VIDEO entertainment group MultiChoice saw its interim profits dip, knocked by forward exchange losses and a stronger rand, but the good news for its growing subscriber base is that it stepped up investment in local content, producing 2 692 additional hours of viewing material.
In the period ended September 30, its core headline earnings, the board's measure of sustainable business performance, was down 26 percent on the prior period at R2 billion due to higher realised foreign exchange losses caused by the stronger rand relative to the hedged rates of the group’s forward exchange contracts in the South African business during this period.
MultiChoice chief executive Calvo Mawela said: “We are pleased with our performance over the past six months. 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.”
It added one million 90-day active subscribers, an increase of 5 percent year on year, while also saying it had boosted its local content.
MultiChoice said it had continued its strategy of differentiation through local content and stepped up its investment by producing 2 692 additional hours. This represented 41 percent year-on-year growth, and was supported by less disruption from the third wave of Covid-19 versus the initial lockdowns in the prior period. As a result, the total local content library was approaching 66 000 hours and local content represented 45 percent of total general entertainment content spend.
In South Africa, local documentary Devilsdorp became the most viewed programme of all time on Showmax. In Nigeria, Big Brother Naija delivered record viewership and advertising revenues, and has become one of Nigeria’s most-loved reality brands.
Reyka, a global co- production with Freemantle, was broadcast to critical acclaim during Sunday night prime time,while a further four co-productions (Recipes for Love and Murder, Crime and Justice S2, Pulse and The Fix) are currently in production. Interest in the group’s content is at an all-time high, with 121 series sold to international buyers, seven times more than last year.
MultiChoice said local content remained critical to the strategy, and the group would increase its investment in local content in line with its target of 45 percent of total general entertainment spending.
The group said it had also recently launched DStv Internet, a plug and play fixed-wireless LTE solution, which enables broader access to the group’s online platforms.
The business in the Rest of Africa (RoA) experienced accelerated growth primarily on the back of major sporting events and successful local content productions, while growth rates in South Africa were subdued by rising consumer pressure and tough comparables given the boost in the prior year numbers triggered by strict lockdown restrictions at the time.
Revenue increased 3 percent to R26.8bn, with the stronger rand reducing the revenue contribution on translation of the RoA and Technology segments. Subscription revenues amounted to R22.1bn, with 7 percent organic growth. Advertising revenues, which were impacted by Covid 19 in the prior period, rebounded strongly, growing 77 percent year on year.
This outperformance was driven by the return of live sport, sales linked to a strong local content line-up and the success of new digital advertising strategies. Commercial subscription revenues increased 50 percent year on year.
Group trading profit increased 5 percent to R6bn, benefiting from 7 percent growth in South Africa, with RoA losses remaining largely in line with the prior period. Trading profit margins were supported by the advertising revenue recovery and continued cost control, but were knocked by a 17 percent increase in content costs, mainly due to the deferral of content costs from full year 2021.
This included major sporting events such as Euro 2020, the British and Irish Lions rugby tour and the Tokyo Olympics, while other drivers included the group's continued ramp-up in local content investment and non-recurring content refunds received in the prior period.
MultiChoice’s consolidated free cash flow of R3.2bn was up a strong 54 percent compared to the prior period, underpinned by focused working capital management and reduced capital expenditure.
Looking ahead, Mawela said: “The expansion of our ecosystem and the investment in opportunities underpinned by technology will bring the next wave of our growth, especially as we have the scale and reach to make this meaningful.”
In the second half of the financial year, the group would be looking to continue scaling its video entertainment services across the continent subject to a stable regulatory environment and taking into account the challenging consumer and macro-economic environment, it said.
It would also focus on delivering its festive season targets for traditional linear broadcasting and streaming services and retaining these customers into the new calendar year.
“As vaccination rates increase, we are hopeful that the worst of Covid-19 is behind us. However, we know that many of our customers, employees and economies will be recovering from the impact for some time to come,” said Mawela.
“We will support our customers with excellent service and the best video entertainment – a place not only to watch but to rest, unite, laugh and dream again.”
BUSINESS REPORT ONLINE