From the desk of the CEO

Our vision is to be the platform of choice for African households and to enrich their lives by delivering entertainment and relevant consumer services through technology. We will achieve this vision by growing our core linear pay-TV business, developing our online and interactive services, and introducing scalable technology-based consumer services. We don’t plan to do everything on our own. We will continue to innovate but will also make targeted investments and partner with best-in-class third parties when appropriate. This provides us with the best opportunity to leverage our established scale and footprint, trusted brands, robust technology foundation, and unmatched distribution, payments and in-country localisation. This also provides us with the highest probability of successfully creating long-term value for our shareholders.

Dear shareholder

Having unbundled from Naspers and separately listed on the JSE just over four years ago, we have achieved a number of significant financial and non-financial milestones. From establishing standalone corporate structures and settling into life as a self-sustaining listed company, to returning our Rest of Africa business segment to profitability within our ‘medium-term’ targeted timeframe, to redefining and implementing our group’s platform-led strategy.

At the same time, there is a daunting amount of work ahead of us as we embark down our new strategic path in an incredibly challenging global and local macro-economic environment. FY22 saw us exit lockdowns and return to the office, but as the pandemic subsided into FY23 we still found ourselves faced with a confluence of exogenous headwinds. As global inflation rates rose through the course of the year, central banks followed with sharp hikes in interest rates from historic lows. This triggered a squeeze on indebted households and businesses over and above rising energy, food and other inputs costs, pushing already-stretched household budgets and corporate income statements to breaking point.

A strengthening dollar has further exacerbated these issues in several of our key markets, while localised challenges created pressure in our two largest consumer markets. Corruption, deteriorating municipalities and energy, transport and water infrastructure, as well as rising unemployment have meant that South Africans have had little to buffer themselves against the loadshedding crisis in our country. Meanwhile, Nigeria has been hamstrung by its oil sector, which has suffered from malinvestment, sabotage, theft, a lack of refining capabilities and an unaffordable fuel subsidy, and a challenged exchange rate regime which constrains investment and foreign exchange movements.

But all is not lost. Civil and private society is stepping in as our young democracy in South Africa continues to mature. We are nothing if not resilient. The incoming administration in Nigeria have said all the right things and started to take steps towards reform. We wish them well on their journey. The long-term trajectory of democracy and technology on the continent means that the future has never been brighter for Africa. We have come such a long way, and yet we are just getting started.

Standing back and surveying this landscape as both a leader of and a shareholder in our organisation, one has to be careful to avoid extreme thinking. One cannot be too defeatist, resigned to a world of sub-par outcomes because of the litany of challenges that confront us daily. We must persevere by demonstrating resolve with resilience. But one cannot be too idealistic either, believing that everything will work out perfectly despite the dim reality of our present circumstance. We must adapt by demonstrating patience with ingenuity.

As an organisation, therefore, we opt for pragmatism over undue pessimism and optionality over undue optimism. We ask ourselves what we can do within the constraints of our current environment? How can we improve? How can we make things better? What can we build? What can we create? Who can we connect with? How can we help? And when we ask those questions, we find that there is no shortage of opportunity to improve and myriad ways for us to make a positive difference in our customers' lives.

With that framing in mind, we hosted our inaugural Capital Markets Day in May 2023 and, although it took place post year-end, FY23 was the year where we step-changed the implementation of our new strategy and prepared the market for our new direction. The presentations from the event are available on our website in the link that follows and I would encourage those of you who are interested in our journey to go through them if you have not already done so: https://investors.multichoice.com/presentations

The introduction to this letter provides a neat summary of where we are going and how we aim to get there. In short, we continue to expand our ecosystem and, by creating a 'World of More' we keep increasing the value that we offer to our customers and to our business partners. I won't rehash the entire contents of the presentations, but thought it worth sharing the following excerpt again here:

"We've spent the time to ask ourselves the hard questions and analyse what really sets us apart. We realise that it is hard for a company to disrupt or reinvent itself and we know that we can't be all things to all people. We also understand that pay-TV people are unlikely to run businesses in other market sectors as effectively as entrepreneurs who are native to those environments and business models. And we appreciate the need to be careful and avoid stretching ourselves, our support structures and our systems in too many directions too quickly. That is why we are leveraging our unique strengths as a scaled platform, while partnering with best-in-class third parties and sector-specialists to ensure that we execute strongly as a collective. On their side, our partners know that nobody can provide them with deep understanding and access to the African continent on the scale that we can."

With that context in mind, we believe that our strategic approach in three key verticals beyond linear pay-TV will deliver significant value in time.

• Streaming video: In March we announced a game-changing partnership with one of the largest technology and media companies in the world to help elevate our ambitions for Showmax to be the long-term leader in streaming video on the continent. We are already deeply embedded in the collaboration with teams from Peacock, Sky and NBCUniversal to ensure that our venture with Comcast delivers against its impressive potential in the streaming market.
• Interactive entertainment: As you will recall from my letter last year, we increased our stake in KingMakers to ~49% in FY22, and FY23 has been a year for the organisation to manage a rapidly growing and increasingly complex business in Nigeria, while repositioning its focus outside of Nigeria. A new management team with a refined set of priorities to focus on must-win markets in Nigeria and South Africa creates an exciting opportunity set and we look forward to supporting and co-creating our presence in interactive entertainment.
• Fin-tech: We have partnered with a leading global fin-tech operator and top-tier venture capitalists to incept and build out an integrated payment platform for Africa. By leveraging the unique strengths of the founding partners, Moment will launch on day one with scaled integrations and payment volumes from MultiChoice, proven technology and expertise from Rapyd, and capital and knowledge networks from the likes of General Catalyst. Its aim is to offer payment infrastructure for businesses across the continent, support consumers with access to digital payments and fin-tech solutions, and make domestic, cross-border and global digital payments and transfers more accessible, reliable and affordable for all.

Our Capital Markets Day was specifically focused on our New Opportunities, but those will only deliver value to our investors in time. In aggregate, they require capital investment and carry execution risk - they also require us to generate a return on that capital that adequately compensates our investors for the opportunity cost of that capital and the risk that we assume in taking on these new ventures. In that context, it is critical for us to ensure that we continue to deliver in our core, established video entertainment businesses.

We detail the performance of our established segments in the following sections in General Entertainment, but I wanted to take a moment in the remainder of my letter to flag some of our FY23 operating highlights – a year that required enormous effort from our teams to keep the group moving forward in a meaningful way. You can read more about how we aim to support and develop our employees in Value created for our employees. If our employees don't grow, we will struggle to grow as an organisation. If our employees don't succeed, we will struggle to succeed as an organisation. We want our employees to work hard, to develop, to create change, to build momentum and to be rewarded for adding value. We hope we have achieved this in the year passed and aim to sustain and build on the energy in the organisation in the year ahead.

Operating highlights for FY23:

• General Entertainment: The team reached its FY24 target a year early, delivering 50% of general entertainment spend in local content. Going forward, the focus will therefore shift to local content hours, which were up 9% YoY to around 6 500 hours in FY23. Five new proprietary local content channels were added to grow our portfolio to over 30 channels in total.
• SuperSport: With another successful FIFA World Cup under the belt as the exclusive home of all 64 matches in the 2022 iteration, the SuperSport team delivered almost 25 000 live events in FY23, up nearly 70% YoY, and over 1 000 of our own outside broadcast and studio productions. This included the successful debut of the SA20 cricket competition, which brought fans back into stadiums and generated strong engagement on our linear and digital channels.
• South Africa: Despite the challenges noted above, the South African business still managed to grow its 90-day base by 3% YoY. It also continued to grow its new business lines, including DStv Insurance, which saw revenues increase by 22% YoY.
• Rest of Africa: We took a bold decision to reposition the Rest of Africa business around the time of the commodity crunch and exchange rate meltdown on the continent in 2015/2016. With trading losses peaking at almost ZAR5bn in FY17, I am extremely proud of the business for delivering close to ZAR1bn in trading profit in FY23 despite having to absorb over ZAR4bn in foreign exchange headwinds over the past six years.
• Technology: While many of the challenges inherent in FY22 persisted into FY23, Irdeto continued to gain market share by winning four tier-1 media clients in FY23. It also added a further 17 customers to its new service lines and expanded its presence in the promising gaming vertical by acquiring a 12% stake in the in-gaming advertising business Bidstack.

As we close the chapter on our reporting for FY23, we are already approaching the end of our first quarter of operations for FY24. The remainder of the year ahead promises to be challenging but transformative. We are hard at work at managing our South African business through unprecedented challenges, moving our Rest of Africa business towards free cash flow breakeven, and repositioning our Technology segment in much the same way that we our repositioning our broader group. We are already re-platforming our Showmax business with our partners, collaborating with the KingMakers team to ensure that the launch in South Africa is successful and supporting Moment with the integration of our payments infrastructure.

With three substantial new product launches planned for FY24, any one of which would be significant in it’s own right, and hundreds of smaller initiatives to enhance our organisation and add value to our customers’ lives, we will continue to expand our World of More. We intend to execute well against our business plans, and I look forward to reporting back to you, our shareholders, with encouraging updates and promising developments in another year’s time.

Calvo Mawela
Group CEO