MultiChoice has defended its spending splurge ahead of the 2022 Fifa World Cup, including R700-million on decoder subsidies, saying the investment should pay off in higher subscriber numbers.
The spending supports the “anticipated subscriber growth opportunity” around the global football showcase and “mitigates the growing risk of supply-chain disruptions from global silicon chip shortages”, the pay-television group said alongside its interim results for the 2023 financial year, published on Thursday.
For the six months ended 30 September 2022, MultiChoice said its investments for the World Cup reduced group trading profit by about R700-million and free cash flow by around R800-million, primarily in its “Rest of Africa” segment – all markets outside South Africa.
The decoder investment shaved three percentage points off the group’s trading margin
Overall, group trading profit increased 2% to R6.1-billion (6% organic), benefitting from a R300-million reduction in organic losses in Rest of Africa (or a R1-billion improvement if the World Cup decoder investment is excluded).
“The decoder investment shaved three percentage points off the group’s trading margin but is expected to unwind in the second half of the year. The group’s established cost optimisation programme delivered a further R600-million in cost savings and should exceed the full year target of R800-million,” it said.
Core headline earnings, MultiChoice’s preferred measure of “sustainable business performance”, increased 2% year on year to R2-billion. However, consolidated free cash flow of R1.8-billion was down 44% compared to the prior period, adversely affected by the increased investment in decoder subsidies. Free cash flow also included R300-million (R400-million in the same period a year ago) in tax deposits in relation to an ongoing Nigerian tax audit.
Year on year, the group grew its user base by 5%, adding a million 90-day-active subscribers to close the reporting period on 22.1 million, split between 13 million in Rest of Africa and 9.1 million in South Africa.
Premium base grows again
“Rest of Africa maintained its growth trajectory on the back of successful local content productions. In South Africa, growth rates recovered during the second half of the reporting period despite evidence of rising consumer pressure,” MultiChoice said.
Revenue increased 7% (2% organic) to R28.6-billion, with the weaker rand increasing the revenue contribution on translation of the Rest of Africa and Technology segments, both of which report in US dollars.
Subscription revenues amounted to R23.8-billion, up 8% year on year (3% organic), driven mainly by Rest of Africa. Advertising revenues were up 5% (2% organic).
Turning to South Africa, MultiChoice said its Premium segment, which has been under pressure, showed positive subscriber growth for the first time in years. The mass market business also grew, while the middle segment “remained under pressure as consumers in this segment are most impacted by elevated unemployment rates and consumer indebtedness, as well as rising inflation and interest rates”.
“South Africa revenue decreased 2% to R17.4-billion due to a weaker-than-normal first quarter when the impact of the football off-season was exacerbated by an extremely challenging consumer climate,” the group said.