In the first half of the fiscal year 2024, MultiChoice Group (MCG) reported a mixed financial performance, influenced by various factors including currency fluctuations and consumer pressure. Here’s a detailed analysis of the key financial indicators during this period:
Group Revenue
MCG reported a group revenue of KSH 2.83 trillion, marking a 1% decrease. However, on an organic basis, the revenue was up by 4%. The decline was primarily due to weaker local currencies and consumer pressure. This was offset by the conversion benefits of a weaker KSH on the group’s USD reporting segments and inflationary-led price increases in most of the group’s markets.
Although profitability came under pressure due to ongoing power interruptions, cost of living pressures, and sharp depreciation in local currencies against the US dollar, the impact was mitigated by a change in focus towards subscriber retention, an improved customer mix, as well as ongoing pricing and cost-saving disciplines to protect the resilience of the business. As a result, the group maintained a positive trading profit margin of 3% in the Rest of Africa and delivered a 31% trading margin in South Africa.
Subscription Revenues
The group continued to deliver compelling local content and enable its audiences to access internationally renowned entertainment shows. Playing a vital role in supporting and developing the continent’s wider video entertainment industry, it has increased its spending on local content by 16% YoY, taking its local content library to almost 80,000 hours. Going forward, the group plans to enhance the monetization of each hour of content produced by leveraging both its linear and streaming platforms.
Subscription revenues saw a 3% increase on an organic basis. This growth was attributed to strong performance in the Rest of Africa (+14%) and Showmax (+25%), which was offset by pressure in the South African business (-4%).
In South Africa, the challenging consumer environment persisted into 1H FY24. Loadshedding remained the most immediate challenge in terms of subscriber activity, with the number of active days per subscriber declining by 5% due to a significant increase in both frequency and intensity of load-shedding, especially in Q1 of the reporting period. Premium and Compact bases showed improved stability compared to the latter part of FY23.
Group Trading Profit
The group trading profit increased by 18% on an organic and like-for-like basis (excluding the additional investment in Showmax), reducing to a 10% improvement once the investment in Showmax is considered. On a reported basis, trading profit was 18% lower at KSH 500 billion, impacted by foreign exchange headwinds of KSH 170 billion, Showmax trading losses of KSH 80 billion, and a lower contribution from South Africa.
Total content costs were up by 10% (+ 4% organic), driven by ongoing investment in local content (+16% YoY) and several World Cups hosted in the first half of the year.
Core headline earnings were reported at KSH 190 billion, down 5%, impacted by the same drivers weighing on trading profit, with some offset from realized gains on forward exchange contracts and lower tax and minorities in South Africa.
Adjusted core headline earnings, which incorporate the impact of losses incurred on cash remittances in markets such as Nigeria, increased 25% to KSH 150 billion.
Free cash flow was reported at KSH 110 billion, impacted by the increased investment in Showmax and a lower contribution from the South African business.
Financial Position
MCG retained cash and cash equivalents of KSH 560 billion and had access to KSH 900 billion in undrawn facilities. The financial debt remained stable at KSH 810 billion with a Net debt:EBITDA ratio of 1.30x.
In conclusion, the 1H FY24 period was marked by significant financial developments for MCG, influenced by various internal and external factors. The company’s strategic investments, particularly in Showmax, indicate a strong focus on long-term growth and market dominance.
