StarHub H2 net profit falls 98% on higher operating expenses, one-off impairment losses

STARHUB posted a 98.4 per cent fall in net profit to S$1.3 million for the second half of the year ended Dec 31, 2022, from S$81.4 million a year earlier.

This was despite a rise in revenue of 18.7 per cent to S$1.3 billion, from S$1.1 billion the year before.

At its earnings briefing on Tuesday (Feb 7), the telco said this came on the back of lower profit from operations, including provisions for the company’s Dare+ transformation initiatives. Dare+ is a five-year transformation plan that includes the establishment of StarHub’s 5G network and other IT expenditures.

StarHub chief financial officer Dennis Chia said that the company had anticipated incurring additional utilities costs due to higher electricity prices. In addition, he noted that the company has been building staff capabilities, which contributed to higher operational expenses.

The company also recognised higher non-operating expenses of S$60.1 million from impairment losses on certain legacy network assets and the discontinuation of one of Strateq’s business lines in the US.

Excluding the Dare+ provisions, non-operating items and its corresponding tax effects, StarHub said net profit after tax would have fallen by 34.6 per cent to S$53.2 million in the second half of the year.

For the full year, the company’s net profits declined 58.3 per cent to S$62.2 million, while revenue rose 13.9 per cent to S$2.3 billion. Basic earnings per share stood at S$0.031, down from S$0.082 in FY21.

Still, StarHub noted that its service earnings before interest, tax, depreciation and amortisation (Ebitda) margin stood at 20.1 per cent, which narrowly beat the company’s guidance of at least 20 per cent. This is also down from 29.8 per cent a year earlier.

“This level of decrease is actually lower than what we had anticipated … and this is on the back of ongoing cost optimisation initiatives that we take on an ongoing basis,” Chia said.

Service revenue for the full year rose 17.2 per cent, beating the company’s guidance of between 12 and 15 per cent.

The company has declared a final dividend of S$0.025 per share for the second half of the year, lower than the S$0.039 it declared in the same period a year ago. This brings the company’s full-year dividend to S$0.05.

Within the revenue segments, the company’s strongest growth was in its broadband segment, where full-year revenue grew by 25.1 per cent to S$242.4 million.

The company attributed the higher revenue to consolidation of MyRepublic Broadband and higher subscription revenue achieved. Average revenue per user also rose to S$34 in the fourth quarter of 2022, from S$33 a year earlier.

The enterprise segment also achieved significant growth, with revenue rising by 22.6 per cent year on year to S$865.5 million on consolidation of revenue from MyRepublic Broadband as well as JOS SG and JOS MY, the company’s infocomm communications technology arms.

As for the company’s Dare+ transformation, chief executive Nikhil Eapen said that the company’s targets of S$220 million in expected gross profit growth and S$280 million in expected savings between FY22 and FY26 remain unchanged despite additional costs relating to the Premier League rights that the company secured.

Eapen added that the company expects to increase its investments to S$310 million from the original S$270 million estimate as it invests in its Cloud Infinity network transformation.

“We are absorbing those increased costs associated with the Premier League with the growth outcomes that we are going to be deriving,” he said.

On Jan 17, StarHub announced its Cloud Infinity initiative, which aims to reduce the cost of operating the network business through the use of cloud services.

Eapen added that the company will continue to pay either 80 per cent of the company’s net profit after tax or S$0.05 per share in dividends in FY23, whichever is higher.

Shares of StarHub closed flat on Tuesday at S$1.11, before the results were released.