November 11, 2019 / 2:52 PM / a month ago

UPDATE 2-MultiChoice profits leap on cost-controlling measures

(Adds CEO comments, detail)

JOHANNESBURG, Nov 11 (Reuters) - Africa’s biggest pay-TV group MultiChoice saw half-year profits leap 22%, it said on Monday, as it further cut losses outside of its home market South Africa and as foreign exchange swings worked in its favour.

The company, spun off by South African e-commerce giant Naspers in February, said last week its profits for the period could increase by up to 25%.

Its headline earnings per share (HEPS), the main profit measure in South Africa, stood at 341 cents for the six months to Sept. 30, compared to 78 cents a year earlier.

Core HEPS, which MultiChoice sees as a more accurate measure of its performance, were up 22%.

“We have reduced our losses by 700 million rand ($47.03 million) in the first six months of this year, and it is our focus to ensure that the rest of Africa turns profitable in the medium term,” said MultiChoice chief executive Calvo Mawela.

MultiChoice shares were down 0.1% at 133.42 rand by 1655 GMT, outperforming a 0.9% drop in the wider index.

“The group added 1.2 million 90-day active subscribers, representing 7% year-on-year growth, taking the overall 90-day active subscriber base to 18.9 million households at 30 September,” it said in a statement.

Subscriber growth rates were reflecting “more normalised trends”, it said.

It said its performance had benefited from tight cost controls and the lower depreciation of the rand against the U.S. dollar compared to the prior period.

That led to a drop in unrealised foreign exchange losses related to liabilities from U.S. dollar-denominated transponder leases.

Since its foundation three decades ago, the company has grown to reach 18.9 million households across 50 African countries with pay-TV products and a streaming service called Showmax that competes with rivals like Netflix.

The subscriber base is split between 8.2 million households in South Africa and 10.7 million in international markets.

The group reported a 2% increase in its home market revenues and a 5% increase in its other African markets.

Loss-making operations elsewhere in Africa are still weighing on performance but are moving back towards profitability, it said, adding that the growing TV and streaming market on the continent is central to its growth strategy.

The group announced in June that 2,000 workers would be laid off in a shake-up of its customer care service. Mawela said that the group will be making an announcement in the coming days confirming the final outcome of the process.

“We still need to make sure that we tick all the boxes from a legislative perspective,” Mawela said.

As well as Netflix, the company faces competition from a host of other local and regional players in both streaming and pay-TV, and from other industries also in the battle to win screen time, such as gaming and user-generated content.

MultiChoice spun off Naspers in February, when it made its debut on the Johannesburg Stock Exchange. Its shares rose 15% following the much-anticipated listing, launching MultiChoice straight onto the top-40 firms on Johannesburg’s bourse.

$1 = 14.8839 rand Reporting by Emma Rumney and Naledi Mashishi; Editing by Jan Harvey

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