Multichoice interim results – strategic gains despite challenges

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Despite unprecedented external headwinds, MultiChoice achieved positive operational outcomes. Most notably, currency depreciation reduced trading profit by ZAR7 billion. This impact was felt over the last 18 months. However, through active interventions, MultiChoice navigated these challenges effectively. These efforts spanned the six months ending 30 September 2024 (1H FY25):

  • A lower subscriber attrition rate in the linear pay-TV subscriber base versus the six-month period ended 31 March 2024 (2H FY24) in both South Africa and Rest of Africa.
  • Showmax paying subscriber base increased 50% YoY, excluding discontinued services.
  • SA trading profit margin was maintained in the low 30s in the seasonally stronger first half (31%).
  • Cost optimisation efforts delivered ZAR1.3 billion in savings, with full year stretch target increased to ZAR2.5 billion from the ZAR2.0 billion set at the beginning of the financial year.
  • In addition to the group’s cost savings programme, decoder subsidies were reduced by a further ZAR0.4 billion across South Africa and Rest of Africa.
  • Free cash flow and adjusted core headline earnings both positive despite external macro and currency headwinds, as well as the Showmax investment cycle.
  • Positive momentum maintained in DStv Stream and Extra Stream, DStv Internet, DStv Insurance, and the group’s sports betting and fintech investee businesses.
  • Liquidity position remains strong with ZAR10.1 billion in total available funds.
  • Transformative insurance deal with Sanlam Life Insurance Limited (Sanlam) nearing completion in the post balance sheet period – the group will recognise an accounting gain in the range of ZAR2.6 billion to ZAR3.3 billion.
  • Meaningful progress made on the Canal+ transaction with the merger control filing submitted to the South African Competition Commission on 30 September 2024, and engagements with other regulatory authorities underway.
  • Taking all developments and initiatives into account, the group anticipates resolving the negative equity position by the end of November this year.

Headline results

Subscribers

The group’s linear subscriber base declined by 11%, or 1.8 million subscribers YoY, to 14.9 million by 30 September 2024. This decline highlights the extremely hostile operating environment experienced over the past 12 months. However, subscriber trends improved sequentially, reflecting resilience despite challenges.

In 1H FY25, the base declined 5% (0.8 million) compared to a 6% decline (1.0 million) in 2H FY24. Notably, subscriber losses were skewed towards the Rest of Africa, which saw a 15% YoY decline. In contrast, South Africa experienced a 5% YoY decline in its subscriber base. The Rest of Africa losses were driven by severe consumer pressure, especially in Nigeria, where inflation exceeded 30% over 12 months.

Additionally, extreme power disruptions in Zambia contributed to the losses in the region. Meanwhile, Showmax demonstrated robust performance, with a 30% YoY increase in paying subscribers. Excluding discontinued services such as Showmax Pro and the Showmax diaspora offerings, this growth reached an impressive 50% YoY.

Revenue

Group revenues decreased by 10% on a reported basis, mainly due to subscriber weakness and foreign exchange (FX) rate pressures. The Rest of Africa business was significantly impacted by these FX rate challenges. Additionally, the translation effects of a stronger rand against the US dollar contributed to the decline. However, revenues increased by 4% on an organic basis, excluding FX and M&A impacts. This growth was driven by the group’s inflationary pricing discipline across markets. Revenue growth from new products, such as insurance and internet, further supported the positive organic performance. Irdeto’s external business also contributed meaningfully to the organic revenue increase.

Trading profit

Group trading profit declined by 46%, mainly due to FX headwinds in the Rest of Africa business amounting to ZAR2.3 billion. Incremental investment in Showmax, totaling ZAR1.6 billion, further impacted trading profit during the reporting period. However, cost optimisation efforts across the group limited trading profit decline to just 1% on an organic basis. Importantly, excluding the impact of Showmax, the group’s reported trading profit would have increased by 28% on an organic basis.

Adjusted core headline earnings, the board’s measure of business performance, dropped significantly from ZAR1.5 billion to ZAR7 million. This decline was driven by foreign exchange losses in the Rest of Africa and investments in Showmax. These factors had a negative impact on trading profit during the current reporting period. Additionally, the group experienced realised foreign exchange losses in South Africa, unlike the profits recorded in the prior year. These losses offset the benefit of lower cash extraction losses from Nigeria on a year-on-year basis.

Additional

Group free cash flows remained positive, totalling ZAR0.6 billion, despite challenging conditions during the reporting period. The South Africa and Irdeto businesses contributed ZAR3.3 billion in free cash flows. However, this was largely offset by a ZAR1.8 billion free cash outflow invested into Showmax. Additionally, a ZAR0.9 billion free cash outflow in Rest of Africa impacted overall performance due to currency-related challenges.

Pressure on the group’s trading performance, combined with non-cash foreign exchange losses, impacted its financial results significantly. The translation of non-quasi, inter-group loans resulted in losses totaling ZAR2.1 billion during the reporting period. Consequently, the group ended the period with a negative equity position of ZAR2.7 billion. However, the non-cash nature of these adjustments does not affect the group’s liquidity or going concern status. Importantly, several developments and initiatives are underway to resolve the negative equity position. These measures are expected to be completed by the end of November this year.

The group operates in numerous markets across Africa and internationally, exposing it significantly to foreign exchange volatility. This exposure can notably impact reported revenue and trading profit metrics across different regions. In the Rest of Africa, revenues are earned in local currencies, but costs are primarily USD-denominated. To reflect sustainable operational performance, amounts and percentages have been adjusted for foreign currency effects. Additionally, these adjustments exclude acquisitions and disposals to present clearer underlying trends. Such adjustments are referred to as “organic” when mentioned in this announcement. These non-IFRS performance measures constitute pro forma financial information under JSE Limited Listings Requirements.

The company’s external auditor has not reviewed or reported on forecasts included in this announcement.

Directorate

As noted in the group’s FY24 results, Imtiaz Patel, the outgoing non-executive chair, was scheduled to step down. However, his tenure was briefly extended on 2 April 2024 to support the Canal+ transaction process. After sufficient progress was made, including MCG and Canal+ entering a Cooperation Agreement, he stepped down on 23 April 2024. Mr. Patel was succeeded by Elias Masilela, an independent non-executive board member.

Another long-serving board member, Jim Volkwyn, chose not to stand for re-election at the AGM on 28 August 2024. Mr. Volkwyn had served MultiChoice with distinction in various roles for over 33 years. The board and executive management teams extend their gratitude to both Mr. Patel and Mr. Volkwyn for their invaluable contributions.

Dividend

No dividend has been declared based on the group’s interim results, in line with the terms of the Cooperation Agreement applicable during the Canal+ mandatory offer period.

Preparation of this announcement

The preparation of this announcement was supervised by the group’s chief financial officer, Tim Jacobs CA(SA). These results were made public on 12 November 2024.

ADR programme

Bank of New York Mellon maintains a Global BuyDIRECTSM plan for MultiChoice Group Limited.

For additional information, visit Bank of New York Mellon’s website at www.globalbuydirect.com or call Shareholder Relations at 1-888-BNY-ADRS or 1-800-345- 1612 or write to: Bank of New York Mellon, Shareholder Relations Department – Global BuyDIRECT, 462 South 4th Street, Suite 1600, Louisville, KY 40202, United States of America, (PO Box 505000, Louisville, KY 40233-5000).


Annual results announcement

Multichoice interim results


 



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