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StarHub nearly doubles Q4 net profit to S$34.9m on cost-cutting

MAINBOARD-LISTED telco StarHub saw its fourth-quarter earnings nearly double on the year before, as operating expenses were pared enough to cover the year-on-year slip in the top line, according to results released on Thursday.

Net profit surged from S$19.8 million to S$34.9 million for the three months to Dec 31, 2019, even as turnover dipped 1.8 per cent year-on-year to S$608.4 million. Service revenue, which excludes equipment sales, was down by 3 per cent to S$443.7 million.

Revenue continued to fall in the core mobile, pay television and broadband businesses, although chief executive Peter Kaliaropoulos said in a statement that "our consumer business has stabilised its quarter-on-quarter revenues for the first time following years of decline".

Mobile post-paid average revenue per user stood at S$40 at the end of the quarter, compared with S$39 in the previous quarter and S$43 in the same period the year before, while the number of subscribers rose to 1.45 million.

Still, overall mobile service revenues were down on issues such as lower excess data use and value-added service revenues, despite higher plan subscriptions, enterprise SMS revenues and reversal of loyalty reward accrual from a change in customer loyalty schemes.

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But StarHub got a lift of S$1.9 million in other income, up from S$500,000 in the year prior, which the telco attributed in its financial statements to "income grant received".

The company also said that it has achieved 64 per cent of the S$210 million in cost savings from its ongoing strategic transformation, which Mr Kaliaropoulos kicked off in late-2018 with a retrenchment exercise. Besides the "workforce optimisation", costs have also come down on the back of lower licence fees and lower impairment loss for voice equipment, among other factors.

Earnings per share rose to 1.9 Singapore cents from one cent before, while net asset value was 29.9 cents a share against an earlier 29.4 cents.

For the 12 months, StarHub's net profit fell by 7.5 per cent to S$186.3 million, on a 1.3 per cent drop in revenue to S$2.33 billion.

Operating profit was 6.4 per cent lower at S$255.9 million, although Mr Kaliaropoulos said that it would have improved to S$278 million sans losses from the growing cybersecurity business.

Full-year service revenue was down by 3.7 per cent to S$1.77 billion, even worse than the downgraded guidance from November 2019 for a decrease of 2 per cent to 3 per cent.

Still, even with the ongoing Covid-19 viral outbreak, which Mr Kaliaropoulos told an earnings call has affected aspects like retail activity and roaming, StarHub's FY2020 service revenue is expected to improve by between 1 per cent and 3 per cent as higher revenues from the cybersecurity services make up for lower mobile and pay-TV contributions.

The board has recommended an interim dividend of 2.25 Singapore cents per share, compared with four cents in the same period the year before.

This is under a trimmed dividend policy announced last year, when StarHub switched from fixed to variable payouts while pledging to distribute at least 80 per cent of net profit each year.

"Taking into consideration short- to mid-term cash flow requirements, as well as results reaped from the ongoing business transformation initiatives, the group intends to maintain a dividend of nine cents per ordinary share for FY2020," it has now affirmed in its financial statements.

The books closure and dividend payout dates have yet to be announced.

StarHub shares fell S$0.01 or 0.66 per cent to S$1.50 on Thursday before the results were announced.

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