MultiChoice Profit Drops, Says Nigeria Subs. Gets FX at Parallel Market Rate
MultiChoice posted a 38% drop in interim profit as earnings per share fell to 356 South Africa cents in the first half of its financial year 2022 ended in September amidst liquidity stress in the Nigeria market. Due to dollar scarcity, the largest Africa’s Pay-Tv hinted that its Nigeria subsidiary’s operations faced liquidity challenges.
“Liquidity challenges continued in Nigeria, with the group extracting cash at every opportunity through local banking partners, largely at the parallel rate”, MultiChoice said in a statement.
In the comparable period in 2021, the group recorded 572 SA cents as earnings per share, but the recent scorecard shows that content costs jumped by 17%. It was noted the company’s operating costs spike due to cost deferrals related to delayed sporting events, including the Euro 2020 soccer tournament, the British and Irish Lions Rugby Tour and the Tokyo Olympics.
Following the successful execution of ‘BBNaija’, Multichoice said its Rest of Africa business grew its 90-day active subscriber base by 0.8 million subscribers or 7% year on year, with the closing base now surpassing the 12 million mark at 12.2 million.
“The popularity of local content such as Big Brother Naija and major sporting events contributed to another robust subscriber growth performance, supported by the segment’s regionalisation strategy”, the group stated.
Although the Rest of Africa business segment reported 16% revenue growth in dollar terms, revenue in South Africa Rand (ZAR) reduced 5% year on year to ZAR8.2 billion due to the stronger ZAR.
Strong subscription revenue growth was offset by an increase in content costs driven by a normalised sporting schedule, increased local content investment and non-recurring content refunds received in the prior period, MultiChoice said.
“Although currency depreciation was more favourable than the previous period, the overall macroeconomic environment remains volatile”. Despite these, the group cash balances in Nigeria remain elevated at ZAR2.8 billion compared to the ZAR2.3 billion reported on 31 March 2021.
The group also revealed involvement in an ongoing tax matter with the Nigerian Federal Inland Revenue Service (FIRS), saying based on the latest facts and circumstances available, no provision has been made, or contingent liability disclosed, in the interim results. Read more: FIRS Engages Banks to Recover N1.8 Trillion from MultiChoice
At PROMAX Awards, MultiChoice has continued its winning streak at the 2021 event scooping 22 gold and 25 silver awards while DStv was named Video Entertainment Brand of the Year.
Building market position, the group increased its 90-day active subscriber base by 1 million to reach 21.1 million subscribers, split between 12.2 million households (or 58%) in the Rest of Africa and 8.9 million (42%) in South Africa.
This represents 5% year-on-year growth, which came primarily from the Rest of Africa, thanks to major sporting events and successful local content productions.
It hinted about the decision to stepped-up investment in local content by producing 2 692 additional hours, translating to 41% growth. As a result, the total local content library is now approaching 66 000 hours and represents 45% of total general entertainment content spend, which was the group’s full-year target.
In South Africa, the local documentary Devilsdorp, became the most viewed programme of all time on Showmax. Multichoice said in Nigeria, Big Brother Naija delivered record viewership and advertising revenues and has become one of Nigeria’s most loved reality brands.
Pay-Tv Company said the South African economic environment remains challenging as the impact of COVID-19 has placed many consumers under financial pressure.
The group generated revenue of ZAR26.8 billion, with strong organic revenue growth of 10%, driven by a 7% increase in subscription revenues and a meaningful recovery of 77% in advertising revenues.
However, the revenue contribution of the Rest of Africa and Technology businesses was reduced by the stronger rand (ZAR) on translation, which resulted in lower reported revenue growth of 3%. The positive impact of revenue gains on trading profit was largely offset by a 2% increase in costs (12% organic), driven predominantly by a deferral of certain content costs from the financial year 2021.
“This included major sporting events such as Euro 2020, the British and Irish Lions Rugby Tour and the Tokyo Olympics, as well as the non-recurrence of certain COVID-19 related content savings”.
This led to an increase in group trading profit of 5% to R6.0 billion, 6% being its organic growth. The group delivered a strong 54% increase in consolidated free cash flow, underpinned by focused working capital management and lower capital expenditure.
“We are pleased with our performance over the past six months,” says Calvo Mawela, Chief Executive Officer, adding that the group was able to absorb a significant shift in content costs from last year while still maintaining our trading profitability.
“More importantly, we continued to bring our magic to millions of households across the continent, delighting them with a bumper slate of sporting events and our ever-popular local content. This is what we live for as a video entertainment business”
Core headline earnings, the board’s measure of sustainable business performance, was down 26% to ZAR2.0 billion due to the impact of the strong rand resulting in foreign exchange losses on hedging instruments.
The group’s established cost optimisation programme delivered a further ZAR0.5 billion in cost savings during the period, with renegotiated content contracts being a major contributor.
MultiChoice said a strong balance sheet remains a core focus to support new investment opportunities, as well as funding requirements for Rest of Africa market segment which it noted is affected by liquidity constraints in Nigeria.
It had launched DStv Internet, a plug and play fixed-wireless LTE solution, which enables broader access to the group’s online platforms.
Kingmakers (previously BetKing), in which the group holds a 20% investment, delivered 78% revenue growth year on year, with profitability at break-even as the business continues to grow its management team, agent network and presence across the continent.
SuperPicks, the group’s first product collaboration with KingMakers, was launched in Nigeria at the start of the 2021/2022 English Premier League season and has achieved impressive user growth on a weekly basis.
It said the group’s additional 29% investment in Kingmakers was finalised on 29 October and has been funded by R4 billion in ZAR-denominated debt.
South Africa
The South African business was impacted by an increasingly difficult consumer climate, according to MultiChoice. It said the prior period benefitted from strict lockdown conditions as consumers prioritised video entertainment services.
This resulted in muted 2% subscriber growth year on year or 0.2 million subscribers on a 90-day active basis. Revenue increased 8% to ZAR17.8 billion due to strong advertising revenue growth (ZAR0.7 billion) and a 2% increase in subscription revenues.
Trading profit increased 7% to ZAR6.2 billion, despite the cost of major sporting events such as Euro 2020, the British and Irish Lions rugby tour and the Tokyo Olympics.
Connected Video users on DStv and Showmax continue to grow as online consumption increases. Paying Showmax subscribers increased by 42% YoY, contributing to an increase of 3% in the group’s African OTT market share since December 2020.
Showmax further localised its business by adding local payment channels and enabling local billing in various markets.
Showmax Pro continues to improve its offering, which included the live broadcast of every medal event from the Tokyo Olympics, the Euro 2020, and every game from the English Premier League.
Prospect
In the second half of the financial year, the group will be looking to continue scaling its video entertainment services across the continent subject to a stable regulatory environment and taking into account the challenging consumer and macro-economic environment.
MultiChoice plans to focus on delivering its festive season targets for traditional linear broadcasting and streaming services and retaining these customers into the new calendar year.
Local content remains critical to the strategy, and the group will increase its investment in local content in line with its target of 45% of total general entertainment spend.
“As vaccination rates increase, we are hopeful that the worst of COVID-19 is behind us. However, we know that many of our customers, employees and economies will be recovering from the impact for some time to come,” says Mawela.
“We will support our customers with excellent service and the best video entertainment – a place not only to watch but to rest, unite, laugh and dream again.” #MultiChoice Profit Drops, Says Nigeria Subs. Gets FX at Parallel Market Rate
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