MultiChoice swings to a full-year loss

South African pay television company MultiChoice has reported a significant swing to a full-year loss, with headline earnings dropping by over 100%. Despite this, revenue saw a 7% growth, showcasing a mixed financial performance for the company. In a recent interview with CNBC Africa, Tim Jacobs, the Chief Financial Officer at MultiChoice, shed light on the operating environment that influenced the company's performance. Jacobs highlighted the contrasting dynamics between the South African market and the rest of Africa region. While South Africa faced challenges due to economic pressures and power outages impacting consumer spending, the company experienced strong subscriber growth and profitability in other African markets. The company managed to deliver a cost-saving of 1.3 billion Rand, exceeding their target of 800 million Rand. However, the rapid decline in revenues in South Africa outweighed the cost-saving efforts. Conversely, the rest of Africa showed a promising performance with MultiChoice achieving a profitable outcome. The company focused on scaling the business in the region over the past four years and delivered a trading profit of 900 million Rand, surpassing the break-even target. Despite facing foreign exchange losses, particularly in Nigeria, MultiChoice aims to attain pre-cash flow break-even in the region in the upcoming year and become self-sufficient in funding future foreign exchange extraction losses. Jacobs expressed confidence in the market potential in Africa, emphasizing the opportunities for growth in regions such as Nigeria. One of the key strategies MultiChoice adopted to mitigate foreign exchange risks was to reduce exposure to US dollars by shifting towards local content production. As of now, 46% of the cost base is denominated in US dollars, down from over 50% previously. By focusing on producing local content, the company generated 50% of total general entertainment hours from local content, reaping cost benefits and enhancing audience engagement. The success of this strategy has prompted MultiChoice to partner with Comcast in Showmax, planning to increase original content production for the platform. Reflecting on the recent Nigerian currency reform, Jacobs acknowledged the challenges faced in extracting cash from the market, resulting in a significant trading profit loss. However, he remains optimistic about the potential benefits of a stabilized single unitary currency in the long term. Jacobs believes that a unified currency could positively impact the company, provided the central bank of Nigeria ensures liquidity at a stable rate. Despite short-term uncertainties, the potential for a single currency system in Nigeria could create a more favorable operating environment for MultiChoice. Looking ahead, MultiChoice sees significant growth opportunities in the Showmax business, particularly through its partnership with Comcast and the upcoming launch of the Peacock platform. The company is gearing up to introduce new products and enhance the platform with sports offerings, aligning with the evolving preferences of consumers. With a strong focus on innovation and adaptability, MultiChoice aims to capitalize on emerging market trends and expand its presence across geographies. As the company navigates through challenges in the South African market and explores avenues for growth in Africa, the strategic emphasis on local content production and partnership ventures positions MultiChoice for sustainable success in the competitive pay television industry.