By Lehlohonolo Lehana.
MultiChoice has warned of a significant deterioration in the operating environment in South Africa that is set to harm its trading margins in the second half of its 2023 financial year.
The warning sent its shares plunging lower in Johannesburg on Tuesday, with the counter down more than 15% at 10.20am.
In a voluntary trading update issued after markets closed on Monday, MultiChoice said the operating environment in South Africa has “deteriorated beyond expectations”, mainly due to intensified load shedding.
The dire outlook comes despite an uptick in subscribers driven by the broadcast of the 2022 Fifa World Cup.
“When MultiChoice reported first-half results on 10 November 2022, it cautioned on the ongoing economic challenges facing various markets, but it was looking forward to second-half subscriber growth and activity being buoyed by the broadcasting of the Fifa World Cup (FWC) from November to December and festive season momentum,” it said.
“Although the FWC delivered subscriber numbers broadly in line with expectations, the operating environment in South Africa has deteriorated beyond expectations over the past few months. Sustained high levels of loadshedding is having a significant impact on the activity levels of the customer base.
“Combined with the negative effect of a weak economy on consumer spending, and thus on the group’s customer mix, indications are that second-half revenue growth in the South African business will be below expectations. Given a largely fixed cost base, as well as the additional Showmax costs incurred in relation to the recently announced agreement with Comcast, this will result in the segment’s FY23 trading margin being between 23% and 28%, which is below the market guidance of 28-30%.”
The company had announced in early March that it inked a deal with US media giant Comcast, that will see the owner of NBCUniversal and Sky take a 30% stake in its streaming platform Showmax.
A new version of Showmax with US technology and a plethora of new content will be launched, with the aim to compete with US giant Netflix, and become Africa’s leading platform, it said.
Meanwhile shares of SA’s biggest taxi financier Transaction Capital, which also owns a majority stake in vehicle trader WeBuyCars, crashed 40% on Tuesday morning, a day after it warned shareholders that it expected interim earnings to fall by more than a fifth.
Shares in the company, valued at more than R21 billion at market open, had fallen 40.17% to R16.83 as of 11:00, taking them to levels last seen in late 2020.
The company warned it believes that the cyclical headwinds facing SA Taxi’s business model have now become more structural in nature, and the business is unlikely to recover to pre-Covid-19 levels in the short to medium term.