M1 Q4 net profit falls 21.4% on higher costs

TELCO M1 - which is facing a general offer by Keppel Corp and The Business Times publisher Singapore Press Holdings - saw earnings slide in the fourth quarter on higher expenses, according to unaudited financial results released on Monday.

Net profit fell to S$25.2 million for the three months to Dec 31, 2018, down 21.4 per cent on the previous year, even as operating revenue edged higher by 3.7 per cent to S$312.8 million, supported by handset and equipment sales.

M1 attributed the damage to the bottom line to higher customer acquisition and retention costs, a rise in staff numbers as the corporate business expanded, and higher repair and maintenance expenses.

Handset and equipment sales, which made up about two-fifths of turnover, grew by 13.3 per cent year-on-year to S$125 million on higher sales volume and the consolidation of a newly acquired subsidiary. M1 completed its acquisition of information technology device and service provider AsiaPac Distribution - a deal that could cost up to S$20 million in cash - on Nov 20, 2018.

Still, service revenue was down 1.8 per cent to S$187.8 million, weighed down by the mobile telecommunications services segment. M1, which includes the figures of mobile virtual network operator partner Circles.Life, reported 1.96 million mobile customers at the end of the quarter, down 4.1 per cent on the year before, on a drop in pre-paid users.

Average revenues per user were down across the board for the quarter in the mobile services segment, for post-paid, pre-paid, data plan and fibre broadband customers.

Contributions from the fixed services business, on the other hand, rose 8.6 per cent to S$36.7 million on a bigger fibre broadband customer base and income from corporate projects.

Earnings per share was 2.7 Singapore cents, against 3.5 Singapore cents the year before, while net asset value rose to 56.3 Singapore cents a share, from 53.4 Singapore cents previously.

For the 12 months, M1's net profit fell by 6 per cent to S$130.7 million, while revenue rose by 4 per cent to S$1.09 billion.

The board has recommended a final dividend of six Singapore cents a share, down from 6.2 Singapore cents the year prior. This would bring the full year's payout to 11.2 Singapore cents a share.

While M1 noted that the performance was in line with its half-year prospect statement, it did not give a detailed outlook statement as the voluntary general offer is still under way.

Konnectivity, a joint venture between Keppel Corp and Singapore Press Holdings, launched a buy-out bid in September 2018 at S$2.06 a share, a price that values the telco at some S$1.91 billion. The offeror, which has stated that it will not raise the offer price, controlled M1 shares representing 34.41 per cent of the company as at Jan 21. It had received valid acceptances for shares amounting to a 1.12 per cent stake, including acceptances from concert parties, from the opening of the offer until then.

M1 closed flat at S$2.06 on Monday before the results were released.