MultiChoice reports strong revenue, profits despite a tough economic climate
CFO Tim Jacobs said the Pay TV operator is improving its services, particularly online streaming.
In the face of intensified competition from video-on-demand services such as Netflix, Amazon Prime Video and YouTube and consumers downgrading their DStv subscriptions due to a tough economic climate, MultiChoice continues to remain resilient.
In its maiden results since it unbundled from parent company Naspers and listed on the JSE in February 2019, MultiChoice reported a strong set of full-year results for the year ended March 2019.
MultiChoice is the owner and operator of pay TV service DStv and online streaming services Showmax and DStv Now.
The company’s operating profit rose by 11 percent to R7 billion on the back of revenue that grew by 6 percent to R50.1 billion. Core headline earnings, a key measure for sustainable business performance, was up 10 percent to R1.8 billion and consolidated free cash flow doubled to R3.3 billion.
The company said its success in the rest of Africa was as one of the contributing factors to its strong results. Underscoring this is that MultiChoice’s local business contributed R33.7 billion, the rest of Africa added R14.8 billion and the technology segment R1.6 billion.
The company has exposure to 50 countries across the African continent.
MultiChoice said the strong operational performance was achieved “despite continued macroeconomic headwinds and consumer affordability pressure, illustrating the resilience of our products.”
MultiChoice’s business is a numbers game as the more subscribers it attracts the more profitable it can be. The company added 1.6 million subscribers across Africa, pushing its total subscriber base to 15.1 million. For the first time, MultiChoice’s subscriber base in the rest of the continent surpassed domestic subscriptions by 300,000.
Most of its growth comes from its lower-tier pay-television bouquets. However, the DStv Premium segment “remained under pressure as consumers were impacted by rising fuel and other costs and we competed for [a] share of wallet”. As a result, average revenue per user declined from R335 to R322.
MultiChoice CFO Tim Jacobs told Tech Central that to stop the decline in the DStv Premium segment, it will improve its online streaming offerings, including Showmax, which now offers live sporting events. It has also decided against a price increase for DStv Premium customers in 2019, with the scope for short-term price hikes also very limited.
“We offer our OTT [over-the-top such as Showmax] products to our Premium subscriber base for free. We are enhancing that all the time. There are three strategies we are deploying in OTT. Firstly, we have introduced sport as a test run to see how the subscriber base reacts to getting that on Showmax. Secondly, we have been working very hard to improve the subscriber experience. We have made significant strides in the past year to improve how you navigate the app. There’s still some improvement to go, but we have started to see some positive feedback from customers. The third thing we are doing is improving the search engine that helps you with content discovery. We’re really trying to enhance these OTT products to support customers. We are also locking prices, like we did on DStv Premium for the year ahead. If affordability is the issue, we really don’t want to put the customer under any more pressure than they already are.”
MultiChoice has realised that the only way it can outpace its competitors such as Netflix, Amazon Prime Video and YouTube is to invest in content. The company had a capital expenditure of R1 billion, which went into, among others, information technology infrastructure to improve the customer experience.
The group continued to invest in local content, adding a further 4 600 hours to take the local content library to nearly 50,000 hours. The spend on local general entertainment content as a percentage of total general entertainment content increased from 38 percent to 40 percent, in line with the strategy to reach a target of 45 percent. CFO South Africa