Nigeria’s Weak Spending and Purchasing Power Hit MultiChoice Earnings as Subscribers Drop

Foreign exchange woes in Nigeria and a drop in subscribers significantly impacted the earnings of Africa’s largest pay TV group, MultiChoice, in the financial year ending March 2024. The company reported on Wednesday that total subscribers, measured on a 90-day active basis, fell by 11% to 20.9 million from 23.5 million in the previous year.

Despite these challenges, MultiChoice Group demonstrated resilient operational performance for the year, delivering a 26% trading profit margin in South Africa and increasing trading profit in the rest of Africa by 48%. Key strategic milestones included the launch of Showmax 2.0, SuperSportBet, and Moment, which are now revenue-generating and support the group’s future growth prospects.

Key Highlights from MultiChoice’s Financial Year
Subscriber Base: Overall active subscribers declined by 9% due to a challenging consumer environment. This was primarily driven by a 13% decline in the rest of Africa, with Nigeria, Angola, and Zambia most affected. The South African business showed more resilience, with a 5% decline.
Group Revenue: Increased by 3% on an organic basis. However, due to weaker local currencies and consumer pressure, reported group revenue declined by 5% to ZAR 56.0 billion.
Subscription Revenues: Grew by 2% organically but declined by 7% on a reported basis due to a weaker Naira.
Group Trading Profit: Increased by 24% organically despite a ZAR 1.4 billion investment in Showmax. However, after accounting for the ZAR 4.5 billion impact of foreign exchange weakness, reported trading profit declined by 21% to ZAR 7.9 billion.
Adjusted Core Headline Earnings: Decreased by 20% to ZAR 1.3 billion due to weaker trading profitability, despite higher realised hedging gains and benefits from a narrower gap between official and parallel Naira rates.
Free Cash Flow: Amounted to ZAR 589 million, impacted by lower profitability and ZAR 1.7 billion in Showmax platform payments.
Local Content Production: MultiChoice remains the largest producer of original content on the African continent, with over 6,500 hours of local content produced in FY24 and a library exceeding 84,000 hours.
SuperSport Highlights: Broadcast 34,490 live events, including the Rugby World Cup, Cricket World Cup, AFCON, FIFA Women’s World Cup, and Netball World Cup.
Segmental Review
South Africa Pay-TV (MultiChoice South Africa)
The South African business saw a 5% decline in active subscribers, now at 7.6 million households. Power outages on 275 days of the year further discouraged potential subscribers without backup power. Total revenues declined by 2% to ZAR 33.6 billion, partly offset by new revenue streams like the insurance business, which saw a 35% increase in premium revenue.

Rest of Africa Pay-TV (MultiChoice Africa)
The rest of Africa faced severe macro-economic challenges, with high inflation and extreme currency depreciation in core markets like Nigeria, Angola, Kenya, and Zambia, impacting USD revenues by 32%. The active subscriber base declined to 8.1 million, but effective retention efforts improved the subscriber mix. Cost-saving initiatives and reduced decoder subsidies enabled a 48% increase in trading profit to ZAR 1.3 billion.

Sub-Saharan Africa SVOD (Showmax)
Showmax relaunched across 44 markets in sub-Saharan Africa on Peacock’s platform, achieving a 22% revenue growth to ZAR 1.0 billion. However, trading losses increased to ZAR 2.6 billion, below the expected range. Showmax’s local content ramped up, with popular shows driving viewership.

Future Prospects
MultiChoice’s linear video-entertainment business remains a core part of its operations, providing a base for expanding service offerings. The group plans to scale Showmax, Moment, SuperSportBet, and drive growth in insurance, DStv Internet, and DStv Stream. To mitigate economic challenges, MultiChoice aims to enhance business efficiency and cost optimisation, targeting ZAR 2 billion in cost savings.

The group’s strategic plans and adaptability position it well to thrive once currencies stabilize and economies rebound.