MultiChoice, the subject of an aggressive takeover bid by France’s Canal+, faltered under the weight of what it describes as the worst conditions in almost 40 years while currency devaluations across its territories left it clutching at straws.
In an earnings report for the six months to end-September, MultiChoice said “unprecedented foreign exchange volatility” combined with macroeconomic challenges sent its annual profit, or adjusted earnings per share (EPS), nosediving from R1.5bn to R7m.
Subscriber numbers, measured on a 90-day active basis, fell 11% (or 1.8-million) to 19.3-million from 21.7-million in the previous comparable period. In SA the group has lost 400,000 customers from a year ago, the biggest drop being in premium subscribers.
According to the group, operating across Africa typically subjects it to unfavourable currency moves. However, abnormal currency weakness over the past 18 months has cut its profits by close to R7bn.
MultiChoice’s struggle to retain clients is part of a satellite pay-TV industry-wide slump due to the rise of streaming services, changing consumer preferences and economic pressures.
The structural decline has the potential to call into question the commercial logic of a takeover bid by Canal+, which has framed the deal as offering it an opportunity to create an African media powerhouse capable of competing globally.
In response, MultiChoice has embarked on a cost-cutting programme while investing in its own streaming service, Showmax. Cost-cutting measures resulted in R1.3bn in “permanent savings” on track to reach its full-year target of R2.5bn.
“We have successfully been implementing our strategy over the past few years, achieving key milestones such as our investment in KingMakers, returning the rest of Africa business to profitability in FY23 and FY24, concluding the Showmax partnership with Comcast and investing in Moment,” said CEO Calvo Mawela.
While we’ve made huge inroads to reduce our cost base, there’s more work to be done
— MultiChoice CEO Calvo Mawela
“While we’ve made huge inroads to reduce our cost base, there’s more work to be done,” Mawela said.
Adjusted core headline earnings per share (HEPS.— the group’s preferred profit measure), plunged from R1.5bn at the same time last year to R7m, affected by foreign exchange losses and the investment in Showmax.
The number takes out the affect of losses on cash remittances mainly from Nigeria after tax and minorities of R23m.
Revenues increased 4% year on year to R25.4bn on an organic basis, benefiting from price increases and growth of new products. However, on a reported basis, revenues declined 10%, affected by foreign exchange pressures on the rest of its business in Africa and a stronger rand against the dollar.
Free cash flow remained positive at R600m, together with R5.7bn in cash and cash equivalents.
The group said it had faced “the most challenging operating conditions in almost 40 years and to generate desired returns”, and that it had been proactive in its focus to “right-size the business for the economic realities and industry changes”.
Stock market reaction was muted, with MultiChoice shares adding 0.27% to end at R109.80 on Tuesday.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.