StarHub has posted earnings of $36.1 million for the 4QFY2020 ended December, 3.5% higher than earnings of $34.9 million in the corresponding period the year before.
The growth was mainly due to higher other income of $13.4 million from the $1.9 million in 4QFY2019, which came from payouts from the job support scheme (JSS) and higher income grant.
That said, the higher earnings met or exceeded expectations against a guidance that was last updated in August 2020.
FY2020 earnings stood 15.2% lower at $157.9 million, from $186.3 million a year ago.
For the 4QFY2020, the group has recommended a proposed final dividend of 2.5 cents per share, bringing the total dividend to 5 cents per share for the FY2020.
In comparison, StarHub paid out a total of 9 cents per share in FY2019.
The total dividend for the year represents a payout of 80%, in line with StarHub’s dividend policy.
StarHub has also guided that it expects to “distribute the higher of 5 cents per ordinary share or as per the group’s… dividend policy” for FY2021 after taking the ongoing effects of Covid-19 into consideration.
Earnings per share (EPS) for the 4QFY2020 stood at 2.0 cents compared to 1.9 cents in the same period a year ago, while EPS for FY2020 came in at 8.6 cents, lower than FY2019’s 10.3 cents.
4QFY2020 total revenue fell 4.8% y-o-y to $579.5 million mainly due to lower contributions from StarHub’s Mobile, Pay TV and Sales of Equipment segments, and was offset by higher revenue from Broadband and Enterprise Business.
The group saw total revenue drop 13.0% y-o-y to $2.03 billion due to lower contributions from the same segments, and slightly mitigated by higher revenue from Enterprise Business.
Mobile service revenues in 4QFY2020 and FY2020 declined 27.4% and 24.3% respectively due to lower postpaid and prepaid revenues.
Pay TV service revenue fell 16.6% y-o-y in 4QFY2020 and 24.2% y-o-y in the FY2020 due to a lower subscriber base.
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Broadband service revenue was up by 11.3% y-o-y in 4QFY2020 due to higher average revenues per user (ARPUs). The segment fell slightly at 0.1% y-o-y for the FY2020 due to a one-time 20% rebate on Home Broadband monthly fee due to service disruption in April 2020. Excluding the rebate, the segment would have been 0.7% y-o-y up for the FY2020.
Enterprise Business revenue was 21.1% y-o-y higher and 12.2% y-o-y higher for the 4QFY2020 and FY2020 due to higher revenues from Cyber security services and the consolidation of Strateq under Regional ICT services following its acquisition on July 30, 2020.
Revenue from Sales of Equipment fell 2.8% y-o-y and 22.3% y-o-y for 4QFY2020 and FY2020 due to lesser handsets sold, and delays in the launch of new premium models.
For the 4QFY2020, profit from operations increased 19.9% y-o-y to $55.7 million, while profit from operations for FY2020 fell 9.6% y-o-y to $231.3 million.
As at Dec 31, 2020, cash and cash equivalents stood at $403.7 million, and free cash flow for Starhub stood at $387.7 million, a 77.3% y-o-y increase.
In its earnings call on 19 Feb, CEO Nikhil Eapen said this was due to "due to cost management, working Capital Management and tax deferrals," and the "strong free cash flow and funding position should position us to fulfill our obligations as well as drive transformation and growth for 2021."
Looking ahead, the telco says it is seeing “encouraging interest” in the Mobile business’s new Mobile+ 5G plans, and that it will continue to seek more partnerships to differentiate its 5G offerings through the integration of gaming and OTT content.
Based on current conditions and prevailing Covid-19 trends, StarHub says it expects FY2021 service revenue to remain stable y-o-y due to higher contributions from Cybersecurity and Regional ICT services.
Group Service EBITDA margin for FY2021 is expected to come in around 24% to 26%.
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“FY2020 was a challenging year with strong Covid-19 headwinds. We remained focused on our transformation to optimise and simplify our processes, evolve our cost and business models, complete the acquisition of Strateq and commence our IT transformation to empower our digital strategies,” says Eapen.
Starhub's CFO Dennis Chia elaborated that the company in October 2018 guided that the transformation to save $210 million over 3 years, and revealed that the company has executed about 82% as at the end of last year. "We expect to be able to execute all of the remaining initiatives by the end of this 3 year journey, and be able to identify the next phase of these cost transformation initiatives as we embark on more digital transformation initiatives." he said.
“While we see early signs of business demand picking up with Phase Three of the economic reopening, the macroeconomic environment remains uncertain. We plan towards a gradual recovery in 2021 and continue to focus on transforming StarHub into an agile business for a digital future. We will pursue growth through new opportunities such as 5G, and continue to create value for customers through innovation, unparalleled network quality and customer experience,” Eapen adds.
Eapen also said in the earnings call that the company is focused on neighbouring countries for its footprint and markets, but also noted "if there are specific capabilities that are important to our consumer enterprise roadmap that are outside of the region we'll look at it."
Shares in StarHub closed 1 cent lower or 0.8% down at $1.28 on Feb 19.
