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Results highlights
Despite unprecedented external headwinds, most notably currency depreciation, which has reduced trading profit by close to ZAR7bn over the last 18 months, MultiChoice delivered various positive operational outcomes through active interventions for the six-month period ended 30 September 2024 (1H FY25 or the half):
There was a lower subscriber attrition rate in the linear pay-TV subscriber base compared to the six-month period ended 31 March 2024 (2H FY24) in both South Africa and the Rest of Africa.
Showmax’s 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 ZAR1.3bn in savings, with the full-year stretch target increased to ZAR2.5bn from the ZAR2.0bn set at the beginning of the financial year.
In addition to the group’s cost savings programme, decoder subsidies were reduced by ZAR0.4bn across South Africa and the Rest of Africa.
Free cash flow and adjusted core headline earnings were both positive despite external macro and currency headwinds and the Showmax investment cycle.
Positive momentum was maintained in DStv Stream and Extra Stream, DStv Internet, DStv Insurance, and the group’s sports betting and fintech investee businesses.
The liquidity remains strong, with ZAR10.1bn as the total available funds.
A transformative insurance deal with Sanlam Life Insurance Limited (Sanlam) is nearing completion in the post-balance sheet period. The group will recognise an accounting gain in the range of ZAR2.6bn to ZAR3.3bn.
Meaningful progress was 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.
Considering all developments and initiatives, the group anticipates resolving the negative equity position by the end of November this year.
Headline results
The group’s linear subscriber base declined by 11% or 1.8m subscribers YoY to 14.9m active subscribers on 30 September 2024. While this is indicative of the extremely hostile operating environment that the group has encountered over the past 12 months, subscriber trends on a sequential basis have improved, with
1H FY25 reflects a 5% decline in the base (0.8m) vs. the 6% decline reported (1.0m) in 2H FY24. The loss in subscribers was skewed towards the Rest of Africa, which lost 15% of its base YoY vs. 5% in South Africa. The loss in the Rest of Africa has been primarily due to the significant consumer pressure in Nigeria, where inflation has remained above 30% for most of the last 12 months and, more recently, due to extreme power disruptions in Zambia. The group’s subscription video-on-demand business, Showmax, delivered a strong 30% YoY increase in paying subscribers, or 50% YoY excluding discontinued services (namely the Showmax Pro and the Showmax diaspora offerings).
Group revenues were down 10% on a reported basis due to subscriber weakness, the foreign exchange (FX) rate pressures impacting the Rest of Africa business and the translation effects of a stronger rand against the US dollar. However, revenues were up 4% on an organic basis (i.e. excluding FX and M&A) due to the group’s inflationary pricing discipline, revenue growth of new products (notably insurance and internet) and Irdeto’s external business.
Group trading profit declined by 46% due to FX headwinds in the Rest of Africa business (ZAR2.3bn) and the incremental investment in Showmax (ZAR1.6bn). However, a step-up in cost optimisation across the group supported a marginal 1% decline in trading profit on an organic basis. Stripping out Showmax, the group would have seen reported trading profit increase by 28% on an organic basis.
Adjusted core headline earnings, the board’s measure of the underlying business performance, declined from ZAR1.5bn in the prior period to ZAR7m in the current period. In addition to the foreign exchange losses in the Rest of Africa and the investment in Showmax, which negatively impacted trading profit, the group generated realised foreign exchange losses in the South African business in the current period compared with profits in the prior year, offsetting the benefit of lower cash extraction losses from Nigeria YoY.
Group free cash flows remained positive at ZAR0.6bn, with ZAR3.3bn in free cash generated by the South Africa and Irdeto businesses, largely offset by a ZAR1.8bn free cash outflow on investment into Showmax and a ZAR0.9bn free cash outflow in Rest of Africa due to the impact of currencies on its trading performance.
Pressure on the group’s trading performance in conjunction with ongoing non-cash foreign exchange losses on the translation of non-quasi, inter-group loans of ZAR2.1bn have resulted in the group closing the period with a negative equity position of ZAR2.7bn. Given the non-cash nature of the adjustments that have resulted in negative equity, they have no impact on the liquidity or ongoing concern of the group. Several developments and initiatives will resolve the group’s negative equity position by the end of November this year.
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 announcement, amounts and percentages have been adjusted for the effects of foreign currency and exclude acquisitions and disposals to better reflect underlying trends and sustainable operational performance. These adjustments (non-International Financial Reporting Standards (IFRS) performance measures) are referred to as “organic” when used. These
non-IFRS performance measures constitute pro forma financial information regarding the 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, the outgoing non-executive chair, Imtiaz Patel, was due to step down from his role at the end of FY24, but his tenure was briefly extended on 2 April 2024 to support the Canal+ transaction process. Having made sufficient progress, with MCG and Canal+ entering into a Cooperation Agreement and issuing a firm intention announcement, Mr Patel stepped down from the board on 23 April 2024. Elias Masilela, an independent non-executive board member, succeeded Mr Patel.
Another long-serving member of the board, Jim Volkwyn, who served MultiChoice with distinction in many roles for more than 33 years, did not stand for re-election at the AGM on 28 August 2024.
The board and executive management teams thank Mr Patel and Mr Volkwyn for their invaluable contributions to the group over the years.
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 group’s chief financial officer, Tim Jacobs CA(SA), supervised the preparation of this announcement. The 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, 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).
Important information
This announcement contains forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. Words such as “believe”, “anticipate”, “intend”, “seek”, “will”, “plan”, “could”, “may”, “endeavour” and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and should be considered in light of various important factors. While these forward-looking statements represent our judgements and future expectations, several risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations.
The key factors that could cause our actual results performance or achievements to differ materially from those in the forward-looking statements include, among others, changes to IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future periods; ongoing and future mergers, acquisitions, or disposals; changes to domestic and international business and market conditions such as exchange rate, interest rate and inflation rate movements; changes in the domestic and international regulatory, legislative and tax environments; changes to domestic and international operational, social, economic and political conditions (including power, water and transport infrastructure); the occurrence of labour disruptions and industrial action; and the effects of both current and future litigation. We are not under any obligation to (and expressly disclaim any such obligation to) revise or update any forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise. We cannot give any assurance that forward-looking statements will prove to be correct, and investors are cautioned not to place undue reliance on any forward-looking statements contained herein.
Further information
This announcement is the responsibility of the directors and is only a summary of the information in the full consolidated interim financial statements. Consequently, it does not contain full or complete details. The full consolidated interim financial statements have been reviewed by Ernst & Young Inc., who expressed an unmodified conclusion. The reviewed interim results announcement was released on SENS on 12 November 2024, and the full, consolidated interim financial statements can be found on the company’s website at https://investors.multichoice.com/interim-results.
Any investment decisions made by investors and/or shareholders should be based on consideration of the financial results as a whole, and investors and/or shareholders are encouraged to review the full consolidated interim financial statements at
This announcement’s information has been extracted from our website’s reviewed consolidated interim financial statements, but the announcement itself was not reviewed.
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