MultiChoice experienced substantial losses in FY24, driven by increased investment in Showmax and challenging economic conditions.
MultiChoice is bleeding losses: Here’s what you must know
MultiChoice Group Limited recently released its trading statement for the financial year ending 31 March 2024 (FY24).
The company reported substantial losses compared to the previous year (FY23).
Loss per share increased significantly, from a loss of 815 cents per share last year to an additional expected loss of 106 to 139 cents this year.
Headline loss per share also rose dramatically, from a loss of 301 cents per share last year to an additional loss of 409 to 421 cents this year.
The company’s trading profit, which measures the profit from regular business activities, was expected to decrease by 19% to 23%.
However, when excluding the effects of currency changes and new acquisitions, this profit was projected to increase by 22% to 26%. When excluding losses from Showmax, the increase in trading profit could range from 36% to 40%.
The core headline earnings per share, a measure that excludes unusual items, was expected to decrease by 36% to 40%.
Additionally, the adjusted core headline earnings, which also excluded specific cash losses from Nigeria, were anticipated to decrease by 18% to 22%.
These changes were primarily attributed to several factors, including an adverse economic environment, increased investment in Showmax, and significant foreign exchange losses due to the depreciation of the Nigerian naira against the US dollar.
A one-time impairment of IT systems, driven by a reassessment of business needs, also contributed to the losses.
Increased Showmax investment drives significant losses
A major factor contributing to MultiChoice’s financial struggles in FY24 was the increased investment in Showmax, the company’s streaming service.
While Showmax is a crucial part of MultiChoice’s strategy to stay competitive in the evolving digital entertainment landscape, the substantial costs associated with its expansion and enhancement significantly impacted the company’s bottom line.
The trading statement revealed that Showmax incurred an additional R1.4 billion in trading losses year-on-year.
This substantial investment was aimed at improving content offerings, expanding the subscriber base, and enhancing the platform’s technological infrastructure.
However, these efforts came at a high financial cost, contributing heavily to the overall increase in losses per share and headline losses per share.
Despite these challenges, MultiChoice implemented several strategic measures to mitigate the financial impact.
The company focused on cost optimisation and cash management, which included reducing decoder subsidies and other cost-saving initiatives.
These measures yielded positive economic outcomes, helping to cushion the overall financial blow.
Furthermore, the weak economic environment and the sharp depreciation of the Nigerian naira against the US dollar resulted in foreign exchange losses amounting to R3.6 billion.
This depreciation affected the non-quasi inter-group loans with MultiChoice Nigeria, further exacerbating the financial losses.
MultiChoice also faced a one-time impairment charge of R1.0 billion related to its IT systems.
This charge resulted from a reassessment of business needs in the context of the challenging operating environment, adding to the company’s financial woes.