StarHub Limited (SGX: CC3) joins the list of companies that announced robust results.
The telco released an encouraging set of financial numbers for its fiscal 2023’s first half (1H 2023).
Let us dig deeper into the telco’s earnings report to tease out five interesting highlights.
1. An improved set of results
StarHub saw total revenue for 1H 2023 rise by 4.5% year on year to S$1.1 billion, with all four core divisions posting year-on-year revenue growth.
Operating profit climbed 11.9% year on year to S$107 million.
Net profit jumped 25.8% year on year to S$76.7 million, aided by a 163% year on year surge in finance income to S$7.4 million.
Operating cash flow, however, fell by 23.1% year on year from S$128 million to S$98.4 million for the half year.
A rise in capital expenditure meant that StarHub generated zero free cash flow for the period compared to a positive free cash flow of S$61.2 million in the prior year.
Despite the weaker free cash flow result, management believes that this metric should turn positive in 2H 2023 because of improvements in working capital.
An interim dividend of S$0.025 was declared, unchanged from the previous year.
2. Higher mobile subscriber base with lower churn
The telco’s mobile division saw a better performance with revenue rising by 12.8% year on year to S$302.7 million.
Postpaid average revenue per user (ARPU) saw a 10.3% year on year increase to S$32 with higher roaming and voice subscription usage.
However, prepaid ARPU fell slightly from S$8 to S$7 due to an increase in promotions.
The good news is StarHub saw its subscriber base for both its postpaid and prepaid customers rise, climbing by 3.9% and 11%, respectively, to 1.58 million and 594,000.
Data usage continued its upward climb, surging by nearly 25% year on year to 16.8 GB.
The mobile division’s market share, however, fell from 23% a year ago to 22.3% as of 30 June 2023.
3. Consolidating MyRepublic’s broadband subscribers
StarHub’s broadband division also enjoyed better results as the telco consolidated its acquisition of MyRepublic.
Revenue improved by 7.6% year on year to S$124.6 million with the division’s subscriber base increasing from 572,000 to 577,000 in 1H 2023.
ARPU, however, stayed flat year on year at S$34 while the average monthly churn rate remained stable at 0.6%.
4. Higher ARPU for the Entertainment division
For the entertainment division, revenue jumped by 18.2% year on year to S$113.9 million, driven by a 15.4% year on year increase in ARPU to S$45.
The uplift in ARPU was attributable to the screening of the English Premier League.
However, the division experienced a 4.3% year-on-year fall in subscriber numbers with a reduction in certain promotions while the churn rate also increased from 0.8% in the second quarter of 2022 (2Q 2022) to 1% in 2Q 2023.
5. Revised guidance for 2023
StarHub has revised its 2023 guidance as it now expects its service revenue to increase by 3% to 5% year on year instead of the previous 8% to 10%.
The reasons for the decline are because of a delay in project recognition for both its cybersecurity and regional ICT services divisions.
On the flip side, the telco’s service EBITDA (earnings before interest, taxes, depreciation and amortisation) margin is projected to be approximately 22%, better than the 20% forecast previously.
The higher guidance for service EBITDA margin is attributed to operating efficiencies from the telco’s DARE+ initiatives that resulted in lower staff costs and professional fees.
Get Smart: Delivering on its DARE+ initiatives
StarHub is advancing on its DARE+ transformation with around S$120 million expected to be spent in 2023 relating to IT transformation and cloud infinity.
Management has acknowledged the slight delay in the implementation of certain initiatives but remains confident of achieving the S$500 million EBITDA level in 2024.
Investors will need the patience to see these measures through and review whether the telco can indeed enjoy the cost savings it touts.
If these cost savings come through, investors could eventually enjoy higher dividends than the minimum of S$0.05 a year that management has committed to paying.
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Disclosure: Royston Yang does not own shares of any companies mentioned.