DStv owner in deep trouble
MultiChoice’s latest financial results reveal that revenue plummeted, losses worsened, and technical insolvency deepened.
On Tuesday, MultiChoice revealed its consolidated interim financial statements for the period ended 30 September 2024. It was a disaster.
Revenue for the six months declined by 11% to R24.8 billion, and operating profit declined by 49% to R2.5 billion.
MultiChoice’s loss for the six-month reporting period increased to R1.8 billion, much worse than the previous period’s loss of R911 million.
It was not only MultiChoice’s income statement that read like a horror movie. Its balance sheet was equally disastrous.
The operator’s assets declined from R43.9 billion to R41.5 billion, while its liabilities were relatively flat at R44.2 billion.
That means that MultiChoice remained technically insolvent. However, its balance sheet worsened significantly over the last year.
Unsurprisingly, MultiChoice’s operational data reflected the dismal financial performance over the interim period.
MultiChoice’s DStv and other subscribers plummeted from 16.7 million to 14.9 million over the last year.
The subscriber number decrease included a 5% reduction in South Africa and a 15% decline in the Rest of Africa.
MultiChoice highlighted that Showmax’s paying subscriber base increased 50% year-on-year. However, this number excluded discontinued services.
Showmax’s revenue declined from R704 million to R469 million, and its loss increased from R799 million to R2.4 billion.
That means that Showmax contributed virtually nothing to MultiChoice’s top line but added over R2.4 billion to the company’s losses.
MultiChoice continues to promote the new Showmax 2.0 as the company’s future and its growth engine.
However, MultiChoice latest financial results have not shown this potential. Its performance was so poor that investors should question its viability.
MultiChoice putting on a brave face
Despite the dismal financial performance, MultiChoice highlighted a few positive aspects in its latest results announcement.
It said it experienced a lower subscriber attrition rate in the linear pay-TV subscriber base versus the six months ended 31 March 2024.
The company’s trading profit margin in South Africa was maintained in the low 30s in the seasonally stronger first half.
Its cost optimisation efforts delivered R1.3 billion in savings, with the full-year target increased to R2.5 billion from the R2.0 billion set at the beginning of the financial year.
In addition to the group’s cost savings program, decoder subsidies were reduced by a further R0.4 billion across South Africa and Rest of Africa.
Free cash flow and adjusted core headline earnings were both positive despite external macro and currency headwinds.
MultiChoice also said it maintained the positive momentum in DStv Stream and Extra Stream, DStv Internet, DStv Insurance, and the group’s sports betting and fintech investee businesses.
It added that it made meaningful progress on the Canal+ transaction. It includes submitting a merger control filing with the South African Competition Commission.
MultiChoice added that it is also engaging with other regulatory authorities regarding the Canal+ deal.
It added that it anticipates resolving the negative equity position by the end of November this year.
Despite trying to remain upbeat about its position, the reality is that MultiChoice is in deep trouble.
If the Canal+ deal does not go through, the share price will plummet, and the company may be forced to consider a capital raise.
For this reason, many analysts have advised shareholders to sell their MultiChoice shares and look for value elsewhere.
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