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MultiChoice shares shrug off full-year loss

News that MultiChoice subscribers had grown by 12% helped push its share price up on Tuesday.

Africa’s biggest pay-TV group MultiChoice swung to a loss in its first full-year results as a standalone company on Tuesday, but its shares rose anyway as solid subscriber growth, cost reductions and other positive developments took centre stage instead.

MultiChoice, which was spun off by South African e-commerce giant Naspers and listed on the Johannesburg Stock Exchange in February, had already warned it expected to make a headline loss per share as a result of a one-off charge and unfavourable foreign exchange.

It had also already flagged strong growth in subscriptions and a reduction in losses in its businesses outside of its home market, South Africa, but nevertheless news it had grown subscribers by 12%, along with other developments, helped push its share price up 1.37% by 1403 GMT.

“Our growth is exceptionally pleasing, especially in the current economic climate, and a clear indication that our strategy is working,” Calvo Mawela, MultiChoice chief executive, said in a statement.

Founded 30 years ago, MultiChoice now reaches 15.1 million households across 50 African countries with pay-TV products and a fledging streaming service called Showmax it hopes can rival giants like Netflix on the continent.

Its subscriber numbers rose by 1.6 million people over the year, with its customer base across the rest of Africa exceeding its 7.4 million South Africa subscribers for the first time.

Losses in its operation outside of South Africa, which analysts said had weighed on its market value during its JSE debut, were also reduced by R900 million.

While the company’s stock rose 15% on the day of its much-anticipated listing, launching it immediately on to the bourse’s blue-chip index, its closing market value remained well below some estimates for the underlying value of the company. Its share price has risen around 22% since then.

The company also reported cost savings of R1.3 billion and a doubling of free cash flow to R3.3 billion. However its headline earnings per share – the main profit measure in South Africa that strips out certain one-off items – fell from 410 cents in the prior year to a loss of 353 cents in the year to end-March.

This was due to the impact of a disposal of a 5% stake in its South African unit, and the depreciation of the rand against the US dollar, which meant it had to pay more for dollar-denominated leases for transponders.

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An accounting student reads Multichoice’s FY19 results…. Can someone help me with some guidance? Forecasting/guessing Fy2020 net subscriber growth.

According to the results announcement net subscriber growth for 2019 was 1.6m new subscribers compared to a historical average of 1.1m. Looking at subscriber growth – presentation deck, slide 2 net subscriber additions I see a slightly different picture:

The 1,1m historical average is calculated from 2009 to 2019. FY2019 net subscriber growth of 1.6m is the second highest annual net growth in that period (2009-2019), so that’s good. FY15 is the record holder at 2,2m net subscribers. But it’s basically the same as FY18 and FY17. In FY18&17 net subscriber growth 1,5m net per year. So it looks like net subscriber growth is basically stable year on year for FY17,FY18, and FY19. The average net subscriber growth for the same period i 1,53m which is identical to the average net subscriber growth for FY13,FY14, and FY15 before a plummet in net subscribers in FY16 driven by rest of Africa. FY13,FY14 and FY15 net growth was more forceful than FY17,FY18, FY19 but so was the correction. Looks like Rest of Africa can sustain a three year growth period.

Ok. So based on the above, will forecasting the net subscriber growth for 20,21, and 22 look like this?

FY2020 +0,4m
FY2021 +1,3m
FY2022 +1,5m

End of comments.

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