Share price of DStv parent plunges as power crisis hits
MultiChoice expects earnings to come in below guidance for the full year
MultiChoice’s share price plummeted on Tuesday, losing R8.54bn for shareholders in the DStv operator, as it said load-shedding and a weak economy had greatly reduced activity in its SA business. As such, earnings will probably come in below guidance for the full- year.
Africa’s largest pay TV operator had been banking on the 2022 Fifa World Cup in November and festive season in the next month to boost business activity and its numbers for the year to end-March 2023. Unfortunately, the effect of power cuts and consumers under pressure dampened prospects in SA, the group’s largest business.
“Although the FWC [Fifa World Cup] delivered subscriber numbers broadly in line with expectations, the operating environment in SA has deteriorated beyond expectations over the past few months.” Sustained power cuts “is having a significant impact on the activity levels of the customer base”, the group said in a trading update late on Monday.
“Combined with the negative effect of a weak economy on consumer spending, and thus on the group’s customer mix, indications are that 2H [second half] revenue growth in the SA business will be below expectations.”
The share price fell as much as 15% in early trade, paring some of the losses to close 13.82% down on Tuesday at R120.29, its biggest one day drop since it listed in February 2019.
Market players appear to be skittish about the impact of load-shedding on local business.
On Monday, MTN’s share price fell more than 9%, the biggest intraday drop since December 2020, as the group warned that rolling blackouts would continue to hit earnings. This, despite the company putting more than R6bn in shareholders’ hands via a dividend payout, making substantial headway in paying down its debt and showing tangible signs of recovery in its mobile money service.
Given a largely fixed cost base, as well as the extra Showmax costs incurred in relation to the recently announced agreement with Comcast, this will result in the segment’s trading margin for the 2023 financial year being 23%-28%, which is below the market guidance of 28%-30%, said Multihoice.
This comes as the group, now worth R53.23bn, continues to push its investment in streaming, recently entering an agreement with media giants NBCUniversal from the US and the UK’s Sky, to create a new Showmax service.
Outside SA, the outlook is brighter for the rest of Africa business, which is expected to return to trading profitability, driven in part by increased subscribers during the festive season, in countries such as Nigeria.
The group also expects to save more than R800m in costs.
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