Entertainment firm MultiChoice has bet big on its investment on the 2022 World Cup, as it hopes to attract new subscribers, putting a squeeze on its interims as a result.
The Fifa World Cup Qatar 2022 kicks off on November 20 and ends on December 18. SuperSport will be the only platform where customers across the group’s 50 markets can watch all 64 matches live and in a suitable time zone for African viewers.
In its results for the period ended September 30, 2022, the group said this working capital investment increased decoder subsidies and reduced group trading profit by R7 billion and free cash flow by R8bn, primarily in the rest of Africa.
In an interview, MultiChoice chief financial officer and executive director Tim Jacobs said whenever MultiChoice had a big event like the World Cup, it always does a lot of stock build-up.
“If you normalise our numbers for that, what you see is that we have a substantial organic growth in trading profit of 6%.”
He said given the tough economic conditions “we achieved a good recovery of volumes, and secondly, through very disciplined cost control, we saved about R600m in the first six months of the year”.
While Jacobs said he could not say what type of viewership numbers they expected this year, he said in past World Cup years MultiChoice would target growth of 1.2 million to 1.5 million subscribers.
“We are definitely expecting to see a significant increase in subscriber growth this year. We also have the only platform that has all 64 matches this year. So that we think is going to be quite a strong positive for us,” he said.
Jacobs said following the World Cup, MultiChoice had a strategy in place to keep the subscribers.
“We have a clear strategy. Depending on whether in our linear businesses or whether in our Showmax businesses, we are making sure that we are increasing our investment in new content,” he said.
Jacobs said the company increases local content in the first six months of every year. It increased it by another 15% over the past year.
“The reason for that is that the demand for local content is still outstripping demand (for other content). If we produced 30% of our total programming hours as local content, demand is sitting at about 40 to 45%. We believe that there’s still a significant opportunity to keep attracting audiences and hold them on the base,” he said.
The group was also bringing in a lot of new products to markets that wee enablers.
“We have DSTV fixed LTE, so fixed internet, which is capped, and now we’ve recently introduced uncapped fibre products, and we are bundling that with our DStv. So the combination of getting good pricing with these bundled products, and some good content line-ups, we believe is going to be a strong driver into the next financial year,” he said.
MultiChoice’s core headline earnings rose by 2% year-on-year to R2bn. However, consolidated free cash flow of R1.8bn was down 44% compared to the prior period, knocked by the increased investment in decoder subsidies.
Revenue increased 7% to R28.6bn, with the weaker rand increasing the revenue contribution on a translation of the rest of Africa and Technology segments, both of which report in US dollars.
“Subscription revenues amounted to R23.8bn, up 8% year-on-year, 3% organic, driven mainly by the rest of Africa that delivered a 27% increase, 12% organic. Advertising revenues were up a solid 5%, 2% organic, as growth trends normalised in a post-Covid-19 environment,” it said.
Jacobs said the South African business was working incredibly hard to manage the very saturated top end of the market and the mid-markets.
“South Africa’s revenue decreased 2% to R17.4bn due to a weaker-than-normal first quarter when the impact of the football off-season was exacerbated by an extremely challenging consumer climate,” the group said.
The group did not declare a dividend.
BUSINESS REPORT