MultiChoice takes a hit from currency movements

Source: MultiChoice

South African pay TV operator MultiChoice expects trading profit and core headline earnings per share to fall as a result of unfavourable currency trends for its fiscal first half to the end of September – despite a rise in trading profit on an organic basis.

The expected increase in losses and headline losses per share is primarily due a sharp depreciation in local currencies against the US dollar. This primarily impacts the revaluation of dolla- denominated transponder leases and non-quasi equity foreign exchange losses on intergroup loans with MultiChoice Nigeria. Losses were further impacted by the increased investment in Showmax ahead of its relaunch in the second half of the current financial year.

MultiChoice, which will report its interim consolidated earnings shortly, has absorbed ZAR1.7 billion (US$92 million) in costs from weakness in the currencies in which it trades, with trading profit expected to be between 16% and 21% lower than the ZAR6.1 billion reported for the same period last year.

This drop comes despite an expectation that organic profit will be 7-12% higher, despite an additional ZAR0.5 billion in costs for streamer Showmax and a 16% increase in local content investment.

MultiChoice also expects core headline earnings per share for the first half to be between 3% and 8% lower than for the pior year period. The number includes the impact of realised foreign exchange gains and losses but does not include ZAR0.5 billion in losses on cash remittances from Nigeria.

The earnings per share calculation includes higher investment costs in Showmax, which MultiChoice said were primarily due to running two platforms in parallel during a transition from the service’s current platform to the new Peacock platform.