MultiChoice provided the following segmental review of its business:
South Africa
The South African business delivered a resilient performance in a tough consumer climate, reporting subscriber growth of 7% YoY or 0.5m subscribers
on a
90-day active basis. The impact of Covid-19 and the associated lockdown
saw consumers prioritise video services, but a lack of live sport and
the inability of commercial subscribers to trade negatively impacted revenue generation.
Revenue declined 3% to R16.5bn, affected by the lower advertising and commercial subscriber revenues. Trading profit increased 12% to R5.8bn. This higher profitability can be attributed to a doubling down on the group’s cost optimisation programme, the non-recurrence of three major sporting events expensed in the comparative prior period, lower operational costs in a Covid-19 environment and a temporary shift in content costs as a result of delays in sporting events.
SuperSport
had to contend with the absence of live sport for a large part of the
reporting period and nimbly adapted by changing channel line ups,
broadcasting
top quality documentaries and showcasing blockbuster sporting movies to
keep subscribers
entertained. Highlights for the interim reporting period included
renewing the English Premier League and UEFA Champions League rights to
the 2024/2025 seasons, enhancing
the portfolio with two ESPN channels and launching a refreshed thematic
channel line up to improve content discovery for sport lovers.
Connected
Video users on the DStv and Showmax platforms continue to grow as
online consumption increases. During the reporting period, Showmax
launched
Showmax Pro, the group’s first standalone online sports offering.
Showmax Pro allows subscribers
to watch their series, movies, kids and sport content across several
devices, while also offering a mobile option at a lower price point.
Rest of Africa
The RoA business grew the 90-day active subscriber base by 6% YoY or 0.6m subscribers, despite a macro-economic environment which remained challenging. As part of its growth strategy, the group relaunched its operations in Ethiopia in September, with a much stronger local-offering which includes localised billing, more Amharic content and SuperSport local-language commentary.
Revenue of R8.7bn represented 11% growth YoY (6% organic), supported by subscriber
growth, the weaker Rand versus most local currencies, as
well as inflationary price increases. Currency depreciation impacted
results more than in the previous year, mainly due to the material
depreciation of the Angolan kwanza (-70%) and the Zambian kwacha (-45%).
Trading
losses narrowed by 59% (150% organic) or R0.5bn (R1.2bn organic) to
R0.4bn. This represents a 7% improvement in the trading margin,
driven by a combination of revenue growth, effective cost control,
content refunds on various sports and general entertainment properties
and lower content costs with football leagues being delayed.
Technology segment
Irdeto,
the group’s technology segment, was impacted by the deferral of certain
project revenues due to COVID-19, as well as the non- recurrence of
USD8m in once-off revenues in the prior
period. It contributed R0.9bn in group revenues, a decrease of 1% YoY
(-17% organic), whilst the trading profit margin normalised to 28%.
Over
the past six months, Irdeto gained market share in providing digital
security services and won 18 new customers across both traditional video
entertainment and connected industries. Beijing
Hyundai, which now incorporates Irdeto’s Keystone security technology in
all new models, has already shipped 50,000 new vehicles with this
technology into the market. As one of the market leaders in its field,
Irdeto now provides security services to five of
the six largest global OTT players.
SHARE TRANSACTIONS
In
order to preserve cash reserves, the group transferred 3.6m treasury
shares (with a value of R0.3bn on the date of utilisation) of the total
10.1m repurchased in the prior year, to fund the current year awards
under the group’s restricted stock unit (RSU) share plan.
SUBSEQUENT EVENTS
To expand the group’s entertainment ecosystem further, it finalised a subscription
for a 20% investment in BetKing, a high-growth sports betting
group with operations in Nigeria, Kenya and Ethiopia. The transaction
price amounted to an upfront investment of $81m (R1.3bn), with the
potential for a further $31m (R0.5bn) in payments should certain earn
out targets be met between December 2022 and December
2024. As the group exercises significant influence over BetKing, the
business will be equity accounted as an associate from 1 October 2020.
To
improve the group’s cost of capital and reinforce the balance sheet, an
amortising working capital loan of R1.5bn was concluded in November
2020. The loan has a three-year term and bears interest at three-month
JIBAR + 1.70%.
FUTURE PROSPECTS
The
group’s focus for the full year, subject to a stable regulatory
environment and potentially adverse consequences of COVID-19, will be to
further scale its video entertainment platform across the continent,
focusing on both traditional broadcasting and streaming services, and to
increase its investment in local content.
“We
will look to expand our entertainment ecosystem and revenue prospects
through offering new products and services and by pursuing new growth
opportunities. At the same time, we will focus on the ongoing
development of employees and on continuing to make a meaningful impact
in the communities where we operate,” says Mawela. “Given the risks
associated with weak macro and consumer environments, and
the potential COVID-19 fallout, we will be looking to maintain tight
cost controls, prioritise cash generation and preserve balance sheet
strength.
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