MultiChoice posts R53bn revenue as subscriptions swell

MultiChoice Group CEO Calvo Mawela.

Video entertainment company MultiChoice Group (MCG) has carefully navigated COVID-19 challenges to deliver strong results for the year ended 31 March (FY21).

In a statement this afternoon, MultiChoice says the group increased its 90-day active linear pay-TV subscriber base by 1.4 million to reach 20.9 million households, split between 8.9 million in South Africa and 11.9 million in the rest of Africa.

According to the company, this represents an accelerated 7% growth year-on-year (YOY), driven by heightened consumer demand for video entertainment products, continued penetration of the mass market and an easing of electricity shortages in Southern Africa.

MCG says revenue was resilient, growing by 4% (4% organic) to R53.4 billion. This performance, coupled with a firm focus on cost containment and a R1.5 billion (R2.7 billion organic) reduction in trading losses in the rest of Africa translated into a 28% (44% organic) increase in trading profit to R10.3 billion.

Core headline earnings, the board’s measure of sustainable performance, was up 32% YOY to R3.3 billion, while free cash flow grew a solid 10% to R5.7 billion.

Dividend, growth initiatives

The group reported R8.5 billion in cash and cash equivalents at year-end. Combined with R4 billion in undrawn facilities, this provides R12.5 billion in financial flexibility to support dividends and growth initiatives, says the pay-TV operator.

“The COVID-19 pandemic taught us more about the art of the possible,” says Calvo Mawela, chief executive officer of MCG.

“We started the year confronted with severe disruptions to our programming schedules, bleak macro-economic forecasts for many of our markets and sharply weaker currencies. In the face of these challenges, our teams rallied together – this helped us deliver on all our key performance metrics and provide more value to our shareholders by declaring a R2.5 billion dividend.”

The company adds that the group continued its differentiation strategy by stepping up its investment in local content.

Despite production stoppages and travel restrictions brought about by the pandemic, it produced 19% more content than last year – a sizeable 4 567 hours.

As a result, the firm adds, the total local content library now exceeds 62 000 hours. Some 42% of the group’s general entertainment spend was on local content and it remains on track to reach its target of 45% by FY22.

“We have a highly engaged base of 20.9 million subscribers and with an average of five people per household, this helps us reach approximately 100 million people. We see great opportunity to keep enriching the lives of our customers by expanding our entertainment ecosystem with innovative offerings that will also enhance our revenue prospects,” comments Mawela.

Both advertising and commercial subscription revenues were significantly impacted by COVID-19, says MCG, pointing out that advertising revenues were down 34% YOY (R0.6 billion) at the interim stage but recovered well in the second half as COVID-19 restrictions eased, ending 11% down YOY at R2.8 billion.

Similarly, it notes, commercial subscription revenues started to recover in the later part of the financial year but finished 35% lower than the prior year. The hospitality industry is expected to take some time to return to normal trading.

According to the company, the South African business held up well in a tough consumer climate, delivering subscriber growth of 6% YOY or 0.5 million linear pay-TV subscribers on a 90-day active basis.

The impact of COVID-19 and the associated lockdowns saw consumers prioritise video entertainment services, but the cancellation of live sport events, combined with the inability of commercial subscribers to trade and a weak advertising environment, impacted negatively on revenue generation, especially early in the financial year, it explains.

Revenue in SA increased 1% to R34.3 billion, while trading profit increased 9% to R11.1 billion, representing a margin of 32%.

“This higher profitability can be attributed to the non-recurrence of three major sporting events expensed in the comparative prior period, a strong focus on the group’s cost optimisation programme, lower operational costs in a COVID-19 environment and a temporary shift in content costs as a result of delays in sporting events,” says the company.

It notes that connected video users on the DStv app and Showmax continue to grow as online consumption increases.

During the year, Showmax launched Showmax Pro, the group’s first standalone online sport offering, as well as DStv Streaming, which allows customers to subscribe to an online-only service.

The company says local content is also proving to be a key differentiator on Showmax, with local content viewership up significantly this year, and four of the top five titles on Showmax being local productions.

It adds that a number of innovative, customer-centric products launched in this past year. The new DStv Explora Ultra decoder allows subscribers to seamlessly shift between satellite and online platforms, with a single billing platform.

The technology segment, comprising Irdeto, had a solid year, says MCG, adding that despite the non-recurrence of $8 million in once-off revenues in the prior year and customers deferring certain projects due to COVID-19, it contributed R1.8 billion in revenues, an increase of 5% YOY (-1% organic). The trading profit margin normalised to 31%.

During the year, Irdeto gained further market share in providing digital security services in the video entertainment sector, winning six tier-one customers, and integrating its watermarking technology with IBM’s cloud platform to enable easier deployment by operators.

Beyond video, it expanded its gaming security platform to include Steamworks, the largest digital distribution platform for PC games, and Sony for the PlayStation 5.

Irdeto also continued to expand its deployment of connected vehicles, with the Hyundai group shipping 200 000 vehicles embedded with Irdeto’s KeyStone technology. It also added new projects to secure high-speed rail networks and capital-intensive construction equipment.

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