StarHub (SGX: CC3) is on the cusp of a major transformation.
Just two months ago, the telco unveiled its ambitious growth plans during its Investor Day.
In a continuation of its DARE transformation programme launched in late-2018, the group has now boldly announced a new DARE+ initiative to cut costs, optimise productivity, and advance its 5G vision.
Last week, StarHub announced its fiscal full-year 2021 (FY2021) earnings and demonstrated that some of its strategies had borne fruit.
Here are five highlights from the telco’s results that investors should note.
1. Higher underlying core net profit
For FY2021, StarHub’s total revenue inched up by 0.7% year on year to S$2.04 billion, while service revenue (i.e. excluding the sale of equipment) crept up 1.4% year on year to S$1.61 billion.
It was a mixed picture for the telco’s four divisions.
Revenue for the full year rose by 10.4% and 9.4% year on year, respectively, for its Broadband and Enterprise Business.
However, its Mobile and Entertainment divisions saw top-line fall by 8.5% and 4.2%, year on year, respectively.
Net profit fell by 5.5% year on year to S$149.3 million, but this included the effects of the Jobs Support Scheme (JSS) extended by the government as financial support during the pandemic.
Stripping out this JSS impact, underlying core net profit jumped by 17% year on year to S$148.3 million.
Free cash flow also climbed by 25% year on year from S$387.7 million to S$484.6 million.
2. Outperforming its original guidance
The telco’s performance came ahead of its guidance for FY2021.
It had projected stable service revenue but ended up seeing a slight uptick of 1.4%.
Back in November last year, it projected an EBITDA (earnings before interest, tax, depreciation and amortisation) margin of at least 26%.
FY2021’s EBITDA margin came in at 29.8%, exceeding its expectations.
Finally, it had communicated a capital expenditure (capex) commitment of between 7% to 9% of total revenue but ended up spending just 3.7% of total revenue
3. An improvement in ARPU
Drilling down into the operating numbers, StarHub enjoyed a gradual improvement in its average revenue per user (ARPU).
Broadband ARPU increased to S$33 in the fourth quarter of 2021 (4Q2021), up 10% year on year due to a reduction in subscription discounts and higher take-up rate for StarHub’s two GBps-tier plans.
For the Entertainment division, ARPU also jumped by 10% year on year to S$44 on higher prices for the group’s bundled plans.
However, subscriber numbers saw a decline for both divisions.
Broadband subscribers fell from 498,000 a year ago to 484,000 while Pay-TV subscribers continued their decline, falling by 11.1% year on year to 279,000.
The Mobile division was a bright spot, though, with ARPU remaining stable year on year at S$30 while postpaid subscribers rose from 1.41 million to 1.48 million.
4. Guiding for higher service revenue
The group expects to chalk up higher levels of service revenue for FY2022 and FY2023, driven by its two acquisitions of MyRepublic Broadband as well as JOS Singapore and Malaysia.
CEO Nikhil Eapen believes that these two acquisitions can help StarHub to improve its market position in key segments while extending its Infinity Play to a larger pool of customers.
StarHub is gearing to launch a “super-app” that will provide customers access to all of its Infinity Play products.
For FY2022, service revenue is projected to increase by at least 10% with another 5% to 10% increase in FY2023, driven by initial contributions from its new DARE+ initiatives.
5. A jump in its final dividend
StarHub’s new dividend policy is to distribute at least 80% of its net profit after adjusting for non-recurring, one-off items.
The final payout will be the higher of S$0.05 per year or the above.
For FY2021, StarHub declared a final dividend of S$0.039, bringing the FY2021 dividend to S$0.064 per share.
The final dividend was a sharp 56% surge from the prior year’s final dividend of S$0.025 and should bring a big smile to income-seeking investors.
Get Smart: Turnarounds take time
StarHub reported better numbers for some of its divisions, while others saw a weaker year on year performance.
However, the group’s DARE+ strategy promises better days for investors, even as it gears up for new growth engines in the digital space.
Turnarounds, however, take time to happen and investors need the patience to see these changes through.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
