Resilient growth amid challenges: MultiChoice Group’s FY24 performance

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Overview

The financial year to 31 March 2024 (FY24) saw the culmination of four years of strategic planning, with MultiChoice Group (MultiChoice or the group) now fully operational in its three core segments, namely video entertainment, interactive entertainment and fintech. Showmax, SuperSportBet and Moment all launched successfully during the year, showing strong initial user traction. 

On the back of inflationary pricing across our markets and in a year that included the premiere of Shaka Illembe and four World Cup events, the group was able to deliver positive organic revenue growth of 3% despite the severity of the macro and consumer headwinds impacting the business. The group also outperformed on cost optimisation once again, delivering ZAR1.9bn in cost savings against an initial target of ZAR0.8bn, and tactically reducing set-top box subsidies by ZAR1.5bn YoY.

As a result of management’s timely interventions, the group delivered FY24 segmental profitability in line with its guidance, with margins in South Africa in the mid-twenties range (>26%), Rest of Africa increasing trading profit to ZAR1.3bn (48% YoY growth), Showmax posting trading losses of ZAR2.6bn which came in below the ZAR3.0-4.0bn guided range and Irdeto delivering a trading margin of 23%.

Headline figures

The group’s 9% decline in active subscribers was mainly due to a 13% decline in the Rest of Africa business as mass-market customers in countries like Nigeria had to prioritise basic necessities over entertainment, while the South African business showed more resilience with a 5% decline. Showmax, which re-launched in February, is showing encouraging early traction – it delivered record single-month growth in March 2024, with the paying subscriber base growing 16% from the migrated base at relaunch to year-end. 

Despite a disciplined approach by the group towards inflation-led pricing, the combination of foreign exchange headwinds and a lower subscriber base resulted in a net decline in group revenues of 5% to ZAR56.0bn (+3% organic). 

Weaker subscriber trends and foreign exchange pressures flowed through to group trading profit which was down 21% to ZAR7.9bn (+24% organic). The commencement of the Showmax investment cycle reduced the group’s trading profit by ZAR1.4bn.

Adjusted core headline earnings, the board’s revised measure of the underlying performance of the business which now includes losses on cash remittances after tax and non-controlling interests, declined by 20% to ZAR1.3bn as higher realised hedging gains and a narrower gap between the official and parallel naira rates in FY24 relative to the prior year were more than offset by weaker trading profitability. 

Despite taking significant steps to control costs and protect cash flows, the increased cash flow investment in Showmax, notably through ZAR1.4bn in additional trading losses and ZAR1.7bn in platform technology advances, and the impact of weaker currencies on profitability resulted in the group’s free cash flow declining by 79% to ZAR589m. The group held ZAR7.3bn in cash and cash equivalents at 31 March 2024, and retained access to ZAR4.1bn in undrawn group borrowing facilities.

The group incurred a number of non-cash charges and accounting-related adjustments during the year which have left the group with a negative equity balance of ZAR1.1bn at year-end, but which have no impact on the liquidity of the group.

The group operates in numerous markets across Africa and internationally, resulting in significant exposure to foreign exchange volatility. This can have a notable impact on reported revenue and trading profit metrics, particularly in the Rest of Africa where revenues are earned in local currencies while the cost base is largely USD denominated. Where relevant in this results announcement, amounts and percentages have been adjusted for the effects of foreign currency, as well as acquisitions and disposals to better reflect underlying trends. These adjustments (non-International Financial Reporting Standards (IFRS) performance measures) are quoted in brackets as organic, after the equivalent metrics reported under IFRS. These non-IFRS performance measures constitute pro forma financial information in terms of the JSE Limited Listings Requirements.

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

Salient features

(1) Revenue disclosed above includes IFRS 17 insurance revenue of ZAR969m (FY23: ZAR717m).

Key performance indicators

Group financials

(1) Total group revenue and Rest of Africa revenue presented above includes losses of ZARnil (FY23: ZAR76m) related to fair-value movements on Nigeria futures contracts as the group discontinued the use of Nigerian futures contracts during FY23.

(1) Subscription fees presented above includes losses of ZARnil (FY23: ZAR76m) related to fair-value movements on Nigeria futures contracts as the group discontinued the use of Nigerian futures contracts during FY23.

Directorate

Mr A Zappia was appointed as an independent non-executive director with effect from 1 September 2023.

Ms D Klein was appointed as an independent non-executive director with effect from 1 September 2023.

Mr JJ Volkwyn stepped down as lead independent director with effect from 1 April 2024 but will remain on the board as an independent non-executive director.

Mr MI Patel stepped down as chair and non-executive director with effect from 23 April 2024. The board appointed Mr E Masilela as chair with effect from 23 April 2024. (Mr E Masilela filled the role of Deputy Chair and lead independent director from 1 April 2024 to 22 April 2024).

Dividend

In view of the group’s commitments under the Cooperation Agreement with Canal+, as published in the Combined Offer Circular on 4 June 2024, the question of a dividend declaration does not arise for FY24.

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