MultiChoice tanks as it warns of R1 billion drop in trading profit
MultiChoice has warned shareholders to expect six-monthly trading losses between 16% (R1 billion) and 21% (R1.3 billion) lower than the R6.1 billion it previously reported.
The company is set to release its interim trading statement for the half-year ended 30 September 2023 next week.
It blamed weakening currencies, particularly the Nigerian naira, and increased investment in Showmax for the mounting losses.
MultiChoice said it absorbed a R1.7 billion cost due to weaker currencies, resulting in the trading profit impact.
To try and provide a picture of the core business without the cash remittance losses out of the Rest of Africa (especially Nigeria), the MultiChoice board approved a new adjusted core headline earnings per share metric.
“Adjusted core headline earnings is calculated by adjusting core headline earnings for cash extraction losses, mainly in Nigeria, net of tax and the non-controlling interest in Nigeria,” MultiChoice explained.
“Incorporating R0.5 billion in additional Showmax costs and despite a 16% increase in local content investment, trading profit on an organic basis (i.e. reflecting results on a constant currency basis and excluding M&A) is expected to be between 7% (ZAR0.4bn) and 12% (ZAR0.7bn) higher.”
MultiChoice expects core headline earnings per share for the period to be between 3% (R0.14) and 8% (R0.38) lower than the prior period’s reported R4.74.
“This number includes the impact of realised foreign exchange gains and losses but excludes the R0.5 billion in losses on cash remittances from Nigeria,” MultiChoice stated.
“It also incorporates the higher investment in Showmax, primarily related to dual platform costs that will normalise once customers have been migrated from the current platform to the new Peacock platform.”
Factoring out the impact of cash remittance losses, MultiChoice said it expects to report adjusted core headline earnings per share between 22% (R0.62) and 27% (R0.77) higher than the prior period’s unreported adjusted core headline earnings of R2.84.
Looking at its non-adjusted earnings per share, MultiChoice said the expected increase in losses and headline losses was primarily due to a sharp depreciation in local currencies against the US dollar.
“This primarily impacts the revaluation of USD-denominated transponder leases and the non-quasi equity foreign exchange losses on the intergroup loans with MultiChoice Nigeria,” it explained.
“Losses were further impacted by the increased investment in Showmax ahead of its relaunch in the second half of FY24.”
MultiChoice expects to report a loss per share between R2.48 and R2.52 lower than the prior period’s loss per share of R0.60.
Headline loss per share will see a similar movement, mainly due to foreign currency fluctuations during the reporting period, some of which are unrealised.
“Further details will be provided in the consolidated interim financial results, due to be released on the SENS on 15 November 2023,” MultiChoice stated.
MultiChoice’s share price tanked on the news, dropping over 4% on the day.
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