StarHub Q1 net profit plunges 25.7% to S$40.2m; management pulls FY2020 earnings guidance

STARHUB is withdrawing its financial guidance for this year, the mainboard-listed telco said after just three months, in an interim business update on Wednesday.

While StarHub cut payouts in 2019 as it switched from a fixed to a variable dividend policy, chief executive Peter Kaliaropoulos has now also told an earnings call that the move also scraps its earlier plan to keep this year's annual dividend at S$0.09 a share.

That is even as its first-quarter net profit fell by 25.7 per cent year on year to S$40.2 million for the period ended March 31; revenue dropped by 15.2 per cent to S$506.2 million.

StarHub had earlier expected service revenue to improve by between 1 per cent and 3 per cent this year, despite the novel coronavirus's toll on retail activity, roaming and international calls.

But the management has now pulled this guidance, which it said it would update "once there is greater visibility on the aggregate nature of the impact" of the mystery killer virus.

StarHub plans to offer more information in the second half of the year, as it expects more clarity on the impact of government measures and on Singapore's economic climate.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

"Our customer base is there, some revenues are stabilising, our margins are there, we have liquidity in place," Mr Kaliaropoulos told analysts.

But, citing "a lot of uncertainties in the marketplace", he added: "We don't like to offer guidance or to make statements that we can't deliver... We think it's better to be more conservative and more cautious right now."

The group warned that the pandemic will likely have a material impact on its revenue and profitability, and expects revenue to fall "in most lines of business, to varying degrees".

Still, it stressed that it "remains fully committed to and has the resources to continue with its strategic initiatives", such as its winning 5G joint bid in Singapore, the S$82 million purchase of a stake in Malaysian business solutions firm Strateq, and its build-up of the enterprise business.

StarHub also told shareholders that it will not need any refinancing until 2022, after it negotiated the refinancing of bank loans that had been due for repayment. It also has enough credit facilities to meet working capital and funding needs and to keep operating cash flow positive this year.

The quarter's results "reflect the impact of Covid-19 and the early softening of the economic environment", Mr Kaliaropoulos said in a statement. "Our enterprise business has also experienced some project and tender delays, coupled with longer sales cycles."

He noted that cyber security has "reported a modest profit this quarter" amid business growth - the first time it has been in the black since pure-play joint venture Ensign InfoSecurity was set up with Temasek Holdings - but added on the call that "there's no confidence that that number will be delivered every month; in fact, it will be fluctuating".

While plans had been made to increase hiring, open overseas offices and invest in research and development, "it's fair to say that some of those initiatives are being reviewed and temporarily being reprioritised" he said.

Shorn of equipment sales, service revenue came in at S$404.9 million, down by 8.9 per cent on the year prior. The enterprise segment, buoyed by cyber security services, was the only division to post turnover gains. Mobile, pay-television and broadband all reported declines.

The Covid-19 crisis, which began in China late last year, has also already taken a toll on mobile revenues as it ate into tourist pre-paid income, as well as post-paid roaming charges.

The average revenue per user (ARPU) on post-paid mobile fell to S$34 a month from S$39 in the year before, although the number of subscribers grew by 28,000 to nearly 1.47 million. Meanwhile, home broadband ARPU was S$27, compared with S$31 before, even as the number of subscribers grew to 502,000, from 495,000 before.

StarHub had earlier announced that its annual general meeting will be held electronically on May 22, followed by an extraordinary general meeting to renew its share purchase and interested-person transaction mandates.

The counter closed up by S$0.03, or 2.06 per cent, at S$1.49, on a cum-dividend basis before the announcement of the results.