MultiChoice reports annual loss amid currency volatility and consumer spending decline

South African pay television company MultiChoice Group (MCGJ.J) reported a pre-tax loss of 706 million rand ($38 million) for the fiscal year ending in March. This marks a significant downturn from the previous year’s pre-tax profit of 921 million rand. The loss has been attributed to currency volatility and weakened consumer spending.

The company’s financial performance has been adversely impacted by growing debt issues in numerous African nations and investors' risk aversion towards African exports, which have put substantial pressure on foreign currency reserves. This volatility, combined with power challenges in key markets like South Africa and a weak consumer environment exacerbated by rising inflation and high interest rates, has created a challenging operating environment for MultiChoice's customers and business segments.

MultiChoice's group revenue declined by 5% to 56 billion rand, although it saw a 3% increase when adjusting for currency fluctuations. The company, which owns DStv and the Showmax video streaming service, reported that its operating profit fell by 30% to 7.1 billion rand, down from 10.2 billion rand the previous year.

In response to these challenges, MultiChoice announced plans to accelerate its cost-saving measures, targeting savings of 2 billion rand in the new financial year. The company also plans to cut capital expenditure and focus on customer retention to mitigate further financial losses.

The company's active subscriber base fell by 9% to 15.68 million, primarily due to a 13% decline in the Rest of Africa segment. In countries like Nigeria, many customers prioritized essential needs over entertainment. The South African market saw a 5% drop in subscribers, with many potential customers unable to afford the service or opting out due to rolling power cuts experienced last year.

Despite these setbacks, Showmax, which was relaunched in February, has shown promising growth. Its paying subscriber base increased by 16% from the migrated base at the time of relaunch to the end of the year, indicating a positive reception to the revamped service.

Shares of MultiChoice were down 0.2% at 1448 GMT, against a 1.6% rise in the broader market index, reflecting investor concerns over the company’s financial health and future prospects.