MultiChoice Group Limited (MCG) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the MultiChoice FY '23 results conference. [Operator Instructions]. I will now hand over the conference to Meloy Horn.

Thank you, Chris. Hello, everyone, and thank you for joining us today. We released our results for the year ended 31 March 2023 yesterday. And for those of you who registered on our database. You would have received an e-mail with all the information. And if you're not on our list, we have uploaded the slides under latest results in the Investors section of our website. As usual, I'll presenter today, our CEO, Calvo Mawela, who will focus on our operations; and our CFO, Tim Jacobs, who will discuss the financials. After the presentations, we'll be happy to answer some questions. So with that, let me hand you over to Calvo to start today's presentation.

Thank you, Meloy, and good day to everyone. Let's turn to Slide 4 to discuss the highlights of this year's results. We have grown our subscriber base by 8% or 1.7 million customers, which means we now serve 23.5 million households across the continent. The Rest of Africa had a particularly strong year, adding 1.4 million subscribers to reach 14.2 million households or 60% of the group's total base. As a result, a strong revenue growth and cost control, the business reported a trading profit of ZAR 900 million, which is a ZAR 2.8 billion improvement from the previous year on an organic basis. Connected video users on the DStv app and showmax continue to grow -- with paying showmax subscribers increasing a healthy 26% in year. The business is set for exponential growth as we look to relaunch it later this year in partnership with Comcast and by leveraging its world-class pickup platform. Group revenue increased 7% to ZAR 59.1 billion and appealed by the strong Rest of Africa performance, but offset some or up by pressures in the South African business caused by high levels of load shedding, which hit subscriber activity in the final quarter of the year. The 17% trading margin was impacted by the lower earnings in South Africa and an adverse ZAR 900 million in exchange effect, mainly due to the weaker rand. Free cash flow was affected by lower profits in South Africa and from prepayments. The Board took a prudent approach given the uncertain current environment and decided not to declare a dividend for FY '23. And Tim will discuss this in more detail. The past year saw us maintain our ongoing investment in local content, and we delivered a record production of live sports events, which we'll discuss in more detail in the operations section. We are able to report positive organic operating leverage as costs increases were kept below that of revenue growth. We banked ZAR 1.3 billion in cost savings well ahead of our ZAR 800 million target. We used some of the savings to fund other aspects of the business such as pricing offers, more local content and new services. KingMakers', our 49% owned sporting business delivered strong growth with revenues up 51% to $198 million or ZAR 3.4 billion. We've also had a busy expanding our consumer services ecosystem. Let's turn to Page 5 for more details. As we explained at our recent Capital Markets Day, we are focused on creating a world of more to keep increasing the value that we offer our customers, to drive additional revenue streams and to create long-term value for our shareholders. Aggregating content is a critical underpin to our video entertainment strategy. In the past year, we have added business plans to explore outside environment. We have offered customers cost saving bundles to add to the convenience of accessing all their content in one place. We have enhanced our catch-up savings with our -- with the addition of Universal+, and we have launched a dedicated linear channel for the extremely popular SuperSports Schools app. To ensure that our viewers can access our content in a way that best meets their needs, we have launched the [ streamer ] and plan to launch DStv live in partnership with Sky in 18 to 24 months. When it comes to other value-added services, we have expanded our home security offering by buying the Namola app. We have strengthened our connectivity offering by expanding the DStv Internet service. We have expanded our fintech activities by investing in a Moment, a partnership with Rapyd and General Catalyst. And where we joined forces with Comcast to drive Showmax to become the leading streaming platform on the continent. Last, but certainly not least, we have secured a license and are looking forward to the imminent launch of SuperSports Bet in South Africa. On operation front, we have had a good year in terms of execution and our teams did well in navigating the various macroeconomic challenges. Starting on Slide 7, we share some of the highlights. As demand for local content continues to exceed supply, we sustained our investment in local content by producing over 6,500 hours this year. As a result, our local content library now exceeds 76,000 hours. Our target was to spend 50% of our general entertainment budget on local content by FY '24, but we have raised this target in FY '23, which is a year early. We have also launched five more local channels in South Africa, Uganda, Ethopia and Ghana. Our core projects in slate continues to expand. We released four productions during the year, and have another six co-productions in the pipeline for the year ahead. We have spent some time optimizing our third-party content channel slate. For example, replacing low-performing channels and enhancing the GE offering with more movies and lifestyle content. We keep refreshing our content slate and added a mix of the best of local shows, some blockbuster international content and soap opera channels. Finally, MultiChoice Studios continues to grow, selling 151 series and movies in FY '23, and growing its revenue contributing 1.4x. Moving to SuperSports on Slide 8. As one of the best broadcasters Globally, we bring our viewers the [ DS ] events from our world and the most fabulous sporting action on the continent. We are also spending more on local sport. The SuperSports team had a bumper year and increased live broadcast to almost 25,000 events and all-time record -- and a 69% increase year-on-year. Our live broadcasting of all 64 FIFA World Cup matches included local language commentary in 11 languages across 8 markets. We have also enjoyed great success in complementing our live broadcasting with our local sport documentaries, including Rise and Rassie for evidence and [indiscernible] for the local football lovers out there. During the year, we secured multiyear extensions for important sporting rights such as the English Premier League and Formula 1. We also increased our focus on women's sports and are very excited about the old female broadcasting crew, which will be bringing you the Women's Netball World Cup from Cape Town at the end of July. The air ahead promises to be a great one for our sporting fans with a total of not one but four world cups to look forward to. On Slide 9, we look at our new investments to support local sports. With both SuperSport Schools and the annual SA20 Cricket League off to a great start. Premium school sport [indiscernible] to it's supporters and communities, SuperSports Schools now covers 37 sporting codes and has its own PS TV channel. This platform has allowed us to stream almost 34,000 hours of sports this year, an increase of more than five fold. Due to its exponential growth, SuperSports Schools is gaining significant interest from advertisers and is expected to breakeven in FY '24. And to complement the live action, we recently introduced a new short film initiative with the first story VLADO, featuring St John's popular water polo coach. To reignite interest in local cricket, we successfully launched the SA 20 Cricket League in January this year. This venture, in which we own 30% stake was already free cash flow positive in its first year. Turning to Slide 10. We look at the South African business, with added 300,000 customers in an exceptionally challenging environment. As the market is maturing, we have significantly stepped up our retention initiatives. This included more price lock offers, internet bundles for extra savings and doubling the number of participants on the DStv Rewards program to 1.3 million. We have also expanded our content offering by adding ESPN2, which showcases the NBA and NFL and we have deepened our aggregation offering with the introduction of Disney+ and Universal+. DStv via streaming or DVS is showing promising traction and increased its customer base by more than 2x year-on-year, while the DStv internet active user base has increased fivefold since last year. We are also very pleased with the continued momentum of our DStv Insurance business, which now has 2.8 million policy holds and increased its revenue contribution by 22%. Moving from the good work we are doing in the business to the challenge we are facing as a business, which is load shedding. Many of you on the call today are leaving this reality, and have seen the risk comments from the likes of Pepco, Tiger Brands, Spa and Astra Foods, all calling for attention to this crisis. The graph on the left-hand side of Slide 11, show the significant ramp-up in load shedding activity from 40 days in FY '22 to 211 days in FY '23. It also shows the increase in the intensity of load shedding with a number of days where we had stages 4 to 6 load shedding, increasing from 5 to 104 days. In early March, reflect that the unprecedented high levels of load shedding experienced in the fourth quarter of our financial year, we're having a significant impact on the activity levels of our South African customer base and therefore, also on revenue and profitability. Load shedding has resulted in a disconnect between our 90-day subscribers, which is up 2% as people still want our product. And our current active subscriber number, which is 2% down as people struggle to afford or connect out consistently every month. The chart in the middle of the page shows the average daily load shedding level increased month-on-month during this period and the correlated pressure on our active customer base. It also shows how less low shading in March translated into an immediate uptick to our customer, which bodes well for the future once the problem is fixed. The impact of load shedding on viewership is material as ATV also flagged in their recent results. During Stage 6, industry viewership typically declines by 31%. We are somewhat insulated with a 12% decline, but that's a material impact nonetheless. But we did not really accept the situation. We have taken some active steps to mitigate the impact of load shedding on the business from equipping our installers with inverters and adding pop-up channels for our customers to catch up on their favourite shows if they have missed the show because of load shedding. On Slide 12, we reflect on the key performances for the SA business. We delivered 3% aggregate growth with 10% growth in the mass market offsetting presence elsewhere. Negative premium segment churn was then negative premium segment growth but again largely a function of present the compact plus package. Decline in active days by 12 days is mainly due to impact of load shedding and the current macro environment, as already explained. Our pricing for the year has been known for some time and reflects price increases at all around inflation. The ARPU decline on a segmental basis is largely a reflect of the drop in activity levels, while on a blended basis, the ongoing change in mix also came into effect. On Slide 13, we provide an operating update on the Rest of Africa segment, where we now serve more than [ 14 ] million customers. We were able to increase prices on average by 11% in our core markets this year, in line with our objective of passing through inflation in pricing. Buoyed by the FIFA World Cup and a strong local content lineup, advertising revenues grew a healthy 44%. We continue to expand our distribution footprint, increasing our direct sales force to 10,000, our point of sales to 25,000 and our payment partners 121. We broadened our product offering by launching DStv via streaming in Angola, Kenya and Zimbabwe, and we have plans to launch in other markets too. To address issues around affordibility of our satellite service, we launched service offerings in Ghana and Kenya, at below $5 price point. And following the success of the FIFA World Cup campaign, we're able to maintain momentum through to the new calendar year on the back of targeted festive campaigns and the Nigerian elections. Turning to Slide 14. We provide more detailed commentary on some of the largest markets in the Rest of Africa portfolio. Firstly, our Nigerian business continued to perform well with subscriber growth of 15% year-on-year. Both the DTH and DTT segments of the business are now profitable. High inflation and energy prices are affecting consumers and liquidity remains challenged. But we are heartened by the comments from the [indiscernible] and his plans to address these issues. Our Kenyan business became profitable this year with price increases and cost management offsetting currency and growth pressures. The Zambian business saw its in-country profit double as it benefited from price increases and a stronger currency. The Angolan market also benefited from a stronger currency and a drop in inflation and losses narrowed naturally as the base continues to grow. On Slide 15, we've provided a summary of the key KPIs for the Rest of Africa. The business delivered a healthy 11% subscriber growth with strong momentum in the median mass market. Premium growth was affected by normalization and upgrade campaigns. Active days were 7 days lower, reflecting challenges in markets like Zambia, which was affected by power outages and Nigeria where consumers are battling inflationary prices. Blended ARPU was flat year-on-year in dollar terms on the back of inflation linked pricing, offset by the lower activity levels. Turning to Slide 16, where we are on track the impact of one of our flagship events, the FIFA World Cup. From a SuperSport and customer perspective, the event went exceptionally well, our team successfully delivered their borders and biggest World Cup to date. From a management perspective, -- we also evaluate the economics of the event. Everything considered, this World Cup delivered broadly in line with expectations and the previous iteration. As we saw in the graph at the top right of the page, the event delivered a clear step-up in net subscriber adds in the second half over and above the stronger seasonality we see every year similar to the 2018 event. Although we opted to bid for exclusive rights for the 2023 event, the anticipated uplift in our customer mix was somewhat less than expected. However, a strong increase in advertising revenue offset over 2/3 of the increase in the rights costs. To help drive growth, we invested around ZAR 700 million in set top of subsidies ahead of the event. Given the current subscriber environment, we expect the payback period on this investment to be amount of too longer than before. Turning now to our connected video business on Slide 17. The team delivered 12% year-on-year growth in total monthly active users across the combined Showmax and DStv customer bases. Showmax paying subscribers increased 26% year-on-year, while the Showmax pro-user base grew 1.6x. The Showmax team is leveraging our deep understanding of local content, which is regulating very well with our viewers. In the past year, Showmax added 31 new originals such as [indiscernible], The Wife and The Real Housewives. The team has recognized -- has been recognized by the industry for producing excellent content winning 17 SUBTA awards. Showmax is also the top streaming app in the South African App store. Our technical team has worked hard to keep reducing the cost of streaming. We now offer the lowest data streaming option on the continent at just 50-megabyte per hour. We are also very proud of showcasing all 64 FIFA World Cup games in 4K and of ending almost 0.5 million simultaneous views during the tournament without any hitches. Showmax successes to date sets us well for the next stage of its journey, as I will explain on Slide 18. In March this year, we announced our streaming partnership with Comcast, NBC Universal and Sky to relaunch Showmax. Powered by Pickups leading bad-scale technology, the new Showmax Group will be 70% owned by MultiChoice and 30% by NPC inverse. The new partnership will bring form of the world's best content to streaming customers in MultiChoice [indiscernible] market footprint across sub-Sahara and Africa. This includes our own local content, international content from Comcast Group, the second largest content producer Globally, the English Premier League and great third party content. We'll disclose more details about our offerings and pricing closer to the launch later this year, but we believe our strategy will result in far higher customer traction than what we proved obviously envisage as we show in the graph on the bottom left of the page. The partnership with Comcast will also allow us to ramp up of our production of Showmax original quite significantly as we show in the next graph. We have set ourselves to target of generating $1 billion in revenue after 5 years and of reaching trading profit breakeven in the next 3 to 4 years. At scale, we would expect the business to generate healthy EBIDTA and cash flow margins. Going forward, we will be disclosing Showmax as a separate segment in our financials. On Slide 19, we provide an update on Irdeto, our technology business. Customers service by database ongoing strategies in silicon supply and distractions in global supply chains. The war in Ukraine also led to a group decision to exit the inflationary market, which impacted both revenue and margins. In the meantime, the team remained focused on execution. They gained further market share in media security and won 17 new connected services customers. The new services segment now accounts for almost 1/3 of external revenues. Irdeto secured more than 61 billion streams during the past year, which is more than a 50% increase from the year before. They are recognized for their efforts, and we named the best cybersecurity company at a recent industry event. In FY '23, Irdeto's gaming, cybersecurity and Denuvo and very new technology that can identify bots in real time with close to 100% accuracy. The business rolled out Irdeto control for multi digital rights management, launches CrossCharge solution for electric vehicles and two additional fabs in Connected health. Let's turn to Slide 20 for an update on KingMakers, our sports betting investment. The business reported a strong growth momentum for the year, with active users increasing 20%, while active agents were up 39% year-on-year. Sales increased to $1.8 billion, which supported a 51% (sic) 50% increase in revenues to $198 million or ZAR 3.4 billion. The J-curve remains shallow and the business reported a $28 million loss after investing in operating capacity and absorbing some cash extraction losses from Nigeria. At the year-end, the business had $166 million in cash, mainly held in the U.K., which will be utilized to fund its expansion plans. The past year, saw a change in management we see with new CEO, Kim Reid, previously from Takealot, leading a group of experienced executives with deep industrial expertise. The team decided to reprioritize its activities and focus on large mass win markets like Nigeria and South Africa first, resulting in an exit from Kenya and Ehopia. SuperSport Bet obtained a license in South Africa and will be launching soon. Turning to Slide 21 to discuss the impairment of our investment. The KingMakers business has grown exponentially over the past few years. Since our investment in 2020, they have delivered in line with our regional U.S. dollar business plan investment. As the business is performing well, the impairment did not related to operational performance. A roughly 7% increase in the U.S. dollar discount rate for the Nigerian market, driven by macro seats globally, higher risk premium and a material change in currencies resulted in us incurring an impairment charge of $112 million. And while this represents a downward adjust of around 40%, it is in line with the average decline in value of the peer group over the past 2 years. We know that the valuation reflects things at a point in time and could well increase again going forward. We remain convinced about the future upside of this business. Finally, we turn to Slide 22 to briefly revisit our investment in moment a fintech startup, which we announced at our Capital Market Day. Moment, which represents a significant opportunity for the partners in the venture is fair to transition consumers and SMEs across Africa from casualty sell solutions. Fintech is a highly competitive and fast moving space, but Moment will enjoy significant competitive advantages at launch. It will look to leverage MultiChoice 200-plus payment partner integrations and our existing base loss of $3.5 billion in annual customer payments across 50 markets. It will also benefit from the proven technology and expertise of the Rapyd team and the resources and networks of the founding venture capital partners. Our initial capital investment was around $3 million, and the venture is unlikely to require better funding in the next 18 months. It is early days, but we believe that moment has a role to play in shaping the payment landscape in Africa for the better. We have received a lot of interest from the market about Moment and how we do work. We look forward to unpacking more detail with you in the future. This concludes my operational update. Let me now hand over to Tim to discuss our financial performance.

Thank you, Calvo. Our operational teams have worked hard to navigate challenging macro conditions, and we unpack this on Slide 24. Across Sub-Saharan Africa, GDP growth has been problematic and is forecast to slow further into calendar year 2023. Regional economies faced a range of challenges that include a strong dollar environment, elevated inflation, higher interest rates and a challenging geopolitical climate. In South Africa, GDP growth is forecast to slow significantly to 0.1%, given the load shedding crisis and the tough macro environment. Recent research suggests that middle class South Africans are now spending 70% of their monthly income on servicing debt installments. As we show on the bottom left of the slide, local currencies have generally weakened against the dollar. Zambia and Angola bucked this trend as government reforms less stronger currencies, and we hope to see small improvements in other markets like Nigeria with the incoming government. The strong dollar environment and rising inflation has translated into elevated levels of food and energy prices across our markets. Nigeria inflation is experiencing 17-year highs of 22%, while rates in South Africa and Kenya also remain elevated. The combination of rate hikes by leading central banks in conjunction with local inflation, has seen African Central banks entering a hiking cycle as well. Higher interest rates are putting further strain on local businesses, consumers and economic activity. The impact of these dynamics is that discretionary consumer spending is squeezed, placing pressure on the activity levels of our customer base. With that backdrop, we turn to Slide 25 for our key financial highlights for the period. Bearing in mind that macro conditions in our largest markets deteriorated into the second half, we believe we've delivered a reasonable performance as a group. We delivered 4% organic top line growth, driven by our strong performance in Rest of Africa with a weaker rand against the U.S. dollar accounting for the 7% reported revenue growth. Our trading profits were up 5% organically following the return to profitability in the Rest of Africa, but were down 3% on a reported basis, following an adverse ZAR 900 million foreign exchange impact on our U.S. dollar businesses. Core headline earnings were up 2% on a reported basis, which excludes the impact of the Nigerian cash extraction losses as we regard them to be of a temporary nature. Our lower free cash flows reflect the impact of weaker South African operating performance, prepayments made during the period, an increase in content spend as well as the timing of payments brought forward due to financial system upgrade. On Slide 26, we look at the subscriber numbers in subscription revenue, the largest contributor to our topline. The chart on the left shows our 90-day active subscriber base, which was up 8%, driven by 11% growth in the Rest of Africa and a 3% increase in South Africa. Subscription revenues on the right were up 7% or 4% on an organic basis. In the Rest of Africa, we benefited from an average 11% price increase, strong subscriber growth through the FIFA World Cup in festive season and a reasonably stable subscriber mix to deliver 16% organic growth. Growth on a nominal basis was positively impacted by the translation of the Rest of Africa dollar revenues into rands at an average rate of ZAR 17.14 compared to ZAR 14.93 to the dollar in the previous year. In South Africa, subscription revenues were 3% lower as the benefit of price increases was offset by the decline in activity rates on the back of a tough macro environment. as well as the ongoing shift in mix towards the mass market. Turning to Slide 27. We unpack our revenue performance by time. Outside of subscription revenues, our DStv media sales team delivered 7% growth in advertising despite an exceptionally strong prior year performance due to a post-pandemic rebound. This outcome was driven by the FIFA World Cup and the team's continued focus on new digital advertising initiatives and local content properties. Our technology business, Irdeto, experienced ongoing global supply constraints and the decision to exit all Russian-based operations impacted negatively on performance, resulting in external revenue declining 4% year-on-year. Given the rapid growth of our insurance business, we are disclosing this revenue separately for the first time this year. It generated ZAR 717 million, an increase of 22% year-on-year. The 8% growth in other revenues mainly relates to Dakota sales in Africa, as could be expected in the FIFA World Cup year, as well as sublicensing revenues. Slide 28 provides an update of our segmental trading margins. The South African trading margin came in at 24.2%. At the start of FY '23, we guided the market to a target range of 28% to 30%, which was 200 basis points lower to account for what we saw as a deteriorating macro and consumer picture. While we were directionally correct, unfortunately we weren't able to anticipate the extent to which the environment worsened through the course of the year. We discussed the SA margin in more detail on the next slide. The Rest of Africa business performed exceptionally well and has reached profitability for the first time since listing with a trading margin of 4%. This represents an improvement in reported trading of ZAR 2.1 billion. The debtors margins at 41% were higher than normal due to the impact of the FIFA World Cup deferred the sales, which are excluded from consolidated revenues but included in trading profits. Aside from this, the team's tight cost controls helps offset external top line pressures. Slide 29 provides more detail on the South African margin and the outlook for the near term. Over the past 7 years, the segment had consistently delivered margins between 30% and 32%. Despite a shifting subscriber mix, pressure on the premium and mid-market segments, and lower top end pricing in recent years. As mentioned, growing concerns about the macro environment led us to lowering our initial guidance for the year '23. Through the course of the fourth quarter, we realized a rapidly declining trading conditions, mainly due to low churning meant that we were likely to miss revised range, and we informed the market of a revised margin range of 23% to 28%. To the right of the slide, we show a recon of the year-on-year movement in margins to arrive at the 24% outcome for financial year 2023. The key items impacting the margin include increased business-as-usual losses in Showmax despite higher revenues as we improved the user interface, user experience and back-end technology and increased our Showmax original content slate. Approximately ZAR 100 million in operating costs related to the Comcast deal, Negative operating leverage from lower revenues, which came as a result of a weak consuming environment and extensive load shedding towards the latter part of the year. As we have a largely fixed cost base, this left insufficient time for us to adjust and absorb all of the additional pressure in financial year 2023. And lastly, a broad increase in content costs which includes local content, the FIFA World Cup, SA 20 Cricket and various Rugby leagues as well as increased sales and marketing to support these events. Looking to financial year 2024 and despite many uncertainties, the benefit of stripping out the Showmax losses from the South African segment results should outweigh the additional negative impact of persistent load shedding and macro weakness, enabling us to target a trading margin in the mid-20s. Moving to Slide 30. We analyze our operating leverage and look at our cost savings for the year. As you know, our target is to generate positive operating leverage by keeping the organic growth in revenue ahead of organic growth and operating expenditure. Despite the challenges, we've managed to achieve that this year. We delivered ZAR 1.3 billion in savings, with major contributions this year coming from renegotiated contracts for international general entertainment content and sports rights, as well as targeted savings around discretionary spend in noncritical promotions and travel. As we mentioned previously, we expect these savings to become lumpy in the future and has set a target savings of ZAR 800 million for financial year 2024. On Slide 31, we provide our standard trading profit bridge for the Rest of Africa for the last time. The business enjoyed a material benefit from our inflationary price increases across the majority of our core markets, demonstrating the benefits of a more sustainable pricing policy on a scaled customer base. We also saw strong growth in subscriber volumes during the FIFA World Cup, which boosted advertising revenues in conjunction with our local content slate. Finally, the segment benefited from tight cost management as we pushed the team to ensure that we met our medium-term breakeven target. This exceptional performance resulted in a trading profit improvement of ZAR 2.8 billion on an organic basis. Currency headwinds, however, still amounts to a considerable ZAR 700 million after major FX declines in markets like Ghana, Nigeria and Kenya, which were more than outweighed by improvements in Zambia and Angola. The net result was reported trading profit of ZAR 900 million, and we have now set our sights on our next target, which is free cash flow breakeven in financial year 2024. Just to note, during the period, we incurred a loss of ZAR 2.4 billion in extracting cash from Nigeria, which is reflected below the trading profit line. On Slide 32, we show our core headline earnings which reflects modest growth of 2% year-on-year. The key driver of this performance was the sharp improvement in profitability in the Rest of Africa segment, largely offset by the lower net contribution from South Africa which includes higher interest charges on increased loan balances. At the bottom left of the slide, we also show adjusted core headline earnings that includes the impact of the Nigerian cash extraction losses net of taxes and minorities. As mentioned earlier, we have historically excluded these losses from our core metrics as we consider them temporary in nature. Given comments from the incoming Nigerian President and recent market activity, the encouraging indications that reforms could lead to the elimination of the parallel market driving these losses. Slide 33 provides an update on our free cash flow, which was down 48% year-on-year. The waterfall graph lags the key movements, which we unpack starting from the left. In the comparative period, we generated ZAR 5.5 billion in free cash flow. EBITDA was $300 million lower year-on-year as the weaker South African performance was mostly offset by the stronger improvement in the Rest of Africa. We incurred ZAR 1.2 billion in prepayments, mainly relating to the renewal of certain content rights and for operational expenses such as software licenses. CapEx work in progress, mostly relates to a SuperSports OB Van, which we only took delivery subsequent to year-end. Cash taxes of ZAR 3.4 billion, transponder lease repayments of ZAR 2.5 billion, CapEx of ZAR 1.2 billion and ZAR 600 million in Nigerian tax order deposits were broadly in line with the prior year. This leaves other working capital movements of ZAR 800 million, which includes ZAR 400 million in early creditor payments as a consequence of our finance system upgrade going live on the first of April. While the balance is the portion of the FIFA World Cup investment not yet recouped at year-end. We are targeting free cash flow breakeven for the Rest of Africa in financial year 2024, while group free cash flow will be impacted by the operating environment in South Africa and the planned investment spend for Showmax. Moving from cash flow to cash balances. We provide an update on our balance sheet on Slide 34. Our reported cash holdings have improved year-on-year from ZAR 6.2 billion in the prior year to ZAR 7.5 billion at year-end. However, as we noted in our Capital Markets Day, we typically aim to retain meaningful cash balance in the underlying business segments for ongoing operating requirements and financial flexibility. Undrawn facilities have increased to ZAR 9 billion, of which ZAR 5 billion in general banking facilities remained similar to last year. We've entered into a new ZAR 12 billion term loan facility, ZAR 8 billion of which was drawn down at year-end to cover our short-term working capital needs and ZAR 4 billion remains available to support ongoing business requirements. Looking at our cash of ZAR 7.5 billion, not all of it is available for deployment. Around ZAR 1.2 billion is subject to liquidity cash, while the net outflow on Phuthuma Nathi dividends will amount to ZAR 1.3 billion. ZAR 400 million of loans and ZAR 2.4 billion in lease liabilities are due and payable within 12 months. This leaves ZAR 2.24 billion of cash flexibility and whether the uncertain current economic environment and start funding the Showmax opportunity. Our debt position at the year-end increased to ZAR 8.4 billion as a result of the term loan facility drawdown. This is after ZAR 3.6 billion in loan repayments, mainly in relation to our previous working capital and KingMakers acquisition loans. Our leverage ratio at 1.08x remains well within prudential limits. Before Calvo wraps up with the outlook, I'd like to touch base on capital allocation on Slide 35. We unpacked our thought process in detail at the Capital Markets Day. But as a reminder, we have a disciplined approach to managing this area, which is critical for our business, for our Board and for our shareholders. We continue to optimize our group's core free cash flows by moving Rest of Africa back to free cash flow breakeven and helping the South African technology businesses navigate a challenging local and global macro environment respectively. While we focus on execution in our established verticals, we're also investing in long-term growth in our new verticals. Although the KingMakers business plan is fully funded and Moment is unlikely to require capital for the foreseeable future. Our Showmax streaming venture with Comcast will require a capital investment in a short- to medium-term to secure the opportunity we see ahead. When it comes to dividends, our policy remains to return excess cash to shareholders and to do so in the most optimal way. Given the significant pressures in the South African business, we're likely reduced the MultiChoice South Africa dividend, which is streamed up to the group with Phuthuma Nathi dividend shareholders also receiving a dividend in the process. However, given deteriorating macro conditions in key markets, our focus on returning Rest of Africa to funding breakeven and the near-term investment priorities to support our long-term growth ambitions, we believe it is prudent not to declare a MultiChoice group dividend for financial year '23. The Board hopes to reinstate the dividend as we move through our short investment cycle and macro conditions improve. With that, I'd like to hand back to Calvo to conclude.

Thank you, Tim. Let's turn to Slide 37 for our outlook on the AI. In the coming months, we will be focused on stabilizing the South African business in the face of the ongoing loan shedding challenges. We have made some management changes and the new team is keen to evaluate things. In the Rest of Africa, the team will capitalize on our success so far and continue to drive through various initiatives. Once we have completed the transitioning to the Peacock platform and launched the new Showmax offering, we'll be looking to materially accelerate our streaming revenues. Our focus on delivering great content is unchanged. We are aiming to produce another 6,700 hours of local content, successfully deliver 4 world cup event and drive SuperSports Schools to even greater heights. From a financial perspective, and considering all the uncertainties, we are targeting a mid-20% trading profit margin for South Africa in the year ahead. In the Rest of Africa, we will be looking to generate positive free cash flow. Overall, our aim is to take another ZAR 800 million of cost out of the system this year. We'll also be supporting the launch of SuperSports Bet in South Africa, Moment's launch of their B2B platform and driving more scale in our own value-added services. So these are our plans for the year ahead, but let me end with some context. We understand that things are not easy right now and there are many certain uncertainties. But we play a long-term game and are putting the right building blocks in place now so that we can reap the benefits later. Looking around us, we are encouraged by how quickly things have improved in countries like Angola and Zambia once their governments have taken the right steps to address the problems. We believe the same is possible in our key markets like South Africa and Nigeria. As a result, we remain positive about the future and the long-term prospect of our business. I'm making the most of the opportunities to expand our ecosystem. We are looking to transition from a great pay-TV operator today into a leading much larger consumer tech play. That concludes our presentation for today. Thank you, Chris. We are happy to now take you some questions.

[Operator Instructions] Our first question is from Jared Hoover of RMB Morgan Stanley.

A few questions from my side, please. I thought I would start with Showmax. I think you've repeated some of the charts from your CMD in your whole year presentation. But what I wanted to find out is specifically, if you could talk to what the trading profit losses that specifically related to Showmax are going to be in 2024 and 2025. Based on my estimates, it looks like it's going to be about ZAR 4 billion in '24 and about ZAR 2.5 billion in 2025. And it also looks like you had about ZAR 1 billion in trading profit losses from the Showmax platform in 2023. So if you could give me some color around that, please, that would help as well as if you are able to share what your accumulated losses in the Showmax platform have been to date, relative to some of the returns that you are targeting on that spend? That's my first question. My second question is around the load shedding impact. I think it was on Slide 11, where you put up a slide showing that the moment the energy constraints seem to abate, you start to see your subscriber growth come back a bit. And I think you've mentioned that you've seen that type of activity in Africa as well. Are you able to share what some of that detail looks like in the current trading environment in MArch, April and maybe I'm not sure you at the June date but maybe in the March and April month? And my very last question is just around South Africa, and some of the conservatism that you may be building into your numbers. Now high level, I think you guys are guiding for, call it, a 25% margin in the South Africa business for 2024, and that excludes the Showmax business. If I compare that to 2023, you achieved a margin of about 24% and -- and if I add back what I think are your Showmax losses, it looks like the margin across South Africa would have been about 27%. So the only difference really between 2023 pro forma margin of 27% and 2024s guided margin of 25% to my mind, would be around what you are expecting to lose on the revenue line item, which kind of bats out to losing about 200,000 to 250,000 subscribers in South Africa. Now that feels a bit high to me. So I just wanted to see if you have any comments around that, potentially I'm missing something on the cost growth. I'll leave it there for now.

Maybe let me start by addressing the question and thanks for the questions. On the trading update on -- with regards to load shedding, what we have seen is that, and we have addressed it in some of the commentary is that -- when it goes to Stage 4 to Stage 6, then we are seeing the middle and the mass market being impacted negatively because they don't have alternative source of energy to take up our products. However, as we have indicated out of the March numbers, we have seen that the 90-day fee vis-a-vis the active numbers, there is a big disconnect there. And it is a result of load shedding that has happened. And as soon as load shedding subsides, you see people coming in, which indicates that our product is still sort of the product. We have seen the same thing happening in Zambia, where when they face drought, you see a big change in subscriber numbers. But immediately, when the load shedding subside to below 8 hours a day, then we just see subscribers coming back immediately. And we expect the same thing to happen. As far as we have seen remember, April and May, we were consistently at Stage 6. So your assumption should be that it played out the same way when we experienced Stage 6. We have just seen just 2 weeks of some relief in load shedding, and we are monitoring it to see how much of the subscribers come back. But usually, there is a timing where they want just whether this improvement is almost permanent and then they come back in big numbers again. So we expect the same kind of situation to play out in South Africa, it has happened in many of the markets that we offer it in.

Okay. Let me touch on the Showmax losses. So we incurred a ZAR 1.2 billion loss in the year that's just passed, financial year 2023. We expect the investment to peak next financial year 2024. And I'm going to give you a range, it's going to be somewhere between ZAR 3 billion and ZAR 4 billion. The investment that we're going to make in Showmax over the next couple of years is going to obviously be dependent on the launch date and making sure that we launch according to where we think the launch should happen. And also, it's going to be largely dependent on the two key factors that we see being enablers in this market. One is data connectivity and the second one is data prices. We need to invest significantly ahead of the curve. You can't wait for those two triggering events to happen because the rate of adoption that has been in emerging markets in other emerging markets on a global scale means that the adoption happens too quickly. And so you have to be moving early and you have to be investing slightly ahead of the curve. So we are -- so that's our anticipation. I think 2025 is a little bit too far out for me to be speculating on a number. But I think you guys can work out relatively relative to the '24 number and the '24 range that I'm just giving you roughly where 2025 will be. But we do think that this is a short J-curve if we're able to scale within the way that we were thinking. You asked another question about historical losses. We don't disclose those. We haven't to date, and we didn't intend to disclose those into the future either. So I'll just let you know that now. And then you asked something specifically about margins. I mean we can't speculate about your mathematical modeling. Right? We've given you a steer as to where we think the numbers will come out. And we've also indicated that in fact there's a 2% Showmax impact on our margins. Those margin guidance exclude Showmax -- so we are anticipating some continued -- some continued top line pressure. Remember that we're a largely recurring revenue business. So when we have weakness in the fourth quarter, as we've disclosed to the market, that weakness -- I mean, we had continued load shedding moving into April and May. And so that would have carried forward into the current year. Now we're obviously doing a lot in the new team that's in place in the South African business is doing an exceptionally large amount of work to rechallenge everything in that business, trying to find ways to stimulate the top line as well as reducing costs in the business, but it's too early to understand from our perspective, how long load shedding will endure and how extensive it will be. So the best that we can offer is a guidance that we think will come out in the kind of the mid-20s.

Next question is from Jonathan Kennedy-Good Of JPMorgan.

Just a simple question from my side. On the free cash flow breakeven target for Rest of Africa this year, presuming that we see the valuation of naira, let's say, towards the parallel rate, perhaps not as far -- just struggling to understand how achievable that target is, assuming we do get towards the parallel, right? I'm guessing you may be baking in pricing increases at term points or -- because I would think there's leverage to foreign currency costs that would make that tough to achieve that breakeven target.

Okay. I anticipate that this is a question directed at me. So let me give it a good go. So look, when we put this deck together, there was -- we give these targets on the basis of current accounting, right, which means that we would have -- we are accounting for our core results and free cash flow at the official rate. I mean, as of about 1 hour ago, there seems to be a significant movement in the markets of the naira towards the unified rates. So we saw that the government in Nigeria came out, made an announcement, quoted NGN 755 to the dollar -- that we've been watching the market movement through the course of this afternoon, it track back to NGN 600, and I think we're currently sitting at about NGN 630. So it looks like that unification rate is happening. In our guidance, what we had said was that we were going to try and get to free cash flow breakeven in '24 and full funding -- full funding breakeven or self-sufficiency in the medium term. Now what will end up happening is I suspect that if this moves as quickly as we see it moving, we might end up in a blended answer where some of those cash extraction losses effectively get hard baked into your core numbers because of the big depreciation in the currency. So we will certainly try to still achieve the free cash flow breakeven -- but I think given the quickness of the movement in the market right now, it's something that we're going to need to let unfold, and we're busy modeling different outcomes as we speak to try and understand exactly how this is going to impact us. But certainly, I mean, as a management team, we're going to do everything we can to try and achieve that free cash flow breakeven. But I suspect we might be -- our timing might be slightly out because we're going to be bringing some of those extraction losses into that number as well.

Great. And if I may follow up with one more. Do you have to get regulatory approval for price increases in Nigeria? And given what looks like a substantial depreciation, would you consider raising prices? Or is that not conducive to building scale there?

No, we don't have a regulation approval for pricing in open market. So we can increase prices as we deem appropriate. We have just increased prices now from the first of May, and we'll make a termination as things go through the course of the -- as to whether there is a need for interim price increases, but we have to consider the ability of our customers also to be able to afford such price increases.

Yes. As a general rule, we don't follow currency movements for price increases because the market can't absorb them. So we try to follow inflationary type price increases. So we put a 17% price increase into Nigeria on the first of May.

[Operator Instructions] The next question is from Dino Constantinou of Investec.

Sorry, I thought it was my question because everything I was going to ask has already been asked, so I'm good.

Then gentlemen we have no further questions, would you like to make some closing comments.

Ladies and gentlemen, we hope you found our feedback useful, and we would like to invite you to reach out to our IR team if you have more questions or need more information. Thank you for joining us today, and goodbye.

Thank you. Ladies and gentlemen, that then concludes this event, and you may now disconnect.