The summary consolidated financial statements for the year ended 31 March 2022 are prepared in accordance with the requirements of the JSE Listings Requirements for preliminary reports and the requirements of the South African Companies Act No 71 of 2008, as amended (Companies Act) applicable to financial statements. The summary consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and Interpretations as issued by the IFRS Interpretations Committee (IFRIC), the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee (APC) and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council (FRSC), and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The group also subscribes in all its activities to principles of best practice and corporate governance, as set out in the King IV Report on Corporate Governance for South Africa 2016. A copy of the full audited consolidated annual financial statements is available for inspection from the company secretary at the registered office of the group or can be downloaded from the group’s website: www.investors.multichoice.com/annual-results.

The summary consolidated financial statements are presented on the going concern basis.

The summary consolidated financial statements are presented in South African Rand (ZAR), which is the group’s presentation currency, rounded to the nearest million. The summary consolidated statement of financial position was prepared using a closing USD exchange rate at 31 March 2022 of 14.61:1 (31 March 2021: 14.78:1) which has been utilised for the consolidation of the Rest of Africa and Technology segments that have a USD presentation currency. The summary consolidated income statement and statement of comprehensive income were prepared using the average USD exchange rate for the year ended 31March 2022 of 14.93:1 (31 March 2021: 16.30:1).

The accounting policies applied in the preparation of the summary consolidated financial statements are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the prior year’s consolidated annual financial statements.

The summary consolidated financial statements do not include all the notes normally included in a set of consolidated annual financial statements. Accordingly, this report is to be read in conjunction with the full consolidated annual financial statements for the year ended 31 March 2022.

The group has adopted all new and amended accounting pronouncements issued by the IASB that are effective for financial years commencing 1 April 2021. None of the amendments had a material effect on the group’s summary consolidated financial statements.

Trading profit includes the finance cost on transponder lease liabilities and the derivative profit or loss impact relating to economic hedges (ie futures) against foreign currency movements, but excludes the amortisation of intangible assets (other than software), impairment/derecognition of assets, equity-settled share-based payment expenses, cash-settled share-based payment expenses on closure of schemes, severance provisions raised and other operating gains/losses.

COVID-19 considerations

Management has conducted an updated review of all possible financial effects that COVID-19 could have on the measurement, presentation and disclosure provided in the summary consolidated financial statements. The conclusion reached was that the potential impact is not material to the summary consolidated financial statements. Management will continue to monitor COVID-19 developments.

The following table shows unsatisfied performance obligations resulting from long-term technology contracts as at 31 March 2022 and 31 March 2021:

Management expects that 38% of the transaction price allocated to the unsatisfied contracts as of 31 March 2022 will be recognised as revenue during FY23 (ZAR58m) and 38% (ZAR58m) will be recognised as revenue during FY24. The remaining 24% (ZAR35m) will be recognised as revenue in FY25 and thereafter. The amount disclosed above does not include variable consideration which is constrained.

Management expects that 42% of the transaction price allocated to the unsatisfied contracts as at 31 March 2021 will be recognised as revenue during FY22 (ZAR46m) and 16% (ZAR17m) will be recognised as revenue during FY23. The remaining 42% (ZAR46m) will be recognised as revenue in FY24 and thereafter. The amount disclosed above does not include variable consideration which is constrained.

All other technology contracts are for periods of one year or less or are billed based on time incurred. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed and is also not material.

A significant portion of the group’s operations are exposed to foreign exchange risk. The table below presents the net (loss)/gain from this foreign exchange exposure and incorporates the effects of qualifying forward exchange contracts that hedge this risk:

In addition to the items already detailed, profit before taxation has been determined after taking into account, inter alia, the following:

KingMakers

In FY21, the group acquired a 20% investment in Blue Lake Ventures Limited, a sports betting business (operating as KingMakers). The transaction was structured with an upfront investment of USD81m (ZAR1.4bn) paid in cash and the potential for further payments of up to USD31m (ZAR0.5bn) should certain earn-out targets be met between December 2021 and December 2023, or the valuation paid was supported by future equity transactions. As the group exercises significant influence through its shareholding and board representation, the group’s investment in KingMakers has been equity accounted as an associate from 1 October 2020.

On 29 October 2021, the group increased its investment in KingMakers which triggered the following:

• sale of shares on loan account to the KingMakers share scheme (note 8);
• a USD100m subscription for shares into the business;
• a USD182m partial buy out of minority shareholders; and
• the payment of the contingent consideration of USD31m relating to the acquisition of the first 20% in KingMakers.

The group acquired net assets of ZAR1.9bn (FY21: ZAR0.5bn) and goodwill of ZAR2.6bn (FY21:ZAR1.4bn). Net assets acquired include separately identifiable assets considered in the final purchase price allocation. The fair values of separately identifiable assets include KingMakers brand ZAR344m (FY21:ZAR174m), cash and cash equivalents ZAR926m (FY21:ZAR270m), customer relationships ZAR406m (FY21:ZAR169m) as well as internally developed software ZAR17m (FY21:ZAR8m). Significant judgement was exercised on the identification and valuation of these assets acquired within KingMakers. The significant assumptions taken into account to value these assets included the forecast cash flows, tax amortisation benefit, discount rate, growth rates, EBITDA margins, royalty rates, contributory asset charges and terminal growth rates.

At the conclusion of the above transactions, the group now owns 49.23% in KingMakers. However, the group considered the economic ownership to be 51.23% due to the sale of shares to the KingMakers’ shares scheme, which was considered to be the issuance of an option liability as explained in note 8. KingMakers will continue to be equity accounted after considering shareholder and board representation rights (including de facto control) available to the group. The equity accounting post the transaction occurred using the economic ownership taking into account the sale of shares on loan account as well as the additional acquisition of shares. The group also recognised a derivative option liability (included in the consideration paid for the additional ownership percentage), which is fairly valued in terms of IFRS 9 Financial Instruments (note 8).

SafeRide\Questar

SafeRide is a leading provider of multi-layer cybersecurity and data analytics solutions for connected and autonomous vehicles. In FY22, the group approved a merger transaction where the group transferred all of its shareholding in SafeRide in exchange for a 7.6% share of Questar Auto Technologies, a predictive vehicle health company that introduces cutting-edge AI technology for automotive. Questar was assessed to be an associate based on the group’s board representation in the entity. The associate was initially measured at cost, represented by the fair value of the investment received (Questar).

AURA

In FY22, the group participated in a ZAR62m series A funding round into Zendascape Proprietary Limited trading as AURA during October 2021. The group committed to a ZAR31m equity investment for a 12.5% stake in AURA subject to conditions precedent. As at 31 March 2022 the group has released ZAR5m of the required funds for the equity investment. The rest of the cash will be due and payable once the conditions precedent have been met. The group owns 12.5% of the issued share capital of AURA and also has board representation. AURA was assessed to be an associate initially measured at cost.

Commitments relate to amounts for which the group has contracted, but that have not yet been recognised as obligations in the summary consolidated statement of financial position.

The group operates a number of businesses in jurisdictions where taxes may be payable on certain transactions or payments. The group continues to seek relevant advice and works with its advisers to identify and quantify such tax exposures. The group’s current assessment of possible but unlikely withholding and other tax exposures, including interest and potential penalties, amounts to approximately ZAR0.4bn (FY21: ZAR0.2bn). No provision has been made as at 31 March 2022 for these possible exposures.

The group’s activities expose it to a variety of financial risks such as market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The fair values of the group’s financial instruments that are measured at fair value are categorised as follows:

In FY22, the group made a USD10m investment in Trust Machines SPV, LLC (Trust Machines) applications and platforms. MultiChoice does not have an unconditional right to the capital investment, nor the return made from this investment as there is no upfront guarantee for either the capital or the expected return. This was considered as an investment in equity. The group initially measured the investment at fair value and subsequently measured it at fair value through profit or loss. As at 31 March 2022, the investment has a fair value of ZAR146m. The transaction was effective on 16 November 2021. The business operations of Trust Machines have not materially changed from the effective date of the transaction and therefore the group based the fair value on the latest transaction value concluded by market participants at arm’s length.

Currency depreciation features relate to clauses in content acquisition agreements that provide the group with protection in the event of significant depreciation of the group’s functional currency relative to the currency of the content acquisition agreement. The fair value of currency depreciation features is measured through the use of discounted cash flow techniques using the LIBOR rate of 0.46%. Key inputs used in measuring fair value include the terms and benchmark rates contained in content acquisition agreements and average spot exchange rates prevailing at the relevant measurement dates.

During FY22, as part of the additional acquisition of shares in KingMakers (note 6), 10% of the shares in KingMakers were issued to the KingMakers’ share scheme. This resulted in the group reducing its shareholding to 18% (before the acquisition transaction was finalised). The subscription was for an amount of USD11m (ZAR167m) on loan account to the KingMakers share scheme. The loan account will be due and payable after 10 years. The only source of return for the ESOP will be through the shareholding in KingMakers. The only security on the loan for the group are the KingMakers’ shares themselves that have been issued. Management assessed the transaction and concluded that the substance is that the group issued an instrument with a similar profile as an option instrument and therefore accounted for the transaction as such. The option liability was initially measured at fair value and subsequently measured at fair value through profit or loss. The key inputs in using the Monte Carlo Simulation included the fair value of KingMakers of USD850m, a volatility of 62.88% and a dividend yield of 4% to 5%. The group used USD overnight index swap (OIS) curve to determine the risk-free rate. A 5% decrease in the volatility rate would result in an option value of USD12m, a 5% increase in the volatility rate would result in an option value of USD13m.

Contingent consideration related to earn-out provisions, to be settled in cash, as a result of the group’s initial acquisition of KingMakers (note 6). The fair value measurement of the contingent consideration considered the most current probability estimates and assumptions, including changes due to the time value of money determined based on budget and forecast information related to KingMakers. Consideration was provided for a market-related discount rate in determining the fair value of the contingent consideration. Based on the assessment of KingMakers budgets and forecasts relating to gross gaming revenue done by the group in FY21, the group assessed probability of payment to be 100%. The effect of discounting was considered to be immaterial. Post initial recognition, the contingent consideration had no material movement impacting profit or loss.

The carrying values of all other financial instruments are considered to be a reasonable approximation of their fair values.

Fair values are determined using observable inputs, which reflect the market conditions including that of COVID-19 in their expectations of future cash flows related to the asset or liability at 31 March 2022.

During FY22, the group received advertising and sponsorship revenue of ZAR127m from KingMakers. This revenue has been recognised by the group in advertising revenue in note 2.

There have been no significant changes to related party balances in the current year.

Dividend

The board has proposed a gross dividend of ZAR2.5bn or 565 SA cents per listed ordinary share for FY22. The dividend will be declared from income. It will be subject to the dividend tax rate of 20%, yielding a net dividend of 452 SA cents per listed ordinary share to those shareholders not exempt from paying dividend tax. Dividend tax will be 113 SA cents per listed ordinary share. The expected dividend payment date will be Monday, 12 September 2022.

There have been no other events that occurred after the reporting date that could have a material impact on the summary consolidated financial statements.