MultiChoice Group maintains strategic momentum despite macroeconomic challenges – Africa.com
- Unprecedented foreign exchange pressures and economic challenges in key African markets impact earnings and curb user growth
- As streaming gains traction at the expense of traditional pay TV, expect to adjust the cost base and add new revenue streams to drive future growth
- Cost-cutting measures deliver permanent savings of R1.3 billion, on track to meet full-year target of R2.5 billion
- As the leading streaming service in sub-Saharan Africa, Showmax customer base grows 50% year-on-year
- New product revenue grew strongly: DStv Steam +71%, DStv Internet +85%, DStv Insurance +31%, KingMakers +53%
- Strong liquidity of R10 billion provides a solid financial foundation to support growth
- The negative equity position is expected to be resolved in November 2024.
Multiple Choice Group (MCG or The Group) (www.MultiChoice.com) continues to deliver superior video entertainment and execute on core strategic initiatives during the first six months ending September 30, 2024 (first half of fiscal 2025). However, unprecedented foreign exchange volatility significantly impacted the Group’s interim financial results, while ongoing macroeconomic challenges impacted customer growth and impacted overall results.
Facing the most challenging operating environment in the past 40 years, in order to generate ideal returns, the Group has been proactively “right-sizing” its business in line with current economic realities and industry changes. While the group’s operations across Africa are typically affected by currency fluctuations, exceptional currency weakness over the past 18 months has reduced the group’s profits by almost R7 billion. Combined with the impact of the weak macro environment on consumer disposable income and subscriber growth, this required the group to fundamentally adjust its cost base – and that is exactly what we have done. Normal cost-saving programs have accelerated, achieving permanent savings of ZAR 1.3 billion in the past six months and raising the full-year target to ZAR 2.5 billion.
“We are making good progress in resolving the technical insolvency resulting from non-cash accounting entries at the end of last financial year. We expect the net asset position to return to positive by the end of November this year, supported by a series of developments and initiatives. The Group’s liquidity position remains strong, with total available funds exceeding ZAR 10 billion,” MultiChoice Group CEO Calvo Mawela said.
The group is also responding to global pay TV challenges as the rise of streaming services, social media and changing consumer preferences impact its traditional broadcast business. Showmax’s paid customer base grew 50% year-on-year and the company has strategically positioned its business to actively participate in the streaming revolution as it gains momentum in Africa. In order to create sufficient capacity and drive growth, the Group has increased investment in the business in the medium term, increasing its investment by ZAR 1.6 billion.
“Over the past few years, we have successfully executed our strategy and achieved important milestones such as investing in KingMakers, making the rest of Africa profitable in FY23 and FY24, entering into the Showmax partnership with Comcast and investing in Moment. While we have made tremendous progress in reducing costs, there is still more work to be done.”
“However, our focus is not just on cost efficiencies – we are equally committed to growing the business. We remain committed to driving new revenue streams and see significant medium to long-term opportunities in video entertainment, particularly streaming and our adjacent new business.”
There was strong momentum in the group’s new products and services, with strong year-on-year revenue growth of DStv Stream +71%, DStv Internet +85% and DStv Insurance +31%. KingMakers reported a healthy 27% growth in online monthly active users in Nigeria and a 53% increase in revenue in Naira, while the newly launched SuperSportBet has shown good early traction in South Africa.
Financial performance overview
Subscriber base: The linear pay TV subscriber base was under less pressure than in the previous six months, down 5% (800,000) compared to 6% (1.0 million) reported in the second half of fiscal 2024. This reflects a trend of continuous improvement. The linear user base decreased 11%, or 1.8 million active users to 14.9 million active users, compared to the same period last year, driven by challenging macroeconomic conditions that negatively impacted discretionary consumer spending.
Group revenue: Revenue increased organically by 4% to ZAR 25.4 billion, driven by tight inflationary pricing and revenue growth from new products. Revenue was reported to have fallen by 10%, affected by foreign exchange pressures in the rest of Africa business and the strength of the rand against the US dollar.
Group trading profit: The group’s ongoing cost optimization initiatives resulted in savings of ZAR 1.3 billion, which, together with other improvements across the business, resulted in a 33% increase in trading profit before the inclusion of Showmax costs. Showmax increased investment by R1.6bn to create growth capacity, cutting organic trading profit to R5.0b, down just 1% year-on-year. Foreign exchange losses in the Rest of Africa business amounted to R2.3 billion and reported trading profits fell to R2.7 billion.
Adjusted core total earnings, The board’s measure of the underlying performance of the business was ZAR 7 million, affected by foreign exchange losses and the Showmax investment.
Cash flow and liquidity: Group free cash flow remained positive at R600 million, of which R5.7 billion was retained in cash and cash equivalents. Despite increased net interest costs and higher average debt balances, the Group was able to draw on undrawn loan facilities of ZAR 4.4 billion to meet current challenges.
Operational update
General entertainment and sports
Providing content that customers love remains the group’s core focus – whether it’s the best in general entertainment or the most exciting sporting events, locally or internationally.
In the past six months, the group produced 2,763 hours of local content, bringing the local content library to 86,215 hours.
SuperSport has cemented its reputation as a global leader in sports broadcasting with extensive coverage of the Paris 2024 Olympics, Euro 2024 and the ICC T20 Men’s World Cup. In the past six months, SuperSport has broadcast 10,240 live events, with a total of 21,540 hours of live broadcast time, a year-on-year increase of 22%.
SuperSport Schools has doubled its user base, passed the one million registered user milestone on its app and delivered over 35,000 hours of content in the past six months.
Business segment
As a mature enterprise, south africa multiple choice Focus on user retention and reconnection, identifying remaining growth opportunities, and optimizing processes and systems to improve customer experience and operational efficiency.
exist Rest of Africa On the business front, the Group is implementing a number of initiatives to support improved financial conditions, including adjusting prices to cope with the impact of inflation, renegotiating content deals where feasible, restructuring selected packages to increase ARPU, optimizing the DTT network and strengthening anti-piracy measures.
FY25, Show Max Focused on enhancing its content lineup, solidifying distribution partnerships, expanding payment channel integration and refining its go-to-market strategy.
Irdeto Encouraging revenue growth was achieved following the acquisition of key customers in Asia and the expansion of managed services with key customers in Australia.
kingmaker Continuing to maintain strong momentum in Nigeria, BetKing Nigeria has firmly ranked second in the online gambling market. SuperSportBet, the South African operation launched late last year, has shown early signs of success and reported a significant tenfold increase in net gaming revenue over the past nine months.
momentSince its launch last year, it now covers 40 African countries and its total payment volume (TPV) has grown to $242 million. It already processes nearly 30% of the group’s payments.
Looking to the future
The Group continues to invest in its long-term future, focusing on the following strategic priorities:
- Improve the profitability and cash generation of the South African business.
- Simplifying the cost base in the rest of Africa to return the business to profitability.
- Invest in Showmax to build it into the leading streaming platform on the African continent.
- Support KingMakers, Moment and DStv Insurance to expand.
By successfully executing on these objectives, the Group will be well-positioned to achieve future growth and create value as Africa’s leading video entertainment platform and most popular storyteller.
Distributed by APO Group on behalf of MultiChoice Group.
