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MultiChoice bleeds subscribers amid revenue decline

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 12 Jun 2024
Calvo Mawela, MultiChoice Group CEO.
Calvo Mawela, MultiChoice Group CEO.

JSE-listed MultiChoice has reported a significant reduction in the number of subscribers, as well as revenue.

The video entertainment group today announced its financial results for the year ended 31 March, revealing that overall active subscribers declined by 9%.

According to the company, this was mainly due to a 13% decline in the ‘rest of Africa’ business, with Nigeria, Angola and Zambia most affected, while the South African business was more resilient, declining by only 5%.

The results come as French-based media giant Canal+ is looking to take over the South African firm in a R30 billion deal.

Over the years, MultiChoice’s numbers have reduced amid pressure from global streaming services such as Netflix, Disney+ and Amazon Prime.

While the subscriber decline is not flattering, the company says it delivered a 26% trading profit margin in South Africa, while increasing trading profit in the rest of Africa by 48%, despite challenging macro-economic conditions.

It notes that clear strategic milestones were reached, with the group successfully launching Showmax 2.0, SuperSportBet and Moment, all of which are now revenue-generating and supporting the group’s future growth prospects.

“Four years after setting out a clear strategy of building Africa’s entertainment platform of choice and investing in services to support a broader ecosystem, our three core segments are now fully operational – video entertainment, interactive entertainment and fintech,” says Calvo Mawela, MultiChoice Group CEO.

“Our focus now shifts to building on these solid foundations to drive growth in these new areas, and on further enhancing business efficiency across our operations.

“While we are not alone in feeling the challenges of a weak consumer environment, I am proud of the speed and effectiveness of the team in implementing strategic actions to retain customers, safeguard cash generation and drive cost savings which surpassed our targets. It is the strength of this team, the quality of the underlying business and the clarity of our strategy which underpins my confidence in delivering on our potential.”

Currency, consumer factors

Group revenue increased by 3% on an organic basis. However, the company says due to weaker local currencies and consumer pressure, reported group revenue declined by 5% to R56 billion.

It adds that while subscription revenue grew by 2% on an organic basis, on a reported basis, subscription revenue declined by 7% due to a weaker naira.

Group trading profit increased 24% on an organic basis, despite the additional R1.4 billion investment in Showmax to drive future growth, says the firm. After factoring in the R4.5 billion impact related to foreign exchange weakness, reported trading profit declined by 21% to R7.9 billion.

Given the positive impact of the lower expenditure (including R1.9 billion in cost savings and R1.5 billion in reduced decoder subsidies), the group achieved positive operating leverage of 4.3% (ie, a 3.3% organic revenue increase against a 1% organic reduction in operating expenses).

On adjusted core headline earnings, it points out that higher realised hedging gains and benefits from a narrower gap between official and parallel naira rate, was more than offset by the weaker trading profitability, resulting in adjusted core headline earnings (which now includes losses on cash remittances after tax and minorities) decreasing by 20% to R1.3 billion.

Free cash flow amounted to R589 million, impacted by lower profitability and the R1.7 billion in Showmax platform payments.

Due to a strong focus on retention initiatives, MultiChoice says the decline in active subscribers in South Africa was limited to 5%, despite the challenging environment. The base now stands at 7.6 million households.

It notes that power outages experienced on 275 days of the year further discouraged potential subscribers without backup power.

‘Stable’ Premium base

According to the firm, although the Premium bouquet is trending toward a stable base given the targeted retention efforts, the premium customer tier (which includes the Premium and Compact Plus bouquets) declined by 8% in South Africa.

It notes that the mid-market Compact base, which is most exposed to the macro-economic challenges, was down 9%, while the mass-market tier was 2% lower due to pressure in the Family base, the impact of load-shedding and reduced decoder subsidies.

“A consequent 3% decline in subscription revenues and softer advertising income weighed on the segment’s total revenue (-2% to R33.6 billion), but was partially offset by strong traction from new revenue streams, especially the insurance business (NMSIS) which reported a 35% increase in premium revenue to almost R1 billion. Several interventions to reduce costs enabled the SA business to achieve a trading margin of over 26%,” MultiChoice states.

It says the business in the rest of Africa faced the toughest macro-economic conditions in its core markets, with high, double-digit inflation and extreme depreciation of local currencies (especially in Nigeria, Angola, Kenya and Zambia), which impacted USD revenue by 32%.

The active subscriber base declined to 8.1 million, but effective retention efforts contributed to an improved subscriber mix.

The DStv operator adds that FY24 was a pivotal year for Showmax, as it relaunched across 44 markets in Sub-Saharan Africa on Peacock’s platform. Almost 100% of the eligible customer base was migrated to the new Showmax platform, and 88% of those migrated had reactivated their accounts in the seven weeks to year-end.

Showmax revenue for the year grew by 22% (+22% organic) to R1 billion, while the trading loss increased to R2.6 billion.

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