MultiChoice shares fall to record low as forex losses mount

MultiChoice Group will report a loss per share of about R3.10 for the six months ended 30 September after it warned that foreign exchange losses will paint its income statement in red ink.

The headline loss per share – a metric that is closely watched by South African investors – will come in at between R2.29 and R2.33, down from a 58c/share loss a year ago, when it reports its interim results next week.

MultiChoice blamed currency movements, some of which are unrealised, for the erosion in its profitability.

The trading update, published at 4pm on Thursday afternoon, sent MultiChoice’s shares on the JSE tumbling to their weakest ever at R65.25 apiece before recovering some ground. They were trading at R67.87 at 4.14pm, down 3.7% on the session.

“The expected increase in losses and headline losses per share is primarily due a sharp depreciation in local currencies against the US dollar,” it said. “This primarily impacts the revaluation of US dollar-denominated transponder leases and the non-quasi equity foreign exchange losses on the intergroup loans with MultiChoice Nigeria.”

Losses were further impacted by the increased investment in Showmax ahead of its relaunch in the first quarter of 2024.

Nigeria headache

“Management’s focus on pricing and cost disciplines, as well as on subscriber retention, a better customer mix and lower decoder subsidies, delivered an encouraging trading performance on an organic basis,” it said. “On a reported basis, an adverse economic and exchange rate environment impacted negatively on the group’s financial results.”

MultiChoice has long preferred to use trading profit and core headline earnings per share as the financial metrics that best show its underlying performance. These numbers adjust for non-recurring and non-operational items.

It has now added adjusted core headline earnings per share to reflect the impact of losses incurred on cash remittances from rest of Africa (mainly Nigeria).

Read: Load shedding double whammy for MultiChoice

“Given the ongoing disconnect between the official naira rate, used for reporting purposes, and the unofficial parallel naira rate at which cash is remitted from Nigeria, the board has taken the decision to introduce adjusted core headline earnings that includes the impact of losses incurred on cash remittances (after tax and minorities) as an earnings measure. The group expects adjusted core headline earnings per share to be between 22% and 27% higher than the prior period’s unreported adjusted core headline earnings of R2.84.”

Incorporating the R500-million in additional Showmax costs, and despite a 16% increase in local content investment, trading profit on an organic basis (reflecting results in constant currency and excluding M&A) is expected to be between 7% and 12% higher than the R6.1-billion a year ago, it said.

After absorbing a R1.7-billion cost because of weaker currencies, trading profit on a reported basis is expected to be between 16% and 21% lower than the R6.1-billion previously reported. The group expects core headline earnings per share to be between 3% and 8% lower than a year ago.  – © 2023 NewsCentral Media

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