Multichoice

MultiChoice is a leading Africa video   and entertainment company which has been spun-off from its parent  company Naspers, into a stand-alone JSE listed company. The   listing proved to be controversial amongst   the investment community, with the doomsday for cable television sounding its death knell, to be replaced   by entities such as multinationals Netflix and Amazon.

The recent  results seem to have proved that the business model is robust, as is reflected in a solid set of   financials for the year ended 31st March 2020.

Although revenue growth was muted, up only 3%, due to   restrained consumer spending and no increase in its premium package pricing in South   Africa, stringent cost savings   of R1.4bn and a reduction of R800m in the Africa operations,   resulted, in positive leverage.

Trading profit increased by 14% to R8bn, whilst core headline earnings showed a   robust growth of 57% and free cash flow, an important financial metric of management delivery   was up by a substantial 59%.

A strong balance sheet with cash and cash equivalents   of R9.1bn, and  undrawn facilities of R5bn, were some of the predominant features. As was the surprise maiden dividend   of R5.65.

The subscriber base of 19.5 million, consists of 8.4 million households in SA, and 11.1 million in the rest of Africa.   The subscriber base is up by 500,000   users, predominately in the   lower margin mass market. The more lucrative   premium market recorded a loss of 4% or 100,000   subscribers.

Like any media company, the strength of the MultiChoice is   in its total library of 57,000   hours, and local content of 3850 hours   – and its sports broadcasting contracts. These are major assets as well as a future income   streams, with local content rollout gaining   momentum. This is expected to be a major growth driver in the future, having a lower cost   of production profile.

A tie-up with global streaming players Amazon and   Netflix, appears to be a move in the right direction, and should be positive following   the international trend of companies such as Disney, which   has a hybrid model with both streaming as well   as cable TV. Details of the deal are still sketchy.

In a world where IT, is now having a major impact on the media industry, a   deal with Netflix and or Amazon, should infuse a new life into MultiChoice, enabling it to become a competitive emerging market player, and claw back some of its losses at the top end of the market in SA.

Multichoice