MultiChoice Group (MCG or the group) grew its user base by 5% during the period ended 30 September 2022 (1H FY23).
An ongoing focus on leveraging the group’s local capabilities added 1.0 million 90-day active subscribers to close the period on 22.1 million subscribers, with the subscriber base split between 13.0 million households (59%) in the Rest of Africa and 9.1m (41%) in South Africa.
The Rest of Africa maintained its growth trajectory on the back of successful local content productions. In South Africa, growth rates recovered during the second half of the reporting period despite evidence of rising consumer pressure.
The group’s earnings
Revenue increased 7% (2% organic) to ZAR28.6 billion, with the weaker South African Rand (ZAR) increasing the revenue contribution on translation of the Rest of Africa and Technology segments, which have a USD reporting currency.
Subscription revenues amounted to ZAR23.8 billion, up 8% year on year (YoY) (3% organic), driven mainly by the Rest of Africa that delivered a 27% increase (12% organic).
Advertising revenues were up a solid 5% (2% organic) as growth trends normalised in a post COVID-19 environment. Irdeto’s revenues were negatively affected by global supply constraints and declined 13%. This was more than offset by 19% growth in insurance premiums and higher ‘Other revenues’, which included increased revenues from sub-licencing content.
The group’s earnings and cash flows for the interim period were adversely impacted by an outsized investment in decoders ahead of the upcoming 2022 FIFA World Cup (FWC). This investment supports the anticipated subscriber growth opportunity around the FWC while at the same time mitigating the growing risk of supply chain disruptions from global silicon chip shortages.
SuperSport will be the only platform where customers across the group’s 50 markets can watch all 64 matches live and in a suitable time zone for African viewers. This working capital investment increased decoder subsidies and reduced group trading profit by ZAR0.7 billion and free cash flow by ZAR0.8 billion, primarily in the Rest of Africa.
The group’s trading profit and free cash flows
Overall, group trading profit increased 2% to ZAR6.1 billion (6% organic), benefiting from a further ZAR0.3 billion reduction in organic losses in Rest of Africa (or a ZAR1.0 billion improvement if the FWC decoder investment is excluded).
The decoder investment shaved 3pp (percentage points) off the group’s trading margin but is expected to unwind in the second half of the year. The group’s established cost optimisation programme delivered a further ZAR0.6 billion in cost savings and should exceed the full year target of R0.8 billion.
Operating leverage was positive (+1pp) on an organic basis and would have been +4pp better if normalised for the FWC investment. Core headline earnings, the board’s measure of sustainable business performance, increased 2% YoY to ZAR2.0 billion. This was mainly attributable to the reduction in losses in the Rest of Africa and positive foreign exchange movements.
Consolidated free cash flow of ZAR1.8 billion was down 44% compared to the prior period, adversely affected by the increased investment in working capital (decoders). Free cash flow also included ZAR0.3 billion (1H FY22: ZAR0.4 billion) in tax deposits in relation to the ongoing Nigerian tax audit.
The balance sheet remains strong
As one of the largest taxpayers in Africa, the group paid direct cash taxes of ZAR1.9 billion, marginally down from the prior period due to lower taxable profits reported in South Africa.
Net interest paid increased by ZAR108 million to ZAR310 million, driven by an additional ZAR82 million as a result of the group’s total debt rising to ZAR7.1 billion (FY22: ZAR4 billion).
The balance sheet remains strong with ZAR7.5 billion in net assets. This includes ZAR7.0 billion in cash and cash equivalents and when combined with ZAR1.3 billion in available facilities, provide ZAR8.3 billion in financial flexibility to fund the group’s operations.
This financial position is after ZAR4.0 billion was utilised to settle the MCG and Phuthuma Nathi (PN) dividends in September and incorporates the increased working capital
investment in 1H FY23 ahead of the FWC. Leverage remains low with a net debt: EBITDA ratio of 1.08:1 at the end of September.
CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
