MultiChoice points to disappointing subscription revenue in South Africa

Listed entertainment company MultiChoice Group on Thursday (9 June), reported results for the year ended  March 2022, showing a difficult consumer climate in South Africa.

The company that operates DStv said its South African business faced an increasingly difficult consumer climate, with FY22 growth rates impacted by rising unemployment levels, intermittent load shedding, and disruption caused by the July riots in Durban and Johannesburg.

Revenue increased 4% to R35.6 billion, supported by the rebound in advertising revenue and a mere 1% increase in subscription revenues, despite subscriber growth in the mass market and the uplift from annual price increases. The return of live sport and other value-adding initiatives contributed to reducing churn in the premium base relative to the prior year, it said.

It said that trading profit declined 1% to R11 billion as the ongoing cost-optimisation programme only partially offset consumer pressure in the middle market and the normalisation of content costs and sales and marketing expenses.

“Reduced losses in the Rest of Africa (RoA), a rebound in advertising revenues and a continued focus on cost containment enabled us to absorb the R1.1 billion impact of a normalisation in content costs as live sport returned and we resumed our local content production post the Covid-19 lockdowns,” said chief executive officer, Calvo Mawela.

“We continued to enhance our video entertainment offering and expanded the variety of services offered to our customers as we grow our entertainment ecosystem,” he said.

The group’s linear pay-TV subscriber base (measured on a 90-day active basis) increased by 900,000 to reach 21.8 million households, comprising 9 million in South Africa and 12.8 million in the rest of Africa. The 5% growth year-on-year (YoY) is subdued due to the tough economic environment and elevated subscriber growth during Covid-19 related lockdowns in the previous year, MultiChoice said.

Group highlights:

• Revenue: R55.1 billion up 3% (up 7% organic)
• Trading profit: stable at R10.3 billion (up 1% organic, due to absorbing cost normalisation)
• Core headline earnings: R3.5 billion (up 6% as Forex impact was less negative))
• Dividend: R2.5 billion at 565 cents per share (±4% yield)

MCG said it continued to pursue its differentiation strategy through local content, stepping up its local content production by 32% YoY to 6 028 hours and bringing its local content library close to 70,000 hours.

Local content accounted for 47% of total general entertainment content spend and the group remains on track to achieve a target of 50% by 2024, it said.

Growth in Connected Video users on the DStv app and Showmax service is outpacing the market, said MultiChoice. Paying Showmax subscribers were up 68% YoY, whilst overall monthly online users of the group’s connected video services increased 28% YoY.

Looking ahead, the group said it will continue to drive the penetration of its video entertainment services across the African continent by offering customers an array of unique and rich media content delivered in a convenient and cost-effective way.

“Local content and select sporting events such as the English Premier League, UEFA Champions League and the 2022 FIFA World Cup will contribute to the growth in linear and streaming services.”

“Returning the Rest of Africa business to profitability in FY23, maintaining strong cash flows to support a healthy balance sheet and pursuing innovative products and services remain key pillars for long term value creation,” it said.

“As a platform of choice, our group will look to further expand our entertainment ecosystem by identifying growth opportunities that leverage our scale and local capabilities,” says Mawela. “We will continue to strive to be a trusted partner for our customers’ ever-evolving needs, enriching their lives by delivering entertainment and relevant consumer services underpinned by technology.”

Read: How much money MultiChoice makes per subscriber each month