StarHub Q2 profit down 5.6%, but telco upbeat on 5G

 

STARHUB is on the prowl for merger and acquisition (M& A) opportunities, its management suggested in an earnings call on Friday.

 

This is despite a cut to shareholders' H1 payout and a downgrade of FY2020 dividend guidance, which outgoing chief executive Peter Kaliaropoulos said takes into account " everything that' s happened to us in the last six months, and the outlook" .

 

Net profit for Q2 dropped 5.6 per cent to S$37.3 million.

 

Service revenue was down 15 per cent to S$376.2 million. Total revenue, including equipment sales, came in 18 per cent lower at S$453.4 million.

 

The board has recommended an interim dividend of 2.5 Singapore cents a share - down from 4.5 cents in the year-ago period.

 

StarHub expects to pay out at least the same amount in the second half, which would take the full-year payout to at least five cents a share. It paid nine cents last year, and 16 cents in FY2018.

 

Service revenue is now expected to fall 10 to 12 per cent, reversing earlier guidance for growth of 1 to 3 per cent.

 

Still, Mr Kaliaropoulos said: " We' re not planning to have any asset sales at this stage, it' s quite the opposite, as we' re trying to find growth and diversify our business."

 

Chief financial officer Dennis Chia added that with working capital improvements in the first half, the company now has more debt headroom " in case we identify additional growth opportunities down the road" .

 

StarHub also noted that it recently secured extra credit facilities and will not need refinancing until 2022.

 

Its net debt-to-Ebitda (earnings before interest, taxes, depreciation and amortisation) ratio has come down to 1.29 times, from 1.40 times as at end-March.

 

Paul Chew, head of research at Phillip Securities, told The Business Times in an e-mail that StarHub manages its balance sheet conservatively and " we do not expect any debt binge-driven acquisition strategy" .

 

He believes potential M& A would focus strategically on IT solutions, which could complement 5G enterprise offerings.

 

The enterprise business was the only one to post sales growth. This was partly on one-off revenue from the delivery of data transmission equipment, but also from the loss-making but fast-growing cybersecurity business.

 

Mobile revenue shrank 25.4 per cent as the pandemic hit international travel.

 

Separately, StarHub disclosed that it has made a provision for a potential fine.

 

Mr Kaliaropoulos expects to hear from the regulator in the next few weeks, as the Infocomm Media Development Authority probes broadband disruptions that hit home users during the circuit breaker in April.