Pay-TV operator MultiChoice Group (MCG) reported a satisfactory set of results for the period ended 30 September 2021 (1H FY22), achieving its best organic revenue growth since 2016 and successfully absorbing additional content costs.
In a statement, the company says it increased its 90-day active subscriber base by one million to reach 21.1 million subscribers, split between 12.2 million households (58%) in the rest of Africa (ROA) and 8.9 million (42%) in South Africa.
This represents 5% year-on-year (YOY) growth, which came primarily from ROA, thanks to major sporting events and successful local content productions, says the video entertainment company.
It adds the South African economic environment remains challenging, as the impact of COVID-19 has placed many consumers under financial pressure.
The group generated revenue of R26.8 billion, with strong organic revenue growth of 10%, driven by a 7% increase in subscription revenue and a meaningful recovery of 77% in advertising revenue.
The revenue contribution of ROA and technology businesses was reduced by the stronger rand on translation, which resulted in a lower reported revenue growth of 3%.
According to MultiChoice, the positive impact of revenue gains on trading profit were largely offset by a 2% increase in costs (12% organic), driven predominantly by a deferral of certain content costs from FY21.
It explains this included major sporting events such as Euro 2020, the British and Irish Lions Rugby Tour and the Tokyo Olympics, as well as the non-recurrence of certain COVID-19-related content savings. This led to an increase in group trading profit of 5% to R6 billion (6% organic).
The group delivered a strong 54% increase in consolidated free cash flow, underpinned by focused working capital management and lower capital expenditure.
“We are pleased with our performance over the past six months,” says Calvo Mawela, MultiChoice group chief executive officer. “We were able to absorb a significant shift in content costs from last year, while still maintaining our trading profitability.
"More importantly, we continued to bring our magic to millions of households across the continent, delighting them with a bumper slate of sporting events and our ever-popular local content. This is what we live for as a video entertainment business.”
Core headline earnings, the board’s measure of sustainable business performance, was down 26% to R2 billion due to the impact of the strong rand resulting in foreign exchange losses on hedging instruments, says the firm.
The group’s established cost optimisation programme delivered a further R500 000 in cost savings during the period, with renegotiated content contracts being a major contributor.
It notes that a strong balance sheet remains a core focus to support new investment opportunities, as well as funding requirements for ROA, which is affected by liquidity constraints in Nigeria.
After settling the MCG and Phuthuma Nathi dividends in September, the group reported R7.3 billion in cash and cash equivalents. Combined with R4.4 billion in undrawn facilities, this provides R11.7 billion in financial flexibility.
MCG says the South African business was impacted by an increasingly difficult consumer climate. In addition, it notes, the prior period benefited from strict lockdown conditions as consumers prioritised video entertainment services.
This resulted in muted 2% subscriber growth YOY, or 200 000 subscribers on a 90-day active basis, it says.
Revenue from SA increased 8% to R17.8 billion due to strong advertising revenue growth (R700 000) and a 2% increase in subscription revenue.
Trading profit increased 7% to R6.2 billion, despite the cost of major sporting events, such as Euro 2020, the British and Irish Lions rugby tour and the Tokyo Olympics.
The company notes that connected video users on DStv and Showmax continue to grow as online consumption increases. Paying Showmax subscribers increased by 42% YOY, contributing to an increase of 3% in the group’s African OTT market share since December 2020.
The ROA business grew its 90-day active subscriber base by 800 000 subscribers, or 7% YOY, with the closing base now surpassing the 12 million mark at 12.2 million.
The technology segment, Irdeto, delivered a solid performance despite the global silicon chip shortage which impacted revenue, the company says.
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