MultiChoice sees subscriber boost thanks to South Africa’s Covid-19 lockdown

Listed video entertainment group, MultiChoice has published its financial results for the year ended 31 March 2020.

The group reported a ‘solid’ performance, despite global and country-specific macro-economic challenges, highlighting a 38% growth in core headline earnings, to R2.5 billion.

Core headline earnings per ordinary share increased to 569 cents, from 410 cents previously, while headline earnings per ordinary share was up to 128 cents from a 353 cents loss per share previously.

Consolidated free cash flow increased by 59% to R5.2 billion, driven mainly by an improvement in the trading results from the Rest of Africa (RoA), a focus on cost containment and a reduction in working capital, it said.

Other salient features include:

  • Revenue was up 3% to R51.4 billion;
  • R42.8 billion in subscription revenue which increased 4% YoY;
  • Cost containment underpinned a 14% increase in trading profit to R8.0 billion (29% organic);
  • R1.4 billion in cost savings generated during the year;
  • R800 million (R1.8 billion organic) reduction in losses in RoA;
  • Capital expenditure (capex) of R800 million was slightly down on the prior year and included a R200 million investment as part of a multi-year programme to futureproof the group’s customer service, billing and data capabilities.

The group declared a dividend per ordinary share of 565 cents.

“We are certainly facing unprecedented times but are pleased with our performance and the resilience we have demonstrated this year,” said Calvo Mawela, chief executive officer. “Our healthy balance sheet positions us well to weather the uncertainties in our markets going forward.”

“We have also honoured our commitment to shareholders by declaring a maiden dividend of R2.5 billion, on top of some R1.7 billion in share buy-backs executed during the year,” he said.

The group said it added 900,000 new 90-day active subscribers, representing 5% growth year-on-year (YoY). This took the overall subscriber base to 19.5 million households, split between 8.4 million households in South Africa (SA) and 11.1 million households in the rest of Africa.

However, top line momentum was affected by modest subscriber growth due to rising consumer pressure, a decision not to increase prices of its Premium package in South Africa, and the fact that last year’s growth benefited from specific once-off events, the group said.

MultiChoice said it will continue to focus on producing local content, noting successes in this segment so far.

In addition to compelling local stories, it said it will continue to broadcast the best of sport and international content and will now integrate third party streaming services onto its DStv platform.

“The recently signed distribution agreements with two major international Subscription Video on Demand (SVOD) providers will ensure that customers have access to a wider variety of content, all in a single place,” it said.

“As our industry evolves, we believe that we are well positioned to benefit from both worlds – a large, growing pay-TV market in Africa, as well as an emerging over-the-top (OTT) opportunity, where our own OTT services and aggregation capabilities can drive success.”

The group said it also has an exciting product line-up that will launch during the year, including a much-anticipated DStv streaming product.

MultiChoice South Africa

MultiChoice said that its South African business “held up well in a tough consumer climate,” with subscriber growth of 6% year-on-year, or 500,000 subscribers on a 90-day active basis.

The impact of the coronavirus pandemic in South Africa and associated lockdown saw an uplift in subscribers towards the end of March.

Revenue growth of 1% to R34.2 billion was muted as healthy subscriber growth in the mass market was negated by the strategic decision not to increase prices on the Premium bouquet.

Trading profit increased only 1% YoY to R10.3 billion due to modest revenue growth and the cost impact of broadcasting three major sport events in the reporting period, but the trading margin remained stable at 30%, it said.

“The business continues to focus on growth, retention, strategic upselling of bouquets and operational efficiencies to support margins,” it said.

The group’s digital platforms saw strong uptake during the year, including ongoing growth in Connected Video users on both the DStv Now and Showmax platforms as online consumption increases.

“Showmax, the group’s standalone OTT service, gained solid traction this year following the launch of a mobile-only offering, improved marketing and further enhancements to the user interface and the content slate. The platform now boasts more than 50% local content,” MultiChoice said.

Prospects

Looking ahead, MultiChoice said that the Covid-19 pandemic has had a significant impact across the world, adversely affecting the lives of the group’s customers and its employees.

“The aftermath of the virus and low oil price, although uncertain in quantum, will likely have a negative impact on the economies of many of the group’s markets, with weaker currencies and higher levels of unemployment expected. The impact of this on the group’s performance is not yet known,” it said.

“While macro-economic implications are largely uncontrollable, we are taking steps wherever we can to counter potential future headwinds. These include implementing further cost savings initiatives across the organisation and continuing to do what we do best – provide our customers with great entertainment.”

MultiChoice said it will continue scaling its video entertainment services across the continent, focusing on the mass- market for pay-TV services, as well as on OTT.

In addition, it plans to further increase its investment in local content and adjust its cost base to deliver acceptable returns.

“We remain well positioned with a sought-after product offering, significant scale, a diversified footprint across the African continent and a robust business model with a low reliance on advertising revenue.

“Importantly, we have hedging programmes in place to offset some of the currency pressures we’re exposed to and a healthy balance sheet, which includes R9.1 billion in cash,” it said.


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MultiChoice sees subscriber boost thanks to South Africa’s Covid-19 lockdown