MultiChoice reported a 41% rise in earnings for the half-year to September, benefiting from higher entertainment demand during the Covid-19 lockdown as it was hit by reduced advertising revenue.
The DStv operator, which has attracted the attention of French broadcasting group Canal+ added 1.2-million customers during the period, crossing the 20-million mark for the first time to 20.1-million. The subscriber base is split between 11.4-million households (57%) in the rest of Africa and 8.7-million (43%) in SA.
Canal+ is now Multichoice’s second-largest shareholder. Last month, the pay-TV subsidiary of media conglomerate Vivendi increased its stake from 6.5% to 12% within three weeks. The stake is valued at R11bn.
Calvo Mawela, MultiChoice's group CEO, told Business Day on Thursday that the company had a long-standing relationship with Canal+, and it was now being extended.
“We have moved on into discussions about core productions [with Canal+]. That’s something that’s currently happening and will come out very soon. So there is a lot of collaboration between ourselves and Canal+.”
“They’re very bullish about the African content and that’s the basis on which they are making an investment. They’ve got confidence in what we’re doing as a company and are showing that confidence by taking a stake in our company,” Mawela said.
“As to where it’s going to go, I think only time will be able to tell,” he said.
Market reaction was muted on Thursday. MultiChoice’s share price was down 0.14%, closing closed at R124.74.
Peter Takaendesa, head of equities at Mergence Investment Managers, said MultiChoice produced “a decent result”, given the tough times many JSE-listed companies faced, but “the share price had risen already” due to the Canal+ investment, explaining the muted market response on the day.
This set of earning was probably already priced into the current share price, Takaendesa said.
Group revenue rose 2% to R26.1bn as subscription revenue of R22.2bn rose 5% year on year.
The group said that revenue generation was affected negatively due to the Covid-19 pandemic in two main areas. First, advertising revenue fell R600m, mainly due to a lack of sports 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,” MultiChoice said.
MultiChoice also battled with commercial subscriptions, which were R300m lower than in the prior period as hotels, restaurants and other commercial customers were largely closed during lockdown. Though business in the hospitality industry has resumed in recent months, the group expected this to take some time to fully normalise.
In addition to these headwinds, Renier de Bruyn, investment analyst at Sanlam Private Wealth, said “currency volatility will remain an issue for MultiChoice and the impact of the lower oil price can already be seen through lower foreign exchange availability in key markets such as Nigeria”. He said noted that premium subscribers in SA continued to shrink for the group.
Core headline earnings were up 41% at R2.7bn versus those of the previous matching period.
The group said 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.
MultiChoice continued its strategy of investing in local content. The group said it produced 1,870 additional hours of content, despite disruption caused by the strict lockdown earlier in 2020.
No dividend was declared for the period.
Update: November 12 2020
This article has been updated with more information.
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