MultiChoice sees revenues and profits grow, but withholds dividend to focus on Showmax

South African pay TV operator MultiChoice has posted a rise in profit on an organic basis and an increase in revenue on the strength of its ‘rest of Africa’ performance, but is withholding a dividend in part to focus on investment in its Showmax streaming platform.

Revenue was up 7% (or 4% organically) to ZAR59.1 billion. Profit was down 3% due to a ZAR0.9 billion adverse currency impact and weak earnings from South Africa, but was hip 5% on an organic basis to ZAR10 billion.

The company said it would not pay a dividend due to a cautious outlook on currencies in South Africa and Nigeria and a challenging environment in South Africa, exacerbated by energy costs (not to mention the recurring problem of persistent power cuts) and an anticipated increase in investment in Showmax, its streaming JV with Comcast.

The group added 1.7 million 90-day active subscribers, representing 8% year-on-year growth, to close the year on 23.5 million subscribers. The 90-day subscriber base comprised of 14.2 million households (60%) in the Rest of Africa and 9.3 million households (40%) in South Africa.

South Africa continues to suffer from persistent power blackouts or ‘load-shedding’ due to insufficient electricity generation capacity, which has a negative impact on MultiChoice’s domestic pay TV operation. The operator pointed to a 1.14 million drop in its active sub base in March as evidence of the impact of load-shedding.

Revenue in South Africa of ZAR35.0bn was down 2%, affected by a 3% decline in subscription revenues.
By contrast, the Rest of Africa pay-TV business grew its 90-day active subscriber base 1.4 million (up 11%) and now reaches 14.2 million households. Revenue of ZAR22.6 billion was up 26% or 16% organically. The segment now contributes 38% of group revenues, up from 33%.

The group’s overall online user base increased by 12%, with the growth rate for paying existing Showmax subscribers at 26%. Showmax Pro, which includes live sport, enjoyed strong growth and doubled its subscriber base.

A revamped Showmax, based on MultiChoice’s partnership with Comcast/NBCUniversal, is expected to launch in the second half of the current financial year, supported by NBCUniversal-owned Peacock’s tech platform. NBCUniversal holds a 30% stake in the venture, with MultiChoice holding 70%.

“We continued to scale our overall subscriber base and benefited from a strong performance in the Rest of Africa, that delivered a trading profit for the first time since our listing in 2019. It is a remarkable performance by the team considering that they have had to absorb almost ZAR3bn in currency losses in the last four years. We increased the breadth and depth of services offered to our customers and continued to grow our entertainment ecosystem, most notably through our recent streaming partnership with Comcast,” said Calvo Mawela, CEO.

““Our core video entertainment business will remain a central focus for FY24 as we navigate the impact of ongoing economic challenges across our markets, especially the impact of South Africa’s ongoing energy challenges. Our new management team in SA will be looking to leverage the exceptional content slate this year, which includes the Rugby and Cricket World Cups and the locally-hosted Netball World Cup, while tight cost management remains an utmost priority. Despite some challenges presented by the current operating environment, we remain excited about our future prospects as we leverage our platform and broad distribution to drive scale in several new growth opportunities.”