MultiChoice Group said on Monday that it expects its trading profit for the six months to end-September to be relatively flat compared to a year ago due to a R700-million increase in decoder subsidies meant to drive subscriber uptake ahead of the 2022 Fifa World Cup.

Trading profit will be between 0% and 5% higher than the R6-billion reported a year ago, the group said in a trading update.

MultiChoice shares were trading largely unchanged on the trading update and were last quoted down 0.65% at R118.64 apiece, suggesting the numbers were largely in line with market expectations.

“The financial performance for the current period benefited from continued subscriber growth, an ongoing reduction in Rest of Africa trading losses and further savings generated from the group’s established cost optimisation programme,” the group said. The decoder subsidies, however, negated most of these operational improvements.

“The board considers trading profit and core headline earnings per share as the two most appropriate indicators of the operating performance of the group, as they adjust for non-recurring and non-operational items,” MultiChoice explained in the trading update.

On an organic basis – reflecting results on a constant currency basis and excluding mergers and acquisitions – trading profit is expected to be between 2% and 7% higher, it said.

Unrealised forex losses

However, MultiChoice said its headline earnings per share for the six-month period are expected to swing to a loss – they’ll be between R4.06 and R4.20 lower than the prior period’s reported headline earnings per share of R3.56. Earnings per share will also swing into the red, declining by between R3.71 and R3.87 compared to a year ago.

“The reduction in earnings and headline earnings per share is primarily due to higher unrealised foreign exchange losses on the translation of the group’s US dollar liabilities, including transponder leases, stemming from the sharp depreciation in the rand against the dollar towards the end of the current period,” MultiChoice said.

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“This is further impacted by an increase in foreign exchange losses associated with the repatriation of cash from Nigeria at the parallel rate. These exchange losses are considered to be of a temporary nature.”