MultiChoice shares slump on dire South Africa outlook

DStv parent MultiChoice has warned of a significant deterioration in the operating environment in South Africa that is set to harm its trading margins in the second half of its 2023 financial year.

The warning sent its shares plunging lower in Johannesburg on Tuesday, with the counter down more than 15% at 10.19am.

In a voluntary trading update issued after markets closed on Monday, MultiChoice said the operating environment in South Africa has “deteriorated beyond expectations”, mainly due to intensified load shedding.

The dire outlook comes despite an uptick in subscribers driven by the broadcast of the 2022 Fifa World Cup.

“When MultiChoice reported first-half results on 10 November 2022, it cautioned on the ongoing economic challenges facing various markets, but it was looking forward to second-half subscriber growth and activity being buoyed by the broadcasting of the Fifa World Cup (FWC) from November to December and festive season momentum,” it said.

“Although the FWC delivered subscriber numbers broadly in line with expectations, the operating environment in South Africa has deteriorated beyond expectations over the past few months. Sustained high levels of loadshedding is having a significant impact on the activity levels of the customer base.

Trading margin

“Combined with the negative effect of a weak economy on consumer spending, and thus on the group’s customer mix, indications are that second-half revenue growth in the South African business will be below expectations. Given a largely fixed cost base, as well as the additional Showmax costs incurred in relation to the recently announced agreement with Comcast, this will result in the segment’s FY23 trading margin being between 23% and 28%, which is below the market guidance of 28-30%.”

Read: NBCUniversal takes 30% stake in restructured Showmax

It’s not all bad news, though. The Rest of Africa segment – MultiChoice’s Africa business outside South Africa – is still on track to return to trading profitability in the 2023 financial year, it said.  – © 2023 NewsCentral Media

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