Taking Stock - MultiChoice reports big jump in subscriber numbers

In today's taking stock we discuss, MultiChoice that reported that it lifted its subscriber base by 1.4 million in the past year to reach 20.9 million households.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange slipped a tad from the previous day's closing but largely brushed off concerns of higher inflation in the United States. Apart from banks, other financials and retail, most of the South African stock market's performance is largely linked to the performance of global markets. The benchmark All-Share index closed down 0.2% (to 67,543 index points) and the blue-chip Top 40 index ended down 0.23%.

 

EUROPEAN MARKET COMMENTARY

European stocks closed mixed Thursday as traders digested new US inflation data a monetary policy decision from the European Central Bank. The pan-European Stoxx 600 closed marginally higher, with the major bourses struggling for direction. In terms of sectors, telecoms stocks rose 1.2% while travel shares slipped 1.2%. The European Central Bank opted to keep interest rates and asset purchases unchanged on Thursday, despite the recent overshoot of its inflation target.

 

US MARKET COMMENTARY

The S&P 500 rose to an all-time high on Thursday as investors shrugged off a key inflation report that showed a bigger-than-expected increase in price pressures. Consumer prices for May accelerated at their fastest pace since the summer of 2008 amid the economic recovery from the pandemic-triggered recession, the Labor Department reported Thursday. The consumer price index, which represents a basket including food, energy, groceries and prices across a spectrum of goods, rose 5% from a year ago. Economists surveyed by Dow Jones had been expecting a gain of 4.7%.

 

ASIAN MARKET COMMENTARY

Most Asian markets rose this morning following a record lead from Wall Street as traders bought into the Federal Reserve narrative that surging US inflation was only temporary and the central bank was likely to maintain its ultra-loose monetary policies for some time.

 

CURRENCY MARKET COMMENTARY

The rand rallied on Thursday after a rise in US inflation was seen by investors as soft enough to keep monetary policy loose there, boosting demand for risk assets. At the close, the rand was 0.92% firmer as it traded at R13.61 versus the dollar. The high-yielding rand, which hit its strongest level in 28 months last Friday, is the top performing major emerging market currency this year, spurred by a boom in global commodity prices and the low-rate environment in developed markets.

 

COMMODITIES MARKET COMMENTARY

Gold prices hovered near the key $1,900 per ounce level on Friday, helped by a weaker dollar and US bond yields, as investors shrugged off data that showed a rise in US inflation and hoped the Federal Reserve would not change its dovish stance. Oil prices slipped on Friday but were set for their third weekly rise on expectations for a recovery in fuel demand in Europe, China and the United States as rising vaccination rates lead to an easing of pandemic curbs. The US Energy Information Administration reported on Wednesday that gasoline inventories rose by 7 million barrels in the week to June 4, and distillate stockpiles rose by 4.4 million barrels, both much more than analysts had expected.

LOCAL COMPANIES

The Foschini Group (TFG) +2.4%

Non-grocery retail giant The Foschini Group (TFG) posted a record R719.2 million operating loss (before finance costs) for its financial year ending March 31, 2021 on Thursday, from an operating profit of R4.7 billion in its prior financial year. This starkly highlights how the group, which largely owns upper market retail chains like Fabiani, Foschini, American Swiss and @home, has been pummelled by the Covid-19 pandemic and related lockdowns and restrictions to trade. TFG’s United Kingdom (UK) operation (TFG London) took the most pain with the harshest lockdowns experienced of the three major regions (including Africa and Australia) that the group operates. “Most of the group’s 4 083 trading outlets across all our major trading territories – South Africa, the UK and Australia – were closed in the first month of our financial year [April 2020],” the group reiterated in its results Sens statement. “In South Africa, 447 jewellery stores remained closed during the month of May 2020 due to the prevailing lockdown restrictions. Further lockdowns were experienced in certain states of Australia, in the UK and other international markets, which continued to adversely impact trade performance in these countries throughout our 2021 financial year,” it said. TFG Africa, where the group has more than 3 000 stores (largely in South Africa), contributes most of TFG’s overall revenues. “The UK continues to be the hardest hit with no stores operating during Q4 FY2021,” said the owner of Phase Eight, Whistles and Hobbs stores. “As previously advised, the third UK national lockdown [announced on January 4, 2021] was in place for the full fourth quarter of the financial year, with non-essential retail only reopening on April 12, 2021. In total, the UK lost approximately 50% of its available store trading hours during the past financial year and experienced severely depressed footfall and consumer confidence for the remainder of the year,” added TFG. Meanwhile, TFG confirmed that overall group revenue was down 7.5% to R35.6 billion for the financial year. Group-wide retail turnover was down 6.7% to R33 billion. Excluding the recently acquired Jet business, the group’s overall retail turnover for the year decreased by 13%. However, it said that it saw “a strong recovery in H2 FY2021” which includes the Black Friday and December holiday peak sales season. Second-half retail turnover grew by 11.2% (excluding Jet – 0.8%) compared to H2 FY2020 (which was largely pre-Covid). TFG reported an 80.8% plunge in headline earnings per share (Heps) of 197.9 cents (March 2020: 1 029,3 cents per share). But it is worth noting that its R3.8 billion capital raise last year will have also had a contributing dilutionary impact. “The group generated cash from operations of R9.4 billion for the year ended March 31, 2021, which is a very pleasing result,” it however, pointed out.

 

MultiChoice Group (MCG) -2.7%

Consumers love to complain about MultiChoice Group’s services, but they’re not matching that by shutting their wallets to the company. The pan-African pay-television operator, which owns DStv and SuperSport, has, in fact, lifted its subscriber base by 1.4 million in the past year to reach 20.9 million households. The numbers are included in the group’s annual financial results for the year ended March 2021, which were published on Thursday. The group had 8.9 million paying customers in South Africa and 11.9 in the rest of Africa as of March 31, MultiChoice said. Group revenue was 4% higher at R53.4 billion. This performance, coupled with a focus on cost containment and a R1.5 billion reduction in trading losses in the rest of Africa, translated into a 28% increase in trading profit to R10.3 billion. The group declared a R2.5 billion dividend. “Core headline earnings, the board’s measure of sustainable performance, was up a meaningful 32% year on year to R3.3 billion, while free cash flow grew a solid 10% to R5.7 billion,” the group said.

INTERNATIONAL COMPANIES

Electronic Arts (EA) -0.1%

Hackers have stolen valuable information from major game publisher Electronic Arts (EA), the company said. The attackers claimed to have downloaded source code for games such as FIFA 21 and for the proprietary Frostbite game engine used as the base for many other high-profile games. News of the hack was first reported by news site Vice, which said some 780GB of data was stolen. EA said no player data had been stolen in the breach. The firm is one of the largest games companies in the world. It counts major series such as Battlefield, Star Wars: Jedi Fallen Order, The Sims, and Titanfall among the titles it develops or publishes - as well as a vast array of annual sports games. "We are investigating a recent incident of intrusion into our network where a limited amount of game source code and related tools were stolen," an EA spokesperson said in a statement. "No player data was accessed, and we have no reason to believe there is any risk to player privacy," she added. The company said it had already improved security and stated that it did not expect "an impact on our games or our business". Law enforcement has also been contacted. The "network intrusion" was not a ransomware attack and had happened recently, EA added. Source code is a version of computer software which is usually much easier to read and understand than the end version in a finished product, and could be used to reverse engineer parts of the product.

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Media, Sasfin Wealth

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