Release Date: June 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MultiChoice Group Ltd (JSE:MCG, Financial) achieved a trading profit margin of 26% in its South African business, despite challenging macroeconomic conditions.
- The company delivered close to ZAR2 billion in cost savings and reduced decoder subsidies by more than ZAR1.5 billion.
- Showmax experienced record-breaking subscriber growth in March, with 88% of migrated customers reactivating their accounts.
- MultiChoice Group Ltd (JSE:MCG) produced over 6,500 hours of local content, accounting for more than half of its general entertainment spend.
- The company successfully launched SuperSportBet in South Africa, becoming the official betting partner of local soccer clubs Kaizer Chiefs and Orlando Pirates.
Negative Points
- The company faced a significant ForEx impact of over ZAR4 billion, more than the last four years combined.
- Load shedding in South Africa negatively impacted subscriber activity and revenue.
- The Rest of Africa segment experienced a 15% drop in subscriber growth, with a closing base of 8.1 million active customers.
- Showmax incurred additional investment costs of ZAR1.4 billion, contributing to a trading loss of ZAR2.6 billion.
- MultiChoice Group Ltd (JSE:MCG) experienced unprecedented currency depreciation, resulting in ZAR4.5 billion in foreign exchange losses.
Q & A Highlights
Q: Your guidance for FY25 is for flat trading profit margins. How do you plan to achieve this given the subscriber losses and cost pressures?
A: We have increased prices in line with inflation and are focusing on growing ancillary products like DStv Stream, insurance, and internet services. We also have a multi-year cost reduction program targeting ZAR2 billion in savings for FY25, which includes renegotiating contracts and optimizing operations. (Calvo Mawela, CEO; Timothy Jacobs, CFO)
Q: What is the expected financial impact of the Showmax relaunch in FY25?
A: We anticipate an annualization of costs into FY25 due to the late launch in FY24. This includes full-year depreciation of the Peacock platform and additional content spend. We expect Showmax to reach break-even by the end of FY27. (Timothy Jacobs, CFO)
Q: How comfortable are you with MultiChoice's liquidity given the current economic challenges?
A: We have ZAR2.8 billion in available cash and ZAR4.1 billion in undrawn facilities. We are focusing on disciplined cost management and have identified savings opportunities, including renegotiating satellite contracts. (Timothy Jacobs, CFO)
Q: How did the decision to reduce decoder subsidies impact subscriber numbers, and will you reinstate these subsidies if losses continue?
A: The reduction in decoder subsidies, along with price increases, accounted for 20-40% of the subscriber decline. The most significant factor was the macroeconomic environment. We will continue to monitor the situation but have no immediate plans to reinstate subsidies. (Calvo Mawela, CEO)
Q: Are there opportunities to reduce content costs given the decline in subscriber numbers?
A: We are focusing on more efficient scheduling, sharing content across platforms, and leveraging our partnership with Comcast for cost-effective content. We have also hedged our dollar costs to manage currency risk. (Timothy Jacobs, CFO)
Q: What is the outlook for Showmax's revenue targets, and is the $1 billion target still achievable?
A: We remain confident in achieving the $1 billion revenue target within the next four to five years. The successful migration to the Peacock platform and the development of additional payment channels will support this growth. (Timothy Jacobs, CFO)
Q: Will you maintain the current pace of price increases given the subscriber pressure?
A: We will continue to follow inflation-linked price increases. Our product offers great value, and we believe this strategy is necessary to manage the financial impact of currency movements. (Calvo Mawela, CEO; Timothy Jacobs, CFO)
Q: Is the renegotiation of rest of Africa satellite contracts included in the ZAR2 billion cost-saving target?
A: Yes, the target includes savings from renegotiating satellite contracts. We are looking to reduce capacity significantly, but details will be shared once negotiations are complete. (Timothy Jacobs, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
