Difficulty in repatriating money from Nigeria, coupled with the weak South African economy, will hurt MultiChoice Group’s full-year financial results, though the business is still expected to eke out a slight improvement in core headline earnings per share (Heps).

In a trading statement on Thursday, MultiChoice said trading profit is expected to be between 0% and 5% lower, tempered by factors such as increased decoder subsidies aimed at accelerating subscriber growth.

For the 12 months to end-March, the group benefited from strong subscriber growth, a return to profitability in the “rest of Africa” segment and cost savings through a cost-containment programme that exceeded targets.

But a “challenging” South African environment and increased investment in decoder subsidies and marketing related to the 2022 Fifa World Cup eroded those gains.

MultiChoice has long regarded trading profit and core Heps as the most appropriate measures of operating performance as they adjust for non-recurring and non-operational items.

It said trading profit will decline by as much as 5% compared to the R10.3-billion reported a year ago and includes costs associated with the partnership with Nasdaq-listed Comcast and its subsidiary NBCUniversal announced earlier this year. On a constant-currency basis, trading profit is expected to be between 3% and 8% higher.

Core Heps will be between 0% and 4% higher than 2022’s R8.14 and includes realised foreign exchange gains and losses but excludes the impact of Nigerian cash-extraction losses, which the group did not quantify specifically in the trading update.

Red ink

Heps, a closely watched financial metric among South African investors, will be severely impacted by what the group will be hoping are once-offs: higher unrealised forex losses (including transponder leases) stemming from the sharp deterioration in the value of the rand against the US dollar and an increase in forex losses associated with the repatriation of cash from Nigeria.

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In addition to the above, earnings per share (EPS) will also be impacted by an impairment at sports betting company KingMakers Group related to an expected further deterioration in the value of Nigeria’s naira. EPS will decline by as much as R11.42, from a positive R3.18 before. Heps will be as much as R6.90 lower, from a positive R3.81 before, splashing the income statement in red ink.

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MultiChoice Group shares closed down 4.3% in Johannesburg on Thursday following the publication of the trading statement. They have lost 23% over the past 12 months, to Wednesday’s close. – © 2023 NewsCentral Media