MultiChoice shows the power of sport

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MultiChoice has released interim results for the six months ended September 2021.

The big news of course is that sport is back on TV. You can only watch so many Come Dine With Me reruns before craving a bit of Springbok or Protea action. Events like Euro and the Tokyo Olympics added to an action-packed period.

This is great news for advertising revenues (up 77% from last year) but also results in a sharp increase in expenses (17% higher). It costs money to bring sport to the comfort of your living room.

Advertising remains a small part of the overall revenue base. Out of total revenue of R26.8bn, only R1.9bn is advertising.

MultiChoice's subscriber base is now 12.2 million households in the Rest of Africa and 8.9 million in South Africa. Revenue only increased 3%, as a stronger rand reduced the benefit of revenue earned in other regions.

A cost optimisation programme delivered R0.5 billion in cost savings in this period. This was driven by renegotiated contracts for sports rights and general entertainment content. There's a major strategic shift to local content as well, which is a key differentiator for MultiChoice as it competes against streaming players like Netflix.

Core headline earnings unfortunately fell 26%, with the reduction attributed to foreign exchange losses on hedges. When operating in Africa and with the rand as the reporting currency, foreign exchange distortions are par for the course.

Investors generally concentrate on the underlying growth numbers and cash flows. With free cash flow of R3.2bn up 54% vs. the prior period, this has been a strong rebound from MultiChoice.