Multichoice

During FY2019, global economic conditions remained challenging, largely due to financial market volatility and global economic policy uncertainty. Investor sentiment will likely remain fragile in the short term. While global consumer confidence was reasonably resilient, different markets seem to be subject to varying growth dynamics, resulting in more cautious consumer spending.

In Africa, tough economic conditions prevailed and foreign exchange rates in our markets depreciated on average around 10% against the United States dollar. More significant depreciations were experienced in Angola (60%), Zambia (17%) and Ghana (11%) while inflation levels remained elevated in many countries. Consumer spending in South Africa, our largest market, was under pressure due to, inter alia, an increase in fuel and electricity prices and an overall sluggish economy with increasing unemployment rates. Despite this, growth rates are starting to see an improvement in many markets following the commodity downturn experienced in FY2015 and FY2016.

Although we are cognisant of economic uncertainty, MultiChoice retains a leading position in the African market. Our general entertainment content, including an increasing investment in local content, and compelling sport offering are key differentiators, alongside our world-class infrastructure and technology capability.

Overall, financial performance during FY2019 was solid. We recorded revenue of R50.1bn (growth of 6% compared to the prior year), and trading profit of R7.0bn (growth of 11% compared to the prior year). We also achieved R3.3bn in free cash flow (growth of 96% compared to the prior year), and we achieved cost savings of R1.3bn.

Any dividend proposed by the board in respect of any financial period will be dependent on and influenced by the group’s operating results, financial condition, investment strategy, capital requirements and strategic initiatives. MultiChoice Group seeks to ensure there is sufficient cash available to fund its continued growth aspirations, without resorting to excessive leveraging, and to maintain its strategic flexibility. To this end, MultiChoice Group will not pay a dividend for FY2019 but, subject to relevant factors and circumstances at such time including those outlined above, declare a dividend of R2.5bn for FY2020.

The board oversees strategic direction and is ultimately responsible for the organisation’s performance. The board is assisted by various committees in carrying out its duties. The responsibility for implementing strategy is delegated to management. Governance and sustainability are integral to our strategic implementation and critical for the interests of our stakeholders. MultiChoice Group continually identifies areas where governance can be improved. For more information on our approach to governance, please reference Corporate governance report.

Our industry is highly regulated. Recent years saw several policy reviews and sector inquiries resulting in increased complexity in our operating environment. These include reviews of broadcasting codes in certain operating jurisdictions, amended licence renewal conditions, and proposed amendments to copyright legislation. Our approach to regulatory changes involves proactive and positive engagement and providing input into relevant industry discussions that have the potential to lead to regulatory changes.

MultiChoice seeks to play a meaningful role in the development of society. Our sustainable development framework links to our risk management processes, which take an integrated approach to financial and non-financial risk identification, management and monitoring. Our contributions during FY2019 continued to advance issues of education, skills development, community outreach and environmental sustainability. We also aim to enhance the lives of our employees by contributing to their health and wellbeing. Our integrated annual report demonstrates our commitment to sustainability by unpacking the social and environmental initiatives we embark on, and the impact that they make. As a proud contributor to the socio-economic development in the communities where we operate, we recognise the value we can create while being mindful of the sustainability of our planet.

MultiChoice contributes significantly towards social development programmes in the areas where we operate. In South Africa, this includes the MultiChoice Diski Challenge (MDC), the Magic in Motion (MiM) Academy and SuperSport’s Let’s Play initiatives. We also make a significant contribution through our Phuthuma Nathi (PN) share schemes. PN companies have received R10.4bn in dividends since inception, ultimately empowering and enriching the lives of more than 90 000 previously disadvantaged South Africans, reflecting our continued commitment to the transformation of the economy. As part of the Naspers unbundling, the PN companies were allocated an extra 5% shareholding in MultiChoice South Africa on 4 March 2019, for no consideration payable by PN shareholders. The value of this transaction was R2.6bn (R1.9bn after allocation to non-controlling interest). We also established the MultiChoice Enterprise Development Trust as a vehicle for our investment into local industries and have committed R188m in loans, grants and business development expenses to assist 24 businesses. In the Rest of Africa, our efforts focus on the development of talent through the MultiChoice Talent Factory (MTF), which aims to transform passionate youth into skilled filmmakers and storytellers. During FY2019, MTF provided Masterclass training for a total of 400 participants. Irdeto also continued to make an impact on wildlife protection by using its superior technology and security solutions to combat cybercrime in the illegal trade of wildlife.

We are committed to promoting equal opportunity across our operating jurisdictions. We achieve this by embracing diversity and ensuring employment equity through robust diversity management practices. We believe diversity gives us a competitive advantage and aids in decision-making and problem-solving to provide the best solutions for our customers. We are committed to inclusive growth and development and create opportunities that support the continued transformation of our organisation. We have operations in 50 countries. Our employee profile comprises 47% women and 53% men, and our leadership teams are diverse and proudly representative across top and senior management.

Christine Sabwa was appointed to the board on 14 May 2019. Subsequent to the release of our results in June 2019, Jabu Mabuza and Fatai Sanusi were appointed to the board with effect from 5 July 2019.

All directors on the board will stand for election by shareholders at the upcoming annual general meeting of shareholders on 29 August 2019.

MultiChoice will continue to deliver exceptional content to customers while playing a key role in the development of local talent. We will remain focused on our strategic priorities of capturing the fast-growing mass market segment, while delighting and retaining our existing customer base with our entertainment offering. We plan to enhance our online product offerings and continue to invest in technology for improved customer experiences. We will also focus on innovation, particularly in South Africa, where we continue to drive user adoption of our online products. We expect Irdeto to continue to gain market share, and to expand its core security technology by taking a leadership position in connected transport and taking advantage of new opportunities for security-sensitive segments of the Internet of Things (loT). We will drive further operational excellence to deliver strong returns for our shareholders. We will also continue to diligently manage our regulatory risk environment and ensure compliance across all of our markets.

I would like to thank the board for their sound guidance and contribution during our first year as a standalone listed company. Despite difficult operating conditions, management delivered a solid performance and the board would like to express its sincere appreciation to the management teams for their effort and dedication during the year. A special word of thanks goes to our customers and suppliers for their continued support.

Imtiaz Patel
Executive Chair

14 June 2019