MultiChoice Group has demonstrated resilient operational performance for the year ended March 2024 (FY24), delivering a 26% trading profit margin in South Africa, while increasing trading profit in the Rest of Africa by 48%.
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 costs 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.”
Some key points for the past financial year include:
* Subscriber base: Given the challenging consumer environment, overall active subscribers declined by 9%. 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%.
* Group revenue: increased by 3% on an organic basis. However, due to weaker local currencies and consumer pressure, reported Group revenue declined by 5% to R56-billion.
* Subscription revenues: grew by 2% on an organic basis. However, on a reported basis, subscription revenues 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. After factoring in the R4,5-billion impact related to foreign exchange weakness, reported trading profit declined by 21% to R7,9-billion.
* Positive operating leverage: 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% (that is, a 3,3% organic revenue increase against a 1% organic reduction in operating expenses).
* Adjusted core headline earnings: 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-billionn in Showmax platform payments.
* Retained cash and cash equivalents: R7,3-billion in cash (before short-term commitments) and access to R4,1-billion in undrawn borrowing facilities provides significant headroom and flexibility to fund opportunities.
MultiChoice is the largest producer of original content on the African continent. In FY24, the group produced over 6 500 hours of local content and its local content library now has more than 84 000 hours of content, a 12% increase YoY.
A highlight for the year was Shaka Ilembe, which launched on Mzansi Magic in June to become Africa’s biggest TV series. Other content highlights include Reyka (season 2), Devil’s Peak and White Lies on linear (co-produced with Fremantle, Canal +, Abacus Distribution and BBC Studios-owned Lookout Point) and Spinners, Original Sin: My Son The Killer, and Catch Me a Killer, on streaming.
Across Africa, the group launched three new proprietary channels – in Ethiopia (Maaddii Abol), Uganda (Pearl Magic Loko) and Mozambique (Maningue Magic Kool) while also producing content in Africa’s fourth-most-spoken language, Oromo.
SuperSport broadcast 34 490 live events during the year – arguably more live sport than any other broadcaster in the world. Highlights included the Rugby World Cup in France, the Cricket World Cup in India, a second SA20 season in South Africa, AFCON, FIFA Women’s World Cup in New Zealand and Australia, as well as the Netball World Cup in Cape Town.
SuperSport Schools more than doubled its registered user base during the year. The fast-growing platform displayed more than 49 000 hours of live programming across 43 different sports codes, covering 900 school sport festivals and events, featuring more than 1 100 schools, and over 14 500 teams.
South Africa Pay-TV (MultiChoice South Africa)
Due to a strong focus on retention initiatives, 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. Power outages experienced on 275 days of the year further discouraged potential subscribers without backup power.
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%. 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 loadshedding, and reduced decoder subsidies.
A consequent 3% decline in subscription revenues and softer advertising income weighed on the segment’s total revenues (-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 South African business to achieve a trading margin of over 26%.
Rest of Africa Pay-TV (MultiChoice Africa)
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 revenues by 32%.
The active subscriber base declined to 8,1-million, but effective retention efforts contributed to an improved subscriber mix.
Due to the challenging market dynamics, the short-term focus of this business shifted from subscriber growth to safeguard profitability and cash flows. Several cost-saving initiatives were implemented, including scaling back significantly on decoder subsidies (-46% YoY or R1,3-billion), and reducing SG&A costs by R500-million. These interventions enabled the Rest of Africa business to increase trading profit by 48% YoY to R1,3-billion.
Sub-Saharan Africa SVOD (Showmax)
FY24 was a pivotal year for Showmax as it relaunched across 44 markets in sub-Saharan Africa on Peacock’s world-class platform, which is 4K/HDR and ATMOS ready. 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.
Alongside local content from M-Net, Mzansi Magic, Africa Magic and Maisha Magic, Showmax ramped up its local content, releasing 59 original movies and series in SA, Nigeria, Kenya and Ghana (FY23: 48). Popular shows that drove viewership included Tracking Thabo Bester, Koek, The Mommy Club, Youngins, Red Ink, Adulting, Outlaws and Real Housewives of Durban in South Africa, Cheta’m, Real Housewives of Lagos, Dead Serious, Wura and Flawsome in Nigeria, and Single Kiasi and Second Family in Kenya.
Showmax revenues for the year grew by 22% (+22% organic) to R1-billion, while trading losses increased to R2,6-billion. These losses came in below the expected range of R3-billion to R4-billion. As noted before, due to the partnership agreement signed in 2023, 30% of Showmax’s funding requirements is contributed by Comcast.
Technology (Irdeto)
Irdeto’s strong execution, enabled it to become the market leader in managed security services for video with a 22% market share. It also saw significant success in combatting piracy, taking down some 30 000 streaming piracy services during the year.
Revenue increased by 17% (7% organic) driven by external customers across video entertainment, gaming and connected transport, with some additional uplift from a weaker ZAR against the USD. Disciplined cost management supported a 23% trading margin.
Irdeto shipped its first keyless solutions to leading customers, including one of the largest fleet operators in the US market. This resulted in a revenue increase of 119% YoY in the connected transport division, with revenue from new services now representing a combined 35,7% of total revenues.
Sports betting and interactive entertainment (KingMakers)
KingMakers reported strong growth in the online business in Nigeria, with monthly active users up 37% YoY and online gross gaming revenues up 26% YoY in constant currency. New products were also launched, including BetKing Casino and BetKing FootballGO, a virtual football sportsbook service.
Revenue of $147-million was affected by the weak Naira, while the business reported a positive EBITDA of $2-million. At the end of its December year-end the business had a retained cash balance $113-million to fully fund its growth initiatives.
KingMakers launched the SuperSportBet business in South Africa in January 2024. Its pre-game shows and live feed integration with SuperPicks, as well as the Playbook preview show were key drivers of uptake, further supported by SuperSportBet becoming the official betting partner of local soccer clubs, Kaizer Chiefs and Orlando Pirates.
Fintech (Moment)
After being founded during FY23, Moment officially launched in FY24. The business played a vital role in the Showmax relaunch stepping up to fill a critical payments gap. In January this year, Moment also began processing MultiChoice’s payments for DStv, reaching a milestone of processing $85-million in payments in early March 2024.
To date, Moment has processed local and cross-border card payments in 44 Showmax markets and is already accounting for more than 20% of Group’s payment volumes. It also joined real-time payment networks in 18 countries, including South Africa, and is currently piloting instant payment and account activation for DStv.
The business raised an additional $22-million of funding, with MultiChoice contributing USD8m. As a result, Moment is now valued at $82-million and MultiChoice owns a 26% stake.