Chief financial officer's

performance review

  • Despite global and country-specific macroeconomic challenges, the group delivered pleasing operational and financial results with subscriber growth of 0.9m, an increase in core headline earnings per share of 39% and free cash flow growth of 59%. We, however, remain cautious on our outlook given the uncertain economic landscape that lies ahead.

  • Tim Jacobs
    Chief financial officer

    Declared maiden dividend of ZAR2.5bn

    Strong business continuity around COVID-19
    0.9m to 19.5m SUBSCRIBERS


    59% growth IN FREE CASH FLOW





    Subscriber growth was muted due to challenging market conditions and consumer affordability, with some upside seen at the end of March due to COVID-19 lockdowns driving reconnections.

    The group added 0.9m 90-day active subscribers to reach 19.5m households as at 31 March 2020. This rate of growth is somewhat lower compared to the prior year due to:

    • Rising consumer pressure in many markets
    • Drought-related electricity shortages in southern Africa
    • Non-recurrence of specific one-off events

    The 90-day active subscriber base comprises 11.1m subscribers (57%) in the Rest of Africaand 8.4m (43%) in South Africa.


Our priority remains growing the top line in a challenging macroeconomic environment while executing on the group’s robust cost optimisation programme. A further ZAR1.4bn in costs were removed in FY20, with positive operating leverage maintained. Trading margins expanded to 16% from 14% in the prior year.

Revenue  47.5    50.1    51.4        1 
Costs  (41.1)   (43.1)   (43.4)     (3)   2 
Trading profit  6.4    7.0    8.0    27    29    3 
Net interest paid  (0.8)   (0.5)   (0.6)            
Taxation  (3.7)   (3.8)   (3.4)           4 
Non-controlling interests*  (1.1)   (1.0)   (1.4)           4 
Other gains/(losses) – net  0.9    0.1    (0.1)           5 
Core headline earnings  1.6    1.8    2.5    10    38    6 
Core headline earnings per share (cents per share) 374    410    569    10    39    6 
Trading profit margin  13.4%    14.0%    15.6%            3 
Effective tax rate*  59%    75%    65%            4 
* FY19 excludes the impact of the once-off empowerment transaction.
1 Top-line momentum was affected by modest subscriber growth, the group’s strategic decision not to increase Premium prices in South Africa, a reduction of prices in our East African markets, lower hardware revenues and a reduction in sublicence revenues from the South African public broadcaster. Our technology business, Irdeto, increased its contribution to revenue by 12%.
2 A strong focus on cost containment allowed for a further ZAR1.4bn in costs to be eliminated from the base during the year. Overall costs reduced 3% YoY on an organic basis and resulted in positive operating leverage.
3 Trading margins have expanded from 13.4% to 15.6% from FY18 to FY20, with stable margins in South Africa, reduced losses in the Rest of Africa and strong financial performance from the technology segment, Irdeto.
4 The group effective tax rate remains in a range of 60% to 75% driven by losses in the Rest of Africa, which negatively impacts profit before tax and distorts calculations. Non-controlling interests increased in FY20 due to a higher non-controlling interest in South Africa due to the weighted net effect of the additional 5% allocation to Phuthuma Nathi in March 2019 and the Phuthuma Nathi share swap (1.4% impact) in October 2019.
5 Other gains have remained stable in the last two financial years and comprise mainly the adjustment for unrealised foreign exchange included within trading performance.
6 Core headline earnings per share was up 39% on the prior year. When normalising for the impact of the Phuthuma Nathi non-controlling interest movements, growth would have been 57%.


The group delivered strong growth in free cash flow of 59% which was partially reinvested into Phuthuma Nathi dividends, share buybacks and funding the group share plan.

Trading profit  6.4    7.0    8.0             
Non-cash adjustments  3.9    4.2    4.4            1 
Working capital investment  (3.1)   (1.7)   (0.4)           2 
Cash from operations  7.2    9.4    12.1    30    28     
Capex  (0.8)   (1.0)   (0.8)           3 
Lease repayments  (1.4)   (1.5)   (2.1)           3 
Taxation paid  (3.7)   (3.7)   (4.0)           4 
Other operational cash movements  0.3    0.0    0.0             
Free cash flow  1.7    3.3    5.2    96    59     
Add: Net interest received  0.3    0.2    0.2             
Less: Net cash to Naspers  (2.4)   (0.1)   –             
Less: Phuthuma Nathi and other non-controlling interest dividends  (1.4)   (1.5)   (1.6)           5 
Less: Share buybacks  –    –    (1.7)           6 
Less: Other cash movements  0.0    (0.1)   (0.1)            
Retained free cash flow  (1.9)   1.9    2.1             
Less: Increase in restricted cash  –    –    (0.5)           7 
FX translation of foreign cash balances  (0.6)   0.7    0.8            8 
Increase in cash and cash equivalents  (2.5)   2.7    2.4             
1 Non-cash adjustments remain in line with prior years and include depreciation, amortisation, net realisable value adjustments on inventory and non-cash hedge accounting movements.
2 Working capital investment reduced due to the non-recurrence of inventory build-up ahead of the FIFA Soccer World Cup in FY19, limited sport prepayments in FY20 and the timing of creditor payments.
3 Capital expenditure of ZAR0.8bn was slightly down on the prior year and included a ZAR0.2bn investment as part of a multiyear programme to futureproof the group’s customer service, billing and data capabilities. The increase in lease repayments was due to the implementation of IFRS 16, the end of the satellite lease payment holiday in southern Africa and an increase due to the ZAR depreciation on US$-based lease payments (these are partially offset by hedging gains reflected in payables within working capital).
4 As one of the largest taxpayers in Africa, the group paid direct cash taxes of ZAR4.0bn, slightly higher than the prior year driven by improved profitability.
5 Dividends to Phuthuma Nathi increased in the current year due to the additional 5% share allocation in South Africa in March 2019.
6 Share transactions are discussed later in this report.
7 Restricted cash relates to initial margin deposits on Nigerian futures of ZAR0.5bn which are used to hedge Naira currency depreciation. This became material for the first time in this financial year and has therefore been disclosed separately.
8 The translation of foreign cash reserves, mainly held in US$, has increased the cash balance in the past two financial years.


We continue to focus on managing the balance sheet and improving cash generation through a disciplined capital allocation approach.

Non-current assets  24.1    23.7    25.4    (2)     1 
Current assets  14.5    17.3    20.8    20    20    2 
Total assets  38.6    41.0    46.3      13     
Non-current liabilities  28.5    15.2    18.2    (47)   20    3 
Current liabilities  16.0    16.0    18.3    (0)   14    3 
Total liabilities  44.6    31.2    36.5    (30)   17     
Equity  (6.0)   9.8    9.8    nm       
Key ratios                       
Liquidity (>1) 0.90    1.08    1.14             
Leverage (including leases) 2.57    0.88    0.85            4 
Return of capital employed  26.2%    29.5%    30.3%            5 
Interest cover (times) 63.0    33.7    34.2             
1 Non-current assets increased from the prior year due to higher derivative assets related to forward exchange contracts and an increase in deferred tax assets due to timing differences primarily relating to unrealised foreign exchange movements on transponder leases (the group has recognised no material deferred tax assets on unutilised tax losses).
2 Current assets increased due to higher cash balances and the current portion of a more favourable derivative mark-to-market position against the US$.
3 The increase in total liabilities is primarily due to the implementation of IFRS 16 and an increase in programme and film rights due to timing of rights payments. Leases and programme and film rights are largely denominated in foreign currency and therefore also increased due to the ZAR depreciation from a closing rate of ZAR14.50 in FY19 to ZAR17.86 in FY20. A change in accounting policy due to the IFRIC 23 interpretation on disclosure of uncertain tax matters resulted in a restatement of the line in which tax provisions are included. As this was all within current liabilities, no key financial ratios or comparisons were affected.
4 The group retains a low level of gearing, which provides financial headroom to navigate both challenges (COVID-19 and other macroeconomic) and opportunities into the future.
5 Measured as trading profit divided by average total assets less average current liabilities. Return on capital employed has seen a steady improvement from 26% in FY18 to more than 30% in FY20, driven by increased profitability and the current cycle of low capital intensity.


The COVID-19 pandemic has had a significant impact across the world, adversely affecting the lives of the group’s customers and its employees. Simultaneously the oil price, which impacts material markets such as Nigeria and Angola, has reduced. The following table outlines the group’s early assessment of the impact on the group:

Risk factor MultiChoice Group application Short-term impact Long-term impact Management’s response
Foreign exchange rates
  • Local revenues earned in US$
  • US$ costs outside of hedging window
Low (hedging in place up to 36 months) High
  • Continue robust hedging programme
  • Move more costs to local currency
  • Cost optimisation programme
  • Contractual currency protection
Economic impact (unemployment)
  • Lower GDP growth rates leading to higher unemployment will lead to risingconsumer pressure and lower subscriber growth rates
Moderate (lockdowns create
priority towards video entertainment)
  • Deliver on core strategy
  • Cost optimisation process
  • Improve value perception to customers
  • Leverage partnerships
Commercial subscribers unable to trade
  • Majority of hotels and pubs/ restaurants are currently unable to operate resulting in churn
Moderate (approximately 2% of group revenue) High
  • Offer payment relief to commercial subscribers
  • Manage relationships and reconnect as reopening occurs
Business continuity
  • Shift to new ways of working
  • Ensure no services disrupted
  • Adhere to government regulations
Low Low
  • Business continuity plans implemented successfully
  • No disruption to services to date
  • Continue to manage closely
Content disruptions
  • General entertainment content largely unaffected
  • Sport events delayed, but starting to recommence
Moderate (mainly downtrading rather than disconnection) Low
  • Continue to deliver quality general entertainment offering
  • Provide subscriber specials to reduce dormancy
  • Leverage sport leagues recommencing with marketing drive
  • Obtain contractual financial relief for events cancelled/changed (no play, no pay)
Supply chain interruptions
  • Delay in set-top box deliveries affecting growth in subscribers
  • Interruption in supply to technology segment
Low Low
  • Limited delivery interruption seen thus far or expected at this stage


Phuthuma Nathi share swap executed in line with prior commitments

The group remains fully committed to BBBEE and transformation. The Phuthuma Nathi share swap, which was a once-off offer, was finalised on 28 October 2019 and resulted in 3.7m shares being issued to Phuthuma Nathi shareholders, while the group acquired 3.8m shares in Phuthuma Nathi in return. Following the conclusion of this share swap, the group’s overall interest in MultiChoice South Africa increased from 75.0% to 76.4%.

Share buy back programme commenced

The group identified that there was a mismatch between the share price and the internally calculated intrinsic value of the group. The board approved the repurchase of 10.1m ordinary shares between September 2019 and March 2020 at an average price of ZAR96 per share. These shares are currently held as treasury shares.

Funding of the group share plan

In order to fund the 1st allocation under the group restricted share plan, 5.5m shares were repurchased in June 2019 at a cost of ZAR0.7bn. These are held in the group share trust until vesting occurs between years three and five from the date of the award. The group’s intention remains to limit shareholder dilution by buying back shares in the open market to fund future long-term incentive awards.


Dividend declared of ZAR2.5bn in line with previous commitments

The board recommends that a maiden gross dividend be declared at 565 SA cents per listed ordinary share (ZAR2.5bn).


The group’s focus for the year ahead, subject to a stable regulatory environment and the unknown impact of COVID-19, will be to continue scaling its video entertainment services across the continent (mainly in the mid and mass markets, as well as OTT).

The group will keep exploring new opportunities to further expand our existing ecosystem, offering new products to enhance customer experiences and to increase revenues. It will also look to further increase its investment in local content and accelerate the uptake of OTT products by differentiating and strengthening the product offering. Our ambition is to drive further subscriber growth, scale Irdeto to a leading media and cybersecurity business globally and to continue building a sustainable business that delivers value for our stakeholders. We will also continue to invest in the development of our people and our social initiatives to continue making a meaningful impact in the communities where we operate.

Given the risks associated with a weak macro and consumer environment, and heightened by COVID-19, the group will prioritise cash generation and maintain balance sheet strength.


I would like to thank my colleagues on the board and the group executive committee for their support and leadership during the year. I also wish to express my appreciation for the dedication and hard work of our finance teams across the group. Finally, I would like to thank our shareholders for their interest and investment in MultiChoice.

Tim Jacobs
Chief financial officer

10 June 2020