Wrap Text
Condensed consolidated interim financial results for the period ended 30 September 2020
MultiChoice Group Limited
(Registration number: 2018/473845/06)
JSE share code: MCG
ISIN: ZAE000265971
REVIEWED INTERIM RESULTS ANNOUNCEMENT
Condensed consolidated interim financial results for the period ended 30 September 2020
EXECUTIVE REVIEW OF OUR PERFORMANCE
MULTICHOICE GROUP (MCG OR THE GROUP) DELIVERED RESILIENT RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2020
The group added 1.2m 90-day active subscribers year on year (YoY) to close the period ended 30 September 2020 (1H FY21) on
20.1m households and exceeds the 20m subscriber milestone for the first time. This represents growth of 6% YoY, similar to the
prior year, as increased consumer demand for video entertainment services and an easing of electricity shortages in southern
Africa were offset by rising consumer pressure in many markets. The 90-day subscriber base is split between 11.4m households
(57%) in the Rest of Africa and 8.7m (43%) in South Africa.
Revenue increased 2% (-1% organic) to ZAR26.1bn, with subscription revenues of ZAR22.2bn increasing a solid 5% (3% organic)
YoY. Top-line momentum was significantly impacted by COVID-19 in the following areas:
- Advertising revenue declined ZAR0.6bn YoY, mainly due to a lack of sport advertising and a generally softer advertising market
as a result of lower economic activity. This has, however, returned to nearly pre-COVID-19 levels in the months of August
and September.
- Commercial subscriptions were ZAR0.3bn lower than the prior period with hotels, restaurants and other commercial customers
largely closed during lockdowns. Although business in the hospitality industry has resumed in recent months, it is expected
to take some time to fully normalise.
Group trading profit rose 19% to ZAR5.7bn (38% organic), benefitting from a ZAR0.5bn (ZAR1.2bn organic) reduction in losses
in the Rest of Africa and a resilient performance in South Africa. The trading profit impact of COVID-19 was largely neutral,
as the ZAR0.9bn revenue loss mentioned above was offset by ZAR0.8bn in delayed content costs.
A strong focus on cost reduction allowed for a further ZAR1bn in costs being eliminated from the base during the period.
Overall costs decreased 2% compared to the prior period (-9% organic) and resulted in the group maintaining its target of
delivering positive operating leverage by keeping the growth rate in costs below that of revenue growth.
Core headline earnings, the board's measure of sustainable business performance, was up 41% on the prior period at ZAR2.7bn.
The strong earnings growth was attributable to the improvement in trading profit and lower realised foreign exchange losses.
Consolidated free cash flow of ZAR2.1bn was down 13% compared to the prior period. This was mainly due to the end of a
contractual agreement on the southern Africa transponder lease whereby an upfront prepayment reduced lease payments for the
first 36 months of the lease term, together with current period foreign exchange movements (ZAR0.5bn), as well as an increase
in capital expenditure related to a multiyear investment programme to futureproof the group's customer service, billing and
data capabilities (ZAR0.4bn).
SALIENT FEATURES
2020 versus
2020 2019 2019
Period ended 30 September ZAR'm ZAR'm %
Revenue 26 055 25 655 2
Operating profit 5 776 4 926 17
Trading profit 5 699 4 781 19
Free cash flow 2 058 2 360 (13)
Core headline earnings per ordinary share (SA cents) 627 437 43
Earnings per ordinary share (SA cents) 573 336 71
Headline earnings per ordinary share (SA cents) 572 341 68
Net asset value per ordinary share (SA cents) 2 111 2 291 (8)
KEY PERFORMANCE INDICATORS
2020 versus 2020 versus
2020 2020 2019 2019
2019 Currency Organic 2020 Reported Organic
30 September Reported impact growth Reported % %
90-day active subscribers ('000) 18 877 n/a 1 184 20 061 6 6
South Africa 8 163 n/a 541 8 704 7 7
Rest of Africa 10 714 n/a 643 11 357 6 6
90-day active ARPU (ZAR)
Blended 189 3 (5) 187 (1) (3)
South Africa 292 - (14) 278 (5) (5)
Rest of Africa 111 6 1 118 6 1
GROUP FINANCIALS
2020 2020 2020 versus 2020 versus
2019 Currency Organic 2020 2019 2019
IFRS impact growth IFRS IFRS Organic
Period ended 30 September ZAR'm ZAR'm ZAR'm ZAR'm % %
Segmental results
Revenue 25 655 590 (150) 26 095 2 (1)
South Africa 16 952 - (441) 16 511 (3) (3)
Rest of Africa 7 796 446 444 8 686 11 6
Technology 907 144 (153) 898 (1) (17)
Trading profit 4 781 (883) 1 801 5 699 19 38
South Africa 5 156 - 627 5 783 12 12
Rest of Africa (830) (749) 1 241 (338) 59 150
Technology 455 (134) (67) 254 (44) (15)
Revenue and costs by nature
Revenue 25 655 590 (150) 26 095 2 (1)
Subscription fees 21 239 390 617 22 246 5 3
Advertising 1 638 13 (572) 1 079 (34) (35)
Set-top boxes 848 34 59 941 11 7
Technology contracts and licensing 907 144 (153) 898 (1) (17)
Other revenue 1 023 9 (101) 931 (9) (10)
Operating expenses 20 874 1 473 (1 951) 20 396 (2) (9)
Content 8 949 656 (1 953) 7 652 (14) (22)
Set-top box purchases 2 530 159 112 2 801 11 4
Staff costs 2 927 232 (232) 2 927 - (8)
Sales and marketing 1 033 35 (56) 1 012 (2) (5)
Transponder costs 1 318 95 (34) 1 379 5 (3)
Other 4 117 296 212 4 625 12 5
The group continued its strategic focus of investing in local content and produced 1 870 additional hours, despite
disruptions caused by strict early COVID-19 lockdown measures. As a result, the total local content library is now nearing
59 000 hours.
As one of the largest taxpayers in Africa, the group paid direct cash taxes of ZAR2.0bn, slightly more than the prior
year due to higher profitability.
Net interest paid increased to ZAR252m, primarily as a result of the translation of interest on USD transponder lease
liabilities at a weaker ZAR:USD exchange rate.
The strength of the balance sheet is critically important given the uncertain longer-term economic impact of COVID-19
and potential challenges for certain markets in the Rest of Africa as a result of a lower oil price. Some ZAR9.0bn in
net assets, including ZAR7.3bn in cash and cash equivalents, combined with ZAR4.5bn in undrawn facilities, provide
ZAR11.8bn in financial flexibility to fund the group's operations. This strong financial position is after ZAR4bn was
utilised to settle the MCG and Phuthuma Nathi dividends in September.
The group operates in 50 countries, resulting in significant exposure to foreign exchange volatility. This can have a
notable impact on reported revenue and trading profit metrics, particularly in the Rest of Africa where revenues are
earned in local currencies while the cost base is largely US dollar denominated. Where relevant in this short-form
announcement, amounts and percentages have been adjusted for the effects of foreign currency, as well as acquisitions and
disposals to better reflect underlying trends. These adjustments are quoted in brackets as organic, after the equivalent
metrics reported under International Financial Reporting Standards (IFRS). These measures constitute pro forma financial
information in terms of the JSE Listings Requirements.
The company's external auditor has not reviewed or reported on forecasts included in this short-form announcement.
Dividend
No dividend has been declared based on the interim results.
Directorate
Mrs RJ Gabriels resigned as interim company secretary on 11 June 2020 with Ms CC Miller appointed as group company
secretary on the same date.
Mr MI Patel, the board chair, was recategorised as a non-executive director, with effect from 1 October 2020.
Mr DG Eriksson retired as an independent non-executive director on 11 June 2020.
No other changes have been made to the directorate of the group.
Preparation of the short-form announcement
The preparation of the short-form announcement was supervised by the group's chief financial officer, Tim Jacobs,
CA(SA). These results were made public on 12 November 2020.
ADR programme
Bank of New York Mellon maintains a Global BuyDIRECTSM plan for MultiChoice Group Limited. For additional information,
visit Bank of New York Mellon's website at www.globalbuydirect.com or call Shareholder Relations at 1-888-BNY-ADRS or
1-800-345-1612 or write to Bank of New York Mellon, Shareholder Relations Department - Global BuyDIRECT, 462 South
4th Street, Suite 1600, Louisville, KY 40202, United States of America (PO Box 505000, Louisville, KY 40233-5000).
Important information
This report contains forward-looking statements as defined in the United States Private Securities Litigation Reform
Act of 1995. Words such as 'believe', 'anticipate', 'intend', 'seek', 'will', 'plan', 'could', 'may', 'endeavour' and
similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying
such statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future
events and circumstances and should be considered in light of various important factors. While these forward-looking
statements represent our judgements and future expectations, a number of risks, uncertainties and other important factors
could cause actual developments and results to differ materially from our expectations. The key factors that could cause
our actual results performance, or achievements to differ materially from those in the forward-looking statements
include, among others, changes to IFRS and the interpretations, applications and practices subject thereto as they apply to
past, present and future periods; ongoing and future acquisitions, changes to domestic and international business and
market conditions such as exchange rate and interest rate movements; changes in the domestic and international regulatory
and legislative environments; changes to domestic and international operational, social, economic and political
conditions; the occurrence of labour disruptions and industrial action and the effects of both current and future litigation.
We are not under any obligation to (and expressly disclaim any such obligation to) revise or update any forward-looking
statements contained in this report, whether as a result of new information, future events or otherwise. We cannot give any
assurance that forward-looking statements will prove to be correct and investors are cautioned not to place undue
reliance on any forward-looking statements contained herein.
Further information
This shortform announcement is the responsibility of the directors and is only a summary of the information in the
full condensed consolidated interim financial statements. The full condensed consolidated interim financial statements
were released on SENS on 12 November 2020 and can be found on the company's website at www.multichoice.com. Copies of
the full condensed consolidated interim financial statements may also be requested from the company's registered office,
at no charge, during office hours. Any investment decision should be based on the full condensed consolidated interim
financial statements at https://senspdf.jse.co.za/documents/2020/JSE/ISSE/MCGE/12Nov20.HY.pdf published on SENS and on
the company's website. The information in this announcement has been extracted from the reviewed interim financial
statements on our website, but the announcement itself was not reviewed.
On behalf of the board
Imtiaz Patel Calvo Mawela
Chair Chief executive
Johannesburg
12 November 2020
Directorate
Independent Non-executive Executive
non-executive directors directors directors
JA Mabuza (Lead independent director) MI Patel (Chair) CP Mawela (CEO)
SJZ Pacak FLN Letele TN Jacobs (CFO)
KD Moroka JJ Volkwyn
CM Sabwa
FA Sanusi
L Stephens
E Masilela
Registered office: MultiChoice City, 144 Bram Fischer Drive, Randburg 2194, South Africa PO Box 1502, Randburg, 2125
Transfer secretaries: Singular Systems Proprietary Limited
(Registration number: 2002/001492/07), PO Box 785261, Sandton 2146, South Africa
Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)
www.multichoice.com
Date: 12-11-2020 02:30:00
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