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MultiChoice hits 20m subs

In its latest results, Africa’s leading pay-TV service showed why it is attracting global investment interest

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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