It has been more than two months since StarHub Ltd (SGX: CC3) announced its Investor Day objectives.
The telco has ambitious plans to create an all-in-one app and execute an enterprise IT transformation.
Just last week, StarHub released its 2023 results that demonstrated the culmination of its DARE+ initiatives.
The telco delivered an outperformance versus its 2023 guidance across all metrics and also upped its dividend from last year’s payout.
Here are five highlights from the group’s latest earnings report.
1. A stellar set of earnings
StarHub’s revenue inched up 2% year on year to S$2.4 billion for 2023.
Of this total, service revenue rose 5% year on year to S$1.9 billion, with growth achieved across all segments.
With operating expenses dipping by 1.5% year on year, the telco’s operating profit climbed 46.3% year on year to S$226.3 million.
Finance income more than doubled year on year to S$17.1 million while finance costs fell by 9.4% year on year to S$40.9 million.
StarHub’s net profit for 2023 soared 140.4% year on year to S$149.6 million.
Excluding one-off items, StarHub’s net profit would still have risen by 76.5% year on year to cap off an impressive performance for the year.
Free cash flow, however, tumbled by 16.4% year on year to S$185.9 million.
2. Low churn and higher ARPU for Mobile
Digging into each of StarHub’s divisions, the Mobile division saw its revenue improve by 7.9% year on year to S$609 million.
The increase was driven by higher postpaid revenue.
The postpaid average revenue per user (ARPU) increased slightly to S$33 for the fourth quarter of 2023 (4Q 2023) from S$32 in 4Q 2022 because of higher roaming, value-added services, and voice subscription revenues.
StarHub’s postpaid subscriber base also grew 0.7% year on year for 2023 to 1.58 million.
Prepaid ARPU, however, slipped to S$7 in 4Q 2023 from S$8 a year earlier with subscribers falling from 591,000 to 585,000 over the same period.
Despite this, the average monthly churn rate remained low at just 0.9%, a slight improvement from the previous quarter’s 1%.
3. A mixed performance for Broadband and Entertainment divisions
Moving on to the Broadband division, revenue inched up 2.6% year on year to S$248.7 million for 2023.
The division’s subscriber base grew slightly from 578,000 in 2022 to 580,000 because of the consolidation of MyRepublic broadband subscribers.
ARPU remained stable at S$34.
StarHub’s Entertainment division saw revenue rise 5.4% year on year to S$228 million.
ARPU improved from S$45 to S$46, lifted by the screening of the English Premier League.
However, subscriber numbers continued to fall, dropping from 374,000 in 4Q 2022 to 337,000 in 4Q 2023.
The average monthly churn rate increased slightly to 1.1%, up from 0.9% a year ago.
4. Cybersecurity takes centre stage for Enterprise division
StarHub’s Enterprise division reported a decent performance with revenue edging up 4.7% year on year to S$905.9 million.
The Network Solutions sub-division saw a small 2.1% year on year increase in revenue to S$373.3 million with an 18.1% year-on-year jump in revenue for Managed Services offset by lower revenue in data and internet, along with Voice Services.
The highlight for the division was the Cybersecurity Services sub-division which saw revenue rise 16.3% year on year due to higher project recognition.
Operating profit for this sub-division fell year-on-year, though, because of higher investments in staff costs leading to higher operating expenses.
For the Regional ICT Services sub-division, revenue declined by 8.2% year on year to S$185.2 million because of lower hardware sales and a pivot to focus on higher-margin contracts.
5. A positive outlook with a sharp jump in dividends
Reflecting the improvements caused by the telco’s DARE+ initiatives, StarHub offered a positive outlook for this year.
Service revenue is projected to increase by 1% to 3% year on year with higher contributions from regional ICT services and Cybersecurity services.
Legacy capital expenditure will also be replaced with operating expenses that will improve net margin and increase net profits as a percentage of EBITDA (earnings before interest, taxes, depreciation, and amortisation).
StarHub upped its final dividend to S$0.042 from S$0.025 a year ago, exceeding its dividend guide range of “at least S$0.05”.
The group’s payout ratio stood at 80% and it also has a share buyback programme to repurchase up to 3% of its outstanding issued share capital.
For 2024, StarHub is guiding to pay out a dividend of “at least S$0.06” or at least 80% of its net profit excluding one-off items.
For 2023, the total dividend came up to S$0.067, 34% higher than the S$0.05 paid out in 2022.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
