Pan-African pay-TV operator Multichoice has reported significant financial challenges, revealing a $190.5 million (R3.6 billion) foreign exchange loss from its Nigerian operations for the 2024 fiscal year. The announcement was made in a trading statement released on Thursday.
Financial Overview
The company’s financial results for the year ending March 31, 2024, are slated for publication on June 12. Multichoice anticipates a trading profit decline of between 19% and 23% compared to the previous year. Additionally, the headline loss per share is expected to more than double.
This update complies with Johannesburg Stock Exchange (JSE) regulations, which mandate that companies issue a trading statement if the current reporting period’s results will deviate by at least 20% from the previous corresponding period.
Contributing Factors to Losses
The significant forex loss was attributed to the sharp depreciation of the Nigerian naira against the US dollar, impacting the non-quasi intergroup loans with Multichoice Nigeria. Multichoice also cited a weak macroeconomic and consumer environment, alongside increased investment in Showmax, as key factors contributing to the losses.
The group further disclosed a once-off impairment of IT systems amounting to R1 billion (net of tax and non-controlling interest), due to a reassessment of business needs amid challenging operating conditions. Showmax is expected to report an additional year-over-year trading loss of R1.4 billion.
Mitigation Efforts and Future Projections
Despite these setbacks, Multichoice forecasts an increase in organic trading profit, driven by inflation-led pricing and successful cost optimization across most of its markets. The company remains focused on navigating the tough economic landscape while optimizing its operations.
Multichoice Nigeria: Price Hikes and Legal Challenges
In response to economic pressures, Multichoice Nigeria raised the prices of its DStv and GOtv packages by at least 25% in April 2024. This marks the third price hike since the initial adjustment on May 1, 2023.
However, the price increase faced legal hurdles. A Competition and Consumer Protection Tribunal (CCPT) in Abuja issued an order to halt the new prices following a complaint from a Nigerian customer. Multichoice proceeded with the price implementation, leading the Tribunal to impose a N150 million fine on the company for challenging its jurisdiction. The Tribunal also mandated Multichoice to provide Nigerian customers with a one-month free subscription to DStv and GOtv. As of this report, Multichoice has not responded to the Tribunal’s ruling.
Bottom Line
Multichoice’s financial struggles highlight the broader economic challenges faced by businesses operating in Nigeria. The company’s efforts to manage losses through strategic pricing and cost optimization reflect its commitment to maintaining stability amidst a volatile economic environment.
