1 million due to growth in managed services, domestic and international voice revenue, and cyber security services.

Mobile revenue however fell 5.3% to $92.3 million due to lower contributions from IDD, voice and excess data usage, data subscription and added services despite a 5.4% y-o-y increase in post-paid mobile customers to 1.44 million.

Pay TV revenue fell 12.4% to $70.7 million with 55,000 customers exiting long-term Pay TV contracts for alternative sources of content and entertainment.

Total Pay TV customers for 1Q was 394,000 with an average revenue per user (ARPU) of $48.

Broadband service revenue remained flat at $47.1 million despite the addition of 27,000 customers on a y-o-y basis, as 1Q19 ARPU for this segment fell by $2 to $31.

Revenue from sales of equipment, such as mobile handsets and smart home equipment, grew 33.2% to $152.5 million over the quarter.

Group operating expenses rose 45.1% to $524.7 million from $479.6 million a year ago due to higher cost of sales and cybersecurity services, which grew 32.7% and 24.2% to $269.1 million and $37.8 million, respectively.

This was offset in part by 11.8% lower other operating expenses of $217.9 million compared to $229.7 million a year ago.

As a percentage of revenue, total operating expenses formed 87.9%, which is higher than the 85.2% in the corresponding period last year.

In all, profit from operations fell 11.6% to $72.1 million from $83.8 million in 1Q18 due to losses from cyber security services, excluding which profit from operations would have grown $4.9 million higher y-o-y to $83.5 million due to growth in contributions from the Enterprise Business and lower staff costs.

Service EBITDA margin for the quarter grew 2 percentage points to 33.7% due to the impact from SFRS(I) 16 Leases. Excluding the impact of this accounting standard, service EBITDA margin would have fallen 1.7 percentage points to 30% from 31.7% a year ago.

Looking ahead, StarHub says it expects 2019 service revenue to decline 2% on-year, with group service EBITDA margin to range between 30-32% after SFRS (I) 16 adoption.

The group intends to pay out at least 80% of net profit attributable to shareholders as dividend, and a dividend of at least 9 cents per ordinary share, at the rate of 2.25 cents per quarter, for FY19.

In the group’s aftermarket filing on Friday, CEO Peter Kaliaropoulos says StarHub is currently in the midst of revitalising its brand image by simplifying mobile and TV offers, providing clarity with all fees, introducing no hidden charges, and enhancing its consumers’ ability to transact with StarHub on MyStarHub app and online.

“Whilst we are pursuing our fair market share, we are also addressing our operating cost structure for our core mobile and data connectivity businesses… Excluding the impact of cyber security services, NPAT would be $61 million for Q1,” he adds.

Shares in StarHub closed 2 cents higher at $1.58 on Friday.

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