MultiChoice Group Ltd., Africa’s largest pay-TV company, has reported its third consecutive semi-annual loss, attributing the financial challenges to foreign exchange difficulties in Nigeria and persistent power outages in South Africa. Despite securing a significant gain in the African streaming market, effectively overtaking Netflix as the leader, the company faced substantial setbacks in its financial performance.
In a filing, MultiChoice disclosed a net loss of 1.32 billion rand ($72.4 million) for the six months ending Sept. 30. The company cited the poor performance of the Nigerian Naira against the dollar as a primary cause for the recorded loss. The challenges stemmed from Nigeria’s mid-June decision to allow the Naira to trade more freely against the dollar, leading to a 40% devaluation. This compelled MultiChoice to revalue inter-group loans, resulting in substantial foreign exchange losses.
Despite adding 1.4 million new subscribers in the previous financial year, subscriber growth in the Rest of Africa slowed down during the specified period. Factors contributing to this slowdown included inflationary pressures in key markets like Nigeria, following previous patterns seen after major football events such as the FIFA World Cup or northern hemisphere football off-season.
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While the Rest of Africa segment’s active subscriber base remained stable at 8.9 million subscribers, subscription revenues witnessed a 14% organic growth. However, revenue of ZAR10.5 billion remained flat, with a weaker ZAR against the USD offsetting the impact of weaker local currencies.
The RoA (Return on Assets) segment delivered a trading profit of ZAR330 million, a significant increase on an organic basis, attributed to cost interventions around decoder subsidies and content costs. However, weaker currencies significantly hindered profitability, with substantial negative impacts due to sharp falls in exchange rates against the USD.
In addition to currency challenges, South Africa experienced rolling blackouts, contributing to a 5% decline in the number of active days per subscriber. This exacerbation further impacted MultiChoice’s financial performance during the specified period.
The company’s financial statement reads partly: “After adding 1.4m new subscribers in FY23, subscriber growth in the Rest of Africa was more subdued in 1H FY24. This was due to the impact of inflationary pressures in key markets like Nigeria, and similar trends to previous periods which followed a FIFA World Cup or northern hemisphere football off-season.
“A total of 0.1m subscribers were added to end the period at 13.0m 90-day active subscribers. The active subscriber base was broadly stable at 8.9m subscribers and subscription revenues grew 14% organically. Revenue of ZAR10.5bn was flat (+13% organic) with a weaker ZAR against the USD on conversion, offsetting the impact of weaker local currencies relative to the USD.
“The RoA (return on assets) segment delivered a trading profit of ZAR330m (+ZAR2.2bn YoY on an organic basis) which was underpinned by specific cost interventions around decoder subsidies and content costs.
“Weaker currencies remained a significant impediment to improvements in profitability, with average first-half exchanges falling sharply against the USD.
“The sharp fall of the naira resulted in a large proportion of the previously recognised losses incurred on cash remittances now being recorded in trading profit. The net effect of these forex movements was a negative ZAR1.6bn impact on the segment’s trading profit for the period.”
Following these challenges, the company’s shares fell 0.6% in Johannesburg, after a plunge of as much as 3.6% to a record low. MultiChoice plans to relaunch its Showmax streaming service in the second half of the financial year and introduce a sports betting service in South Africa, inspired by a successful offering in Nigeria.
Despite financial woes, MultiChoice’s Showmax presently holds 40% of the continent’s streaming market, as per Omdia Research, showcasing its continued influence in the African entertainment landscape amid recent setbacks.