Multichoice, a satellite television provider, has declared that it will publish a financial report with negative values the next week.
The group claims that its half-year results, which will be made public by November 12, will show a headline loss.
The owner of DStv, SuperSport, and Showmax emphasized in a statement how external exchange rates and macroeconomic swings had hurt its H1 2024.
According to the corporation, “severe pressure in the macroeconomic, foreign exchange rate, and consumer environment in key markets, most notably Nigeria and Zambia, negatively impacted the first half of the 2024 financial year.”
The Nigerian office was responsible for more than R4 billion ($216.9 million) in foreign exchange losses during the previous year, according to the company’s 2024 annual results. It further stated that Nigeria’s $216 million currency loss is four times greater than the total losses from the previous four fiscal years.
Multichoice Group stated that it anticipates reporting an adjusted core headline loss of up to R3.60 per share (South African Rands) in the six months leading up to September 2024, a decrease from a YoY profit of R3.56 per share.
It also noted that the massive investment in Showmax greatly increased the Multichoice group’s financial strain. The current operational environment was also described as “the most challenging” in the company’s history.
The company stressed that to cover the loss and save costs, it aims to leverage on introducing an inflationary pricing strategy.
“As guided in the group’s full-year results for the year ended 31 March 2024, MultiChoice is pursuing an inflationary pricing strategy and targeting R2-billion in cost savings in the group’s full-year results ending 31 March 2025 in order to offset weaker subscriber activity and foreign exchange pressures,” it said.
Huge Investment in Showmax
The Multichoice Group has expressed that its investment in Showmax, a video streaming website, contributed a larger share to its financial decline. Cornered in a bid to surpass streaming competitors like Netflix and Prime Video, the company highlighted that Showmax has reached the peak of its investment cycle.
“Multichoice has entered the peak investment cycle of Showmax and expects losses and headline losses per share to increase as a result of the early life cycle of the Showmax business,” it said. It also expects to report a further R2.1-billion in forex “movements” through its income statement on “non-quasi equity intergroup loans in the current period”.
“The group expects reported trading profit to decline year on year and be close to flat on an organic basis. However, excluding R2.3-billion in forex losses in the group’s rest of Africa business and a R1.6-billion incremental investment in the group’s Showmax business, group trading profit is expected to increase by over 30% year on year due to inflation-led pricing and cost optimization processes.”
Showmax is an online subscription video-on-demand (SVOD) service that launched in South Africa on 19 August 2015. Its majority owner is Multichoice, which owns 70% of the business. American conglomerate NBCUniversal owns 30% in all territories except Nigeria, where NBCUniversal holds an indirect 23.7% stake in the local subsidiary.
Multichoice Financial Loss: Potential Increase in subscription price?
Following its announcement of a negative financial result for H1 2024, expectations will be on how the satellite television company plans to turn its financial books around. In its announcement, Multichoice pointed out that it will use an inflationary pricing strategy to recover its losses.
Recall that on the 1st of May, 2024, Multichoice proceeded with the upward adjustment of its prices for DStv and GOtv subscribers by 25%, despite the court ruling ordering a stay of action. The company announced that the new price regime would take effect on the 15th of May.
Following the price increase, the Nigerian lawyer, Barrister Onifade, asked the Tribunal to order Multichoice Nigeria Limited to pay the sum of N1,000,000,000.00 (One Billion Naira only) or any amount the Tribunal deem may fit appropriate in this circumstance for “deliberately disobeying, contravening, and failure to comply with the Interim Order of this Honourable Tribunal granted on the 29th April 2024.”
Although Multichoice Nigeria challenged the jurisdiction of the Competition and Consumer Protection Tribunal (CCPT) to restrain it from increasing the prices of its DStv and GOtv packages, it was mandated to pay a N150 million penalty.
Fingers are crossed on whether Multichoice will make a decision to introduce another round of price increases.
