Multichoice Group Limited

Good day, ladies and gentlemen, and welcome to the Multi-Choice Group First Half FY24 Annual Results Call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the call. If you should need assistance on the conference call, please signal an operator by pressing star and then zero. Also note that this event has been recorded. I will now hand the conference over to Molloy Horn. Please go ahead.

Thank you, Chris, and hello, everyone. Our results for the six months end of September 2023 were released yesterday, and all of you who have registered on our database would have received an email with all the relevant results information. If you're not on the list, we would like to ask that you please register. It just makes life easier on our side. But in the meantime, you can find today's presentation and the latest results in the investor section of our website. As usual, We will start today's session with a presentation by our CEO, Calvo Moela, who will provide an overview and an update on the operations. This will be followed by our CEO, Tim Jacobs, who will be presenting the financials and outlook for the remainder of the year. Thereafter, we will also gladly take some questions. So let's start. Over to Calvo.

Good day everyone, and thank you for joining us. The past six months provided an opportunity for us to demonstrate our ability to adapt. The interim numbers which we released yesterday reflect our resilience and some excellent execution. In a very challenging environment, we have delivered a 31% trading margin in South Africa, which presents us well for the remainder of the year. We have been able to keep the rest of Africa business profitable. We have taken significant costs out of the system while keeping capacity, and we are driving additional future growth with the launch of SuperSportBed and the new ShowMax, showcasing our ability to stay ahead of the curve. As we show on slide five, The consumer challenges flag last year persisted into the first half of this financial year. Like many other South African businesses, low trading remains the most immediate challenge for us. This is due to a major increase in the number of days and the intensity of disruptions, as we show in the slide on the top left of the page. The bottom left of the slide shows its negative impact on our business. where significant rise in load shedding in May caused a drop in our active subscriber base. What is important to note, as September shows, is how things turn around as soon as electricity supply improves. The cost of living crisis is widely recognized, and the impact of high inflation and interest rate shocks have not escaped consumers on the African continent. In hard times, some households don't have a choice but to cancel their GSTV subscriptions and come back once things improve. But we are pleased that the quality of our entertainment has built resilience into this. The Naira, which weakened by 57% year-on-year, has certainly created serious headwinds for us. The currency has been quite volatile lately, but we are encouraged by potential government actions to address the issues. In the meantime, we are taking active steps to right-size the Nigerian business for the current economic reality. Overall, this is a tough economic climate, and like others, we are not immune. But we have shown that we are effective in managing this, and that our customers appreciate the quality of our offering. Turning to slide six, our multi-trials South Africa team has done a remarkable job in re-energizing and taking active steps to stabilize the business, given the impact of load sharing. We have seen some good initial progress, which we expect to continue. A key highlight for us was the premium customer base, which grew 5% year-on-year, and posted positive growth for the first time in many years. GSTV Stream enjoyed strong growth, mostly after its relaunch in July this year. It is worth highlighting that over 90% of GSTV Stream subscribers added in that period are new subscribers to GSTV who find the connected product without the need for hardware installation more appealing. ExtraStream, which solves the one-stream limitation via mobile, was launched with great success early this year. This gives us confidence for the launch of our new proximity control option, which offers additional streams within the household. The team also recalibrated the pricing and value proposition of the DSTV Business Play packages, which led to a 37% increase in month-on-month revenues in September 2023. This decision was taken to better monetize the GSTV content watched in pubs and clubs who pay the equivalent of only one-third of a premium subscription, a price point clearly out of line relative to value. GSTV insurance continues to enjoy healthy growth, with active policies increasing a healthy 18% to $3.1 million. This segment reported an impressive 31% increase in revenue, almost reaching the half a billion rand mark. We are also pleased with the ongoing traction of DSCV Internet, which more than doubled its revenues year on year. The rest of Africa team stepped up the challenge of achieving profitability by implementing growth initiatives and technical savings as we show on slide seven. Several initiatives were implemented to boost revenue. The launch of GoTV Super Plus in August provides DTC subscribers with a similar value proposition and price point to the GSTV Compact Service. This offering has gained great traction, and as we earn $6 more per subscription, it supports our pools and should lead to a $30 million revenue uplift. To account for a high inflation environment, we increase prices across the region by 14% on a weighted average basis. Although our general policy is to increase prices only once a year, cryptocurrency challenges sometimes prompt us to do so more frequently. This was the case in Kenya and Zambia, where we responded with price increases in April and August. More recently, we have pulled through another 19% price increase in Nigeria, to account for the further Naira weakness. The team also implemented specific initiatives to reduce costs, especially around decoder subsidies. Given the ramp up in decoder subsidies last year around the FIFA World Cup, and taking the macro situation into account, we felt this year called for a more measured approach. We also saved on content and SGMA, which allowed us to deliver a trading profit of 330 million rands in the rest of Africa, which is almost 600 million rands year on year. Turning to slide eight, as we explained at our Capital Markets Day earlier this year, we have always been focused on maximizing the value we can deliver as a business. Leveraging the scale of our leading entertainment platform and our daily access to more than 100 million individuals, we are well-positioned to drive future returns by delivering exponential growth through our expanded consumer offering. The launch of Supersport Bed and Showmax, two exciting new growth opportunities, will be a catalyst for us to double our customer base and generate more than a billion dollars in revenue in the coming years. Tim, our CFO, will get granular about the investment in Showmax later on and will provide more specifics closer to the launch. On the sideline, I would like to spend a moment reflecting on the imminent launch of Showmax 2.0 and why we are so excited about the potential of this offering. We believe streaming will be the critical next step for the African market and we are ahead of the curve with a scalable platform, leading content both local and international, and ready to benefit from fast-mover advantage. There has been a short period during the COVID years where global streaming operators invested aggressively in the scaling of their businesses. This resulted in some questions being raised about the economics of the streaming business model. Nonetheless, all evidence now suggests that streaming services will likely be profitable soon as operators have revised their content costs. Subscription prices are increasing everywhere and the financials of the streaming business are definitely improving. Consolidation in the streaming industry is likely to strengthen the hand of some existing operators while others that are non-profitable will likely close. It is therefore critically important that we make our move now before others reorganize themselves and make a play for Africa, which is seen as the last remaining growth of the market. There are currently just over 450 million smartphones in the hands of individuals across Africa, and at least 250 million football lovers on the continent. This represents a significant addressable market for our new Showmax product. Our EPL in your pocket mobile offering cannot be cast onto a TV screen and will be aimed at bringing the English Premier League games to individuals rather than households, as households tend to gather around the TV and are catered for by existing DTH and DTD offerings. The most exciting part of the new offering is that it will make the EPL available to a new market that loves the EPL but are unable to acquire a dish or want to watch while on the go. The EPL is super excited as this will be the first mobile standalone EPL offering globally and underlines our deep relationship. They've made some unique programming available to complement the live matches, and which is going deeper than ever before behind the scenes, while they are also making players like Drogba available to drive promotion. As for the core general entertainment offering, it will focus on leveraging our vast libraries of local content and access to leading international general entertainment content anytime, anywhere. Turning to slide 10. We have been hard at work over the past six months getting ready for the Showmax launch, which is scheduled for February 2024. Through this process, we are starting to see the benefits of our partnership with Comcast, especially as we leverage the power of the Peacock platform and its immense scalability. Not only do they employ more than 2,500 engineers who work on enhancing the platform on a daily basis, But every December, they live stream the NFL to more than 6 million peak concurrent users. This is simply not something that we could have built ourselves without incurring massive costs and execution risks. Streaming will be an evolving space, and our agreement also ensures that we are on Peacock's global roadmap, but incorporates the local capabilities, such as bitrate compression, which ShowMaps has pioneered. On the content side, we have capability to produce the African stories that everybody loves like nobody else. Through our substantial investment in local content, we now own a significant local content library of 80,000 hours that we are able to monetize. Complementing our unmatched local content will be great international content from our partners through the lives of NBCUniversal, Sky, and DreamWorks, as well as third parties such as HBO, Warner Brothers, and Sony. Payments and distribution is another important driver for our success and maximizes the economics of our business model. The fintech platform in which we have built a 27% stake has already integrated the key Showmax payment options with the aim of onboarding all 200 of our payment partners over the coming months. And to drive distribution, we have secured very valuable local partnerships which will reveal closer to the launch. We are certainly looking forward to Showmax changing content game in Africa and doubling our customer base. That concludes the overview. Let's now turn to slide 12 to discuss our operations. As demand for local content continues to exceed supply, and ahead of the showmix relaunch, we stepped up our investment in local content by 16%. As a result, our local content library is now at almost 80,000 hours, which for context is around nine years of continuous streaming content. Local content matters to our customers and is a true differentiator. It also means that multi-choice plays a vital role in supporting and developing the continent's wider video entertainment industry. Our target had been to spend 50% of our general entertainment budget on local content by FY24. But having achieved it a year early, the focus has now shifted to the number of hours of local content produced, the optimum allocation of those hours between the group's linear and streaming offerings, and the monetization of each hour of content produced. The undoubted highlight of the interim period for MNET was the premiere of Shaka Ilembe. The show delivered record views, with each episode averaging more than three million viewers, mostly through live viewing. We have renewed several studio deals during the period, and our core production state continues to expand, with six pro productions scheduled for release in the second half. As part of our ongoing cost optimization process, we have been able to reduce back-party costs. This has been through renewals that reduce fees or at the same rates, converting contracts into local currency, and adding forex protection mechanisms. Moving to Supersport on slide 13, we could not be more proud of DSTV, the home of the bokeh. Following on from the success of the FIFA World Cup last year, the interim period saw Supersport successfully broadcast three World Cup events, yet again reflecting our ability to source content from a wide variety of sports through the deep international partnership we have built. The FIFA Women's World Cup in July and August drew record television audiences. The Netball World Cup in Cape Town, hosted on the African soil for the first time and produced by an all-female crew, was shortlisted at the Sports Business Awards. Our Rugby World Cup production grew record viewers and served as a reminder that we can be stronger together. Now, we are rooting for the proteas at the Cricket World Cup. The past six months saw the SuperSport team increase the broadcast of live events by 21% to 17,000 hours, step up our investment in local sport by 8%, and increase our own local production by 57%. The broadcast of this year's Comrade Marathon was the biggest production in SuperSport's history. The team was also able to renew several sports rights as to continue to provide our viewers with a wide variety of choice. We remain committed to making school sports accessible to all levels of society through our Super Sports Schools platform. This user base grew by 69% over the last six months, providing a valuable stage for identifying the next generation of South African sports in sparse. And we have enjoyed great success in working with the PSL to re-energize the league through various initiatives. Our leading position in delivering sporting content is also key to broadening our ecosystem with some new strategic initiatives such as SuperSportBet and the English Premier League in your pocket, which I mentioned earlier. These complementary services will help us to drive subscriber adoption, expand market share, and deliver additional revenue streams. Slide 14 shows the key KPIs of our South African linear business. Outside of the ongoing impact of load sharing, which I've already explained, reported subscriber growth was impacted by the removal of 311,000 non-revenue generating customers from the base. This was due to our decision to end the short-term Surprise and Delight campaigns, which were launched to support customers badly affected by load sharing at the end of last year. While we try to support customers in adverse conditions, like we did during the COVID-19 lockdowns, we can only do so for a limited period of time. The effect of this decision is clearly highlighted in the graph on the left. The South African business reported a 5% deadline in 90-day active customers to 8.6 million, of which 3% can be added to this decision. We are particularly pleased with the 5% growth in our premium base, which showed positive growth for the first time in years. The performance of the overall premium segment was, however, dragged down by the pressure on the Compact Plus base, which is much more susceptible to macroeconomic pressures. More stable trends in the mid and upper segments of the customer base, along with inflation-leaked average price increases, helped limit the declining monthly average revenue per user to 2%. This was despite the ongoing negative impact of load shedding on the number of active days. After adding 1.4 million new subscribers in FY23, and similar to previous periods which followed the FIFA World Cup, subscriber growth in the rest of Africa was more subdued. And it's as we expected. Subscriber growth was also affected by the impact of inflationary pressures on consumers in key markets like Nigeria, as well as visibility factors around the northern hemisphere football seasons. On a 90-day basis, we added 100,000 customers to end the period at 30 million households, while the active subscriber base showed resilience despite the difficult macro conditions and was broadly stable at 8.9 million subscribers. Our objective is to pass through inflation-linked pricing, as that is typically what customers are prepared to absorb. As we mentioned earlier, we were able to increase prices on average by 14% across all our markets. Active days were down 4% due to challenging conditions in markets such as Zambia, which experienced power outages, and Nigeria, where the economy is taking strain. Due to currency weaknesses in several markets, the blended ARPU was negatively impacted upon conversion and came in just above $6.00. And although we finished flat in terms of customer growth, we delivered significant growth in profitability. Slide 16 reflects on the performance of Kingmakers, our 49% owned sport betting business. Although similarly impacted by the weaker Naira and challenging macro-environment in Nigeria, Kingmakers continued to deliver strong underlying operating momentum. The business delivered organic revenue growth of 22%, led by strong growth in its online sportsbook, which saw the active users increase 17%, and its revenue contribution grow by 40% year-on-year. The weaker Naira resulted in reported revenues increasing only 2% to $95 million, and or 1.8 billion rand. Encouragingly, the business delivered an EBITDA profit of $10 million, and the net loss has halved. The product and market expansion plans are fully funded, with Kingmakers having $134 million, or 2.5 billion rand of cash at period end. We were pleased with the South African launch of SuperSpotBet last week. To allow it to gain immediate traction and build market share, SuperSportBet will leverage the SuperSport brand and the ecosystem. There will be pre-game shows to build engagement and excitement around the product, as well as live odds integration into selected games, which shows the synergy of our platforms. As South Africa is under-penetrated in terms of sport betting, We believe the combination of the stressful kingmaker sport betting platform and the well-known super sport brand provides a great opportunity for the future revenue stream. On slide 17, we reflect on Ideto, our technology business. Ideto had a solid six months delivering market share gains in its core media security business through customer wins and additional work with existing customers, such as the provision of its managed service solutions. They also had success in combating piracy, somewhat of a rising challenge globally, resulting in over 33,000 streaming piracy services being disconnected. Outside of media security, e-datas connected industry initiatives continue to build momentum, most notably in the Keystone product line, where IDETO secured additional customer wins in the construction equipment space. IDETO further solidified its position as a market leader by joining the RDK Technical Advisory Board and by being recognized for its collaboration to enable the rollout of plug and charge, a seamless and streamlined electric vehicle charging solution across Europe. In conclusion on slide 18, We delivered a resilient operational performance in highly challenging macro environments by proactively implementing initiatives to protect the economics of our business. We have a compelling growth strategy in place to deliver sustainable long-term returns and navigate short-term headwinds. We are approaching an inflation point to deliver on this objective through our investment in both our streaming services and broader ecosystem of interactive entertainment and consumer services. All these positions ask well to capture long-term opportunities to expand our customer base to over 50 million in five years and deliver additional billion dollars in revenue in the medium term. This concludes my operational update. Let me now hand over to Tim to discuss our financial performance.

Thank you, Calvert. On slide 20, we start by highlighting the four areas where our teams have performed incredibly well over the past six months, demonstrating the resilience of our operations in the face of the challenging macro context. In South Africa, we delivered a trading profit margin of 31%, which is a particularly credible result considering the impact of the persistent high levels of load shedding, the rising interest rates, and difficult macro conditions on our customers and our business. Our rest of Africa business was able to maintain a positive trading profit. This is a very strong performance if one takes into account the 1.6 billion rands in currency headwinds that the business had to contend with in the first half of the year. Through tactical decisions and negotiations with our suppliers, our linear businesses were able to collectively reduce the level of spend on Dakota subsidies by 900 million rands on an organic basis, which I will unpack in more detail later. And separate to this, our cost savings of 500 million means that we are well on track to exceed our original full-year target of 800 million rands, and we have revised the target to 1 billion rands. Turning to slide 21, we provide a high-level view of the major elements that impacted our trading profit performance, talking to the waterfall at the bottom of the page and starting from left to right. In the comparative period, we generated 6.1 billion rands in trading profit. Through tactical decisions around pricing, subsidy and a relentless cost-saving discipline, we have delivered a R1.1 billion organic improvement in the core business. That translates into an increase of 18% year-on-year on an organic, like-for-like basis. The additional investment in Showmax that includes customising the new Peacock platform and hiring key staff to fill the new structure amounted to R500 million. This translated into an organic trading profit of 6.7 billion rands, an increase of 10% year-on-year. The major depreciation in currencies such as the Naira, the Kwanzaa, and the Sidi resulted in a 1.7 billion rand foreign exchange hit to our profitability. After absorbing the currency loss, the reported trading profit closed 18% lower than last year at 5 billion rands, but reflects a resilient operational performance as we drive the expansion of our service offerings. With that context, we turn to slide 22 for our key financial metrics. The 4% organic top-line growth was underpinned by strong performance in the rest of Africa. The currency hand-wins already discussed resulted in the top-line contracting 1% on a reported basis. Our trading profit was up 10% organically and would have been up 18% if it wasn't for our conscious decision to invest in future growth behind the new Showmax business. The 1.7 billion currency impact resulted in the reported trading profit being 18% lower year on year. Core headline earnings, the board's measure of the true underlying performance of the business, declined by 5% on a reported basis, impacted by the same drivers weighing on trading profit, with some offset from realized gains on forward exchange contracts and lower tax and minorities in South Africa. In response to Shielder input and a failure of the official and parallel rates in Nigeria to unify into a single rate, the group has introduced an adjusted core headline earnings metric. This metric is identical to the standard core headline earnings definition, with the only exception being the inclusion of losses incurred on cash remittances in markets such as Nigeria. This reflects a 25% year-on-year improvement to R1.5 billion. Our free cash flow was 1.1 billion rands and was impacted by mainly the working capital investment made into the Showmax business. On slide 23, we look at subscriber numbers and the subscription revenue, the largest contributor chart top line. The chart on the left shows our 90-day active subscriber base, which was down 2%. The decision to remove the surprise and delight customers from the base, which Calvin mentioned earlier, had a limited financial impact as they were not generating revenue. Subscription revenues, on the right, were down 2% on a reported basis and up 3% organically. In the rest of Africa, we benefited from an average 14% price increase, which translated into a similar organic growth rate for subscription revenues. The contribution from this segment on a reported basis was positively impacted by the translation of the rest of Africa's dollar revenues into rands at an average rate of 1875 compared to 1661 to the dollar in the previous year. However, this was fully negated by the 57% weakening of the Naira, which not only resulted in a much lower dollar contribution from Nigeria, but in a flat growth on a reported basis for the segment. In South Africa, revenues were 3% lower, as the benefit of price increases was offset by the lower number of active days per subscriber caused by the sustained load shedding and the tough macro environment that is resulting in an increasingly financially distressed customer. Showmax, disclosed separately for the first time, reported a healthy 25% growth in subscription revenues to R500 million. Turning to slide 24. where we unpack our revenue performance by segment and type. The pressure on South African revenues due to load shedding and consumer pressure has already been covered, as has the growth in the rest of Africa. Our technology business, Adeto, experienced growth in its external video segment off the back of improved OTT and managed services revenues, as well as growth in the gaming and connected transport divisions. This resulted in a 4% year-on-year organic improvement or 17% improvement on a nominal basis when considering the benefit of translating their dollar revenues with the weaker rand. Showmax benefited from strong customer growth and delivered a 46% increase in revenues to R600 million. On the right-hand side, advertising revenues, which have been growing strongly in the rest of Africa, was affected by the weaker Naira. This was partially offset by an uplift in South Africa, driven by the World Cups, and a strong general entertainment content such as Shark Air Lembe. Our insurance business increased premium income by a healthy 31%, while the 1% reduction in other revenues mainly relates to a decrease in Dakota revenues owing to the tactical decision to reduce the level of subsidies in both the South Africa and rest of Africa segments. Slide 25 provides a summary of our segmental trading margins. most of which we already commented on earlier. The South African trading margin came in at 31%, ahead of our expectations. The 3% margin delivered by the rest of Africa business was a very strong result. Adeta's external revenue growth and tight cost controls partially offset lower Dakota volumes and revenues in a post-FIFA World Cup year. The trading margin, which trended lower towards historical levels as a result, was also impacted by $2 million in restructuring costs as the business adapts to changing media landscape that will benefit profitability in future periods. Trading losses in Showmax increased from R279 million to R800 million, all relating to the additional investments in preparation for the relaunch. On slide 26, we provide our standard trading profit bridge for the rest of Africa. The business enjoyed a material benefit from the inflationary price increases we put through across the majority of our core markets, demonstrating the benefits of a sustainable pricing policy on a scaled customer base. The segment benefited from tight cost control management, specifically around the Dakota subsidies. This exceptional performance resulted in trading profit improvement of 2.2 billion rands on an organic basis. Currency headwinds amounted to a considerable 1.6 billion rands after major foreign currency depreciation in markets like Nigeria, Angola, Kenya and Ghana more than outweighed the benefit of translating their dollar revenue using a weaker RAT. The net result was reported trading profit of 300 million rands, a 230% improvement from the prior period. Moving to slide 27, we analyse our operating leverage and look at our cost savings for the year. As you know, our target is to generate positive operating leverage by maintaining the organic growth in revenue ahead of the organic growth in operating expenditure. Despite the margin pressure in South Africa and the additional investment in Chomax, we managed to achieve that. If you exclude our strategic investment in Chomax, our organic operating leverage would have been 4%. We delivered 500 million rands in savings. with major contributions coming from renegotiated contracts for international general entertainment content and sports rights, as well as targeted savings around discretionary spend in non-critical areas like travel. Moving to slide 28, we provide more detail on our tactical move regarding subsidies and the results we are seeing thus far in both South Africa and the rest of Africa. The decision to reduce Dakota subsidies was centred around driving better unit economics. This was achieved by negotiating reduced cost prices per decoder with our suppliers, while raising the selling prices of the decoders, resulting in a reduced subsidy per unit. By removing the fully installed option on the Explorer in South Africa, and unbundling the sale of dish kits from the sale of decoders in our rest of Africa markets, these economics were further improved. The successful relaunch of our DSTD Stream product means that customers have access to DSTV without the need for extra hardware at a more affordable price point, while our credit offers on decoders also allow for more affordable access to our platform. As a result, South Africa has seen a reduction in the level of replacement boxes sold from 51% in the prior year to 31% in the first half this year. This means a higher percentage of our boxes are going to new customers, which drives incremental revenue. It has also seen new customers on an equated basis growing 7% year-on-year, resulting in a better quality of customer entering our platform than we saw before. In the rest of Africa, we are also seeing the early signs of a better quality of subscriber being acquired through improving decay curves and higher equated new enables. The net benefit to the group has been a R900 million saving in decoder subsidies. On slide 29, we show our core headline earnings and new adjusted core headline earnings. Core headline earnings reflects a decline of 5% year on year as the sharp improvement in profitability in the rest of Africa segment was more than offset by additional investment in Showmax and the lower net contribution from both Adeto and South Africa. At the bottom left of the slide, we show adjusted core headline earnings which reflects strong growth of 25% year on year that includes the impact of losses on cash remittances, net of taxes, and minorities. Slide 30 provides an update on our free cash flow, which totaled 1.1 billion rands for the period. The waterfall graph highlights the key movements which we unpacked starting from the left. In the comparative period, we generated 1.8 billion rands in free cash flow. The lower EBITDA and increased investment in content, especially ahead of the Showmax launch, resulted in a R800 million net outflow. Other working capital movements totaled R1 billion and includes non-recurring net realisable value adjustments on Football World Cup Dakota inventory in the prior year as well as the benefit of lower content prepayments and timing of supplier payments in this period. Payments of R1 billion were made to Peacock for customisation of the platform ahead of the launch in the second half of the year. Moving from cash flow to cash balances, we provide an update on our balance sheet on slide 31. Our reported cash holdings have declined half and half from 7.5 billion rands in financial year 2023 to 5.6 billion rands at period end after paying the Petuminati dividend of 1.4 billion rands in September. This also includes 500 million rands spent by the group ShareTrust to buy back shares in the open market to offset dilution from share awards. As mentioned before, we typically aim to retain a meaningful cash balance in the business for ongoing operating requirements and financial flexibility. Undrawn facilities have remained at 9 billion rands, of which 5 billion rands is in group borrowing facilities. We entered into a new 12 billion rand term loan facilities last year, 8 billion of which was drawn down at year end to cover our short-term working capital needs, and 4 billion was available to support ongoing business requirements. In October 2023, the remaining R4 billion of the R12 billion term loan facility was drawn down. This has been disclosed as a subsequent event in our financial statements. Our cash plus undrawn facilities provide liquidity to the group of R14.6 billion. Not all cash is available due to R3.3 billion of existing cash commitments. That reduces available liquidity to R11.3 billion, which provides financial flexibility. Our debt position has reduced slightly to 8.2 billion rands. Of the 300 million rands was used to repay our previous working capital loan. Our leverage ratio at 1.3 times remains well within prudential limits. Let's turn to slide 33 for our outlook for the rest of the year. The second half of the year will be a key period as we progress our journey to expand our ecosystem beyond Africa's leading linear pay television operator into a broader ecosystem of interactive entertainment and consumer services. The focus remains on driving further efficiencies in operating expenditure as well as working capital and CapEx decisions to ensure consistent and optimal returns on all capital deployed. At the same time, we continue to seek ways to support or improve the economics of the business through pricing decisions, optimizing customer mix and content monetization, as well as calibrating decoder subsidies according to the macroeconomic backdrop. More specifically, we retain our full year mid-20s guidance for the South African business as the second half of the year is typically affected by higher seasonal costs, but we are targeting the upper end of this range. The rest of Africa team remains focused on maintaining profitability and reducing the funding required from group into the second half. We are looking to achieve our revised cost-saving target of 1 billion rands. We had initially set financial year 24 as the year for pre-cash flow breakeven. However, given the significant setback from currency depreciations, we have now set financial year 2025 as the new target. And as we have touched on, we're excited for the upcoming relaunch of Showmax in February 2024, which will enable us to expand our customer base to 50 million over the next five years, underpinning our long-term growth. To conclude on slide 34, we have a compelling growth strategy in place, which is partly driven by the opportunity to capture sustainable, long-term growth through our targeted investment in streaming, and partly by the need to absorb increased external economic pressure on the business and its customers in the short term. Our priority is to navigate both sets of demands to ensure the group is able to operate sustainably through the current economic cycle and long into the future, while delivering attractive shareholder returns. The relaunch of Showmax, combined with Kingmaker's entry into the South African market with SupersportBet, and Moment's platform launch are all important milestones as we accelerate growth and drive additional scale, creating a world of more for customers and additional value for shareholders. So, to summarize, we are managing the macro challenges, progressing our new business initiatives to stay ahead of the curve, and are confident that we will deliver long-term, sustainable shareholder value. That concludes the presentation for today, and we are now ready to take some questions.

Ladies and gentlemen, if you would like to ask a question, please press star and then one on your touch-tone phone or on the keypad on your screen. You will hear a confirmation tone that you have joined the queue. If you decide to withdraw the question, please press star and then two to remove yourself from the list. Again, if you wish to ask a question, please press star and then one now. Our first question is from Jared Hoover of R&B Morgan Stanley. Please go ahead.

Afternoon, Calvo, Tim and team, and thanks for the call. I've got a few questions on the South Africa business to start off with, please. I guess my first is about revenue progression. And what I'm trying to figure out is how we should think about revenue progression of the South Africa business into the second half of the year and into 2025, given that you are going to be lapping a soft load-sharing impacted base. Load shedding looks like it's coming down below stage four in your outlook. And then you also have an offsetting factor of decoders subsidies coming down. So that's my first question. My second is on the South Africa margin. And I just wanted to make sure that I'm crystal clear on your guidance. I think you just mentioned, Tim, that you're targeting the upper end of that mid-20s guidance for 2024. So does that mean that you're targeting... much closer to 27.5%. And then my third question, also related to South Africa and the margin, looking into 2025, is it reasonable for me to expect the margin to come in closer to 20% than the mid-25% range that you're guiding for this year, purely on the basis of your dollar cost base being reset at at least 17.20 that you are hedging some of your dollar costs at, in your outlook. I'll leave it there for now. Thanks.

Yeah, maybe let me start and then the team will follow through. In terms of the revenue progression from the South African business, as we have already mentioned, we have put inflationary pricing across our products in South Africa. We have launched a new product in tier series 3, which is gaining traction in the market and we are seeing new subscribers that have never been on DSPB taking out this product, which are young people who are sitting in apartments, which bodes well for the growth of the South African business. The other thing to look into is that if load-sharing definitely subsides as we are seeing now, we think we should be able to get customers coming back. So that would be my answer to the first question.

Okay, so the answer to the margin question is I can't be as specific as you want me to be. We've given, I think, quite a firm steer that We think it's going to be in the mid-20s and in the upper end of the range. But to get as specific as confirming the number that you quoted, Jared, I think is a little bit too specific for, you know, especially given the amount of volatility that we're seeing in the marketplace. And while we agree with you that the second half at the moment looks like low-chaining will ease up, there's no guarantees and there's no assurances that that will actually happen. And so, you know, we'd be reluctant to you know, to be as precise as you're asking us to do. And in terms of, you know, the margin for the second half of the year, I think that's just really a kind of a mathematical equation. You can apply, you know, whatever you think, you know, the outcome is. We've steered you to the top end of the mid-20s range, and whatever margin, you know, your model needs to get us, you know, to get your model to that number, I suppose we'd have to work in your... in your own spreadsheet.

Okay, thanks. And just the margin on 2025, is it reasonable for me to expect that to come in closer to 20% than the mid-20s, given the dollar cost recently?

Yeah, so look, I think the margin for 2025, firstly, this is way too early for us to give a steer to the market. As a general rule, we would come out and give some kind of indication as to where we think that will come out when we get closer to the end of the financial year. Remembering that if you just think about the progression of our business, We identified that load shedding was having a material impact on our business in the last quarter of last year. And when we came to the markets and we gave the revised margin guidance, one of the reasons for that was because we said that we had limited time for the business to react to such a material movement in our top line. If you look at the operational performance in the first half of this year, the core business has kind of really responded well. And as a group, we're actually up 18%. So in the context of that, I mean, what we expect to be doing in the second half of the year is to continue with that momentum. The South African business in particular is looking at the extreme product. They're looking at a lot of retention work. We're moving into the festive season, which is always a better part of the year for us. And if the load shedding does ease up, as you kind of indicated that you think it's going to, we think that there is some good opportunity for us to continue with that stabilization of the top line. And then the cost-saving efforts that we've put into the business, of course, are allowed to then mature, and of course we're targeting new cost saving efforts in the second half of the year. We have raised our guidance on cost saving to a billion rand for the full year, so that means that we're looking to at least double the cost saving effort that we did in the first half of the year. So I think you need to then take all of those momentum and directional kind of steers that we're giving for the second half of this year, that will then translate into into next year. Granted, we do have a short hedge book, so we are only covered at the moment into the early parts of next year, but we are well aware of the challenges that the currencies are posing on the business, and we are managing the elements that are within our control as aggressively as we can to make sure that we offset those impacts.

Okay, great. Thank you. I'll rejoin the queue.

Thanks. Thank you very much. Ladies and gentlemen, again, if you wish to ask a question, please press star and then one now. We do have a follow-up from Jared. Please go ahead.

Hi, guys. I'm glad I managed to get back on so quickly. I guess my next question is on the rest of Africa. You're targeting free cash flow break even next year. I think that's a pretty good outcome given where the currencies have moved to. Obviously, a lot of that is based on your ability to take out costs from the business. But are you able to share maybe high level some of the assumptions underpinning that? If you could, maybe the range of Naira that you are forecasting in your assumption set to get you to free cash flow break even? I guess that's my first question on the rest of Africa. My second is on Showmax. Now, you currently have about 22 million subs at a group level. And I picked up some commentary in your results booklet pointing to you looking to get that up to about 50 million in the next five years. Obviously, some of that will be driven by increased pay TV or linear pay TV penetration. Very high level penetration. I guess I could see that getting to about 30 million subscribers in the next five years. So that means the remaining 20 million is probably in your OTT platform on Showmax 2.0. Is my math horribly wrong on that? Or am I ballpark in the range that you could see about 20 million Showmax 2.0 subscribers over the next five years? And then my third question is just on costs. I mean, you've spoken quite extensively about your ability to pull back on subsidies, but I also picked up some commentary around the moment reaching commercial operations in the second half of 2024. And if I recall, I think you mentioned there's about a $60 million potential cost-out opportunity that that moment brings to the party. Is any of that being baked into the outlook at the moment? And how should I think about that? I'll leave it there for now. Thanks.

Let me start with the Showmax question and then Tim will take a financial question. Just on Showmax, I think how you need to think about it is on the linear side you've already seen how the business has performed in terms of growth. Out of that growth then you'll be able to calculate more or less as to where we think the remainder of the growth is going to come from as a result of OTT. What we are doing, if you look at ShowMate 2.0, is that we are bringing in the EPL in our pocket. EPL on the African continent is like a religion. I think we are going to see a massive uptake in terms of the youth because they just love football. And the second element that we are bringing in is the ramp up in local content as well as the best of international content as I've already presented about. We believe we've got a strong companion OTT propositions that we are bringing to the market and that's why we believe very strongly that we will be able to reach the 50 million mark in terms of subscribers and whilst at the same time generating a billion dollars in revenues.

I wish I could take the second or the first part of the question. Okay, so in terms of the breakeven guidance on pre-cash flow, so remember there's a couple of assumptions, right? In addition to the discipline that we have around taking costs out of the business, for example, we are looking very carefully at the subsidies that we're currently deploying in the business. The rest of Africa team started the reduction in subsidies fairly late in the second half, so we're expecting the momentum that we saw in the first half in terms of overall group subsidy cuts to continue into the second half, and a reasonable amount of that should be sitting in the rest of Africa business. That's the first part. And, of course, we're targeting other cost savings as well, as we always do. There's a number of content renewals that come up in the second half of the year. We'd expect to negotiate very hard on those renewals. And then, importantly, we've already mentioned that we have put second price increases into the rest of the African markets. So a number of markets have got a second one, and in particular, in November, Nigeria got a 19% price increase. So all of these factors kind of play the outlook that says we get a free cash flow rate even by the end of next financial year. Keeping in mind that that doesn't mean that the business is self-funding-less, because there are certain expenses that we have to take below the line, like cash extraction rates at the parallel markets. But what we do have as an assumption in that modeling is that the NIRID does weaken from where it was at the half year. I can't give you the precise rates that we're using at this point, but we do weaken that into our forecast model.

Yeah, the last question that you asked around moving the $6 million that you spoke about in terms of the costs. as a result of integration of third-party payments. What we see happening is that as soon as moments start operating, there will be a decrease, but the decrease will not be one shot where the $60 million goes down to zero. It will ramp up as we integrate this third-party payment into the moment and we'll see a reduction coming too.

And it will never be 100% of the $60 million because Moment earns a commission themselves. But I would guess that we are probably expecting at least a third of that to be a saving as we move into the future.

Thank you very much. I would now like to hand over to Muller Horn for any questions off the webcast.

Thank you very much. I'm going to group the questions together because we've received questions that are fairly similar. We had a question about whether we could provide guidance on the expected second half losses for Showmax and the shape of the J curve over the next few years. Then we have a question from Netbank CIP. asking about the rate at which we extract money from Nigeria and how dependent we are on the Nigerian cash flows to fund the group commitments, including dividends, and also then asking the higher rates to get cash out compared to MTN. And then we have a question from Allweather asking about... steer on our second half free cash flow outlook and whether we would consider share buybacks given the current depressed levels and a follow-up question whether we actually have any opinion on the share valuation at this stage also linked to potentially a share buyback. I think those are the questions. The last question is whether the capital market trading profit guidance will stand, but I think that question we can take, so we're the first one about the outlook for Showmax.

Okay, so let me start off with the Showmax J curve question. So we're very comfortable that the guidance we provided at the capital market stay remains intact. Although we do expect the current year to come out in at the bottom end of that range, partly because the launch of the Showmax platform is now scheduled for February this year, and that means that a lot of the content amortization will only be for two months of the financial year. We also expect, as a general principle, we expect a flatter J curve than seen in a lot of the international OTT platforms. So we see a much flatter and a much quicker progression to the break-even position than we still believe is going to be in roughly three to four years' time from launch. So I hope that answers the question. And of course, Calder has already spoken about our ambition to get you a billion dollars of turnover within five years in this business. Then I think the second question related to the extraction of cash out of Nigeria. So we averaged the cash extractions at about 790 Naira in the first six months. If we look more recently, as we got kind of closer to the half year, we were sitting at 1,025. But we're seeing a lot of volatility in the Naira in the last month. So it blew out to kind of 1,300, then it pulled back to close to 1,000, and then kind of weakened to just over 1,100. So we're seeing significant volatility. So it's very difficult to predict at the moment. And as that Naira rate moves around in the parallel market, we're also seeing that there's limited liquidity there. So it's not just that the rate's moving around, but also the propensity for people to put money on the market in such a volatile climate seems to be challenging at the moment. In terms of what, the MTN rates? Yes. Yeah, so look, I mean, guys, it's always difficult for us to comment on MTN and how they get rates out and what rate they're going to get the money out at. Remembering that, firstly, they're in a different industry to us in Nigeria. Secondly, they're listed, so I think there are dispensations that they get from the central bank that we potentially don't enjoy. And we also understand that a lot of their remittances is in the form of dividends, and our understanding is that if you're declaring... dividends that you also get certain special dispensations in terms of the rates that you can extract money at, which unfortunately we don't enjoy at the moment, but I can't comment specifically on the rate that MTN gets the money out, unfortunately. So on the free cash flow outlook, I think There are so many moving parts at the moment, right, that it's always a difficult one to call. I think what I can say is that in the first half of the year, you know, we've delivered this one billion rand profit. A lot of it, a lot of where we're going to end up in the rest of the year is centered around a number of key themes, okay? One of them in South Africa is low chaining. The second outcome is the currencies that we've seen happening in the rest of Africa. Why that's important is because that determines the level of funding that the rest of Africa business will need from the group. And lastly, it's got to do with the way that these price increases that we are putting into the business, how much these are going to stick and how much customers are going to stay with us through the journey. The last part of course is the part that we've already committed to uplifting the targets for the year and that's on the cost saving side. So we expect in the second half of the year to see a sustained improvement or sustained level of savings in the subsidy line across the two businesses and we're also expecting the absolute level of cost saving that we achieved in the first half of the year to at least be achieved in the second half as well. So it's very difficult at the moment to call and give you guys guidance. I mean, obviously we have an internal view, but there's simply too many moving parts to give a firm view as to where the cash flow may end up at the end of the financial year. And I think when we came to the markets with our full year results, and we mentioned that we're not going to pay a dividend, I think what we tried to indicate very firmly to the market was that we're going to try and resume the dividend as soon as we absolutely can. That's the first thing. And the second thing is, given this current level of the share price, I think if we get to the position where we do an excess cash and we're going to return it to shareholders, we would certainly look very carefully at whether a dividend or a share buyback was the most appropriate way to do that. Because at the current share price, we think that is a very strong buying opportunity.

Chris, I've got no more questions on my side. I don't know if there's anybody else that's queued up on your side.

No further questions on the conference call.

Okay, I'm going to then hand over to Calvert to conclude.

Thank you, everyone. We hope you found today's session useful and that you share our excitement about the future of headway creating. We appreciate your time today and are looking forward to engaging with you further over the coming weeks. On behalf of MultiChoice, I would also like to wish all of you and your families well over the coming festive season and all of the best for the year ahead. Thank you.