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Integrated annual report 2011 to the shareholders of Phuthuma Nathi Investments Limited

MultiChoice South Africa Holdings (Proprietary) Limited
Chairman’s Report

 

Nolo Letele Executive chairman

Overview

In line with the recommendations of King III – the revised guidelines on corporate governance in South Africa aligned with global best practice – this is the first MultiChoice integrated annual report to stakeholders. We aim to present a balanced view of our economic, social, environmental and governance activities for the year to 31 March 2011.

As a board, we are ultimately responsible for ensuring that sustainable development is integrated into business strategy. The board delegates implementation of this policy to management, with oversight vesting in the audit and risk committees. Operationally, sustainable development is incorporated under our risk management processes.

The board is also responsible for the integrity of integrated reporting. The audit committee has been tasked to oversee sustainability issues in the integrated annual report and has assisted the board in its review by ensuring the information is reliable and that no conflicts or differences arise when compared to the financial results.

Pay-television operations in tough market conditions underscores the importance of quality content although the rising cost of acquiring subscribers, sport rights and distribution platforms are placing pressure on margins.

Results

As a board we oversee the strategic direction of the company and are pleased to report that our results reflect growth, with total group revenue increasing by 22% from R14,5bn to R17,7bn. Net profit increased by 20% from R2,9bn to R3,4bn as a result of organic growth.

The subscriber base grew over the past year by 637 000 households.

The lower-priced Compact bouquet recorded the best growth, driven by local content, sport, strong general entertainment, movies, kids and other genres. Subscriber growth was driven mainly by excellent sales during the 2010 Fifa World Cup and augmented by decoder price specials. A new lower-priced entry-level bouquet, DStv Lite, helped to drive growth. The DStv Premium and Select bouquets also recorded growth, contributing to the overall subscriber base.

During the period we added several new channels to our bouquet. These include KidsCo, Afro Music and Discovery World. The launch of a new pay-television operator stimulated interest in pay television in the South African market. Operationally we have made good progress in increasing local content and skills in the pay-television market. These are created via additional investment in local programming for the Mzansi Magic channel, as well as corporate social investments such as our film incubator programme and many other initiatives (refer to here).


Dividend

MultiChoice South Africa Holdings (Proprietary) Limited will declare an ordinary dividend (subject to the approval of shareholders at the annual general meeting on 1 September 2011) of R1,5bn (2010: R1,2bn). If approved by shareholders at the annual general meeting, dividends will be payable to shareholders recorded in the books on Friday 2 September 2011 and paid on Monday 5 September 2011.

Phuthuma Nathi and Phuthuma Nathi 2 will thus receive a dividend of R200m (2010: R160m) and R100m (2010: R80m) respectively. The companies will declare preference dividends of R160m (2010: R128m) and R80m (2010: R64m) respectively, in terms of their preference share agreements. The balance of the dividend received by the companies, less expenses, will be declared as ordinary dividends to shareholders of Phuthuma Nathi and Phuthuma Nathi 2 respectively. As such, a dividend of R40m (2010: R32m) (subject to the approval of shareholders at the annual general meetings to be held on 1 September 2011) equating to 88,89 cents per share (2010: 71,1 cents per share) will be declared by Phuthuma Nathi and R20m (2010: R16m) equating to 88,89 cents per share (2010: 71,1 cents per share) for Phuthuma Nathi 2.

MultiChoice South Africa Holdings (Proprietary) Limited will also declare a special dividend (subject to the approval of shareholders at the annual general meeting on 1 September 2011) of R4,5bn (2010: R1,5bn). The purpose of the special dividend is to redeem a significant portion of the loan held by MIH Holdings Limited under the preference share agreements of the Phuthuma Nathi schemes. The dividend proposed will reduce the debt by 30%. As the debt is reduced, the value of the Phuthuma Nathi shares should increase. Phuthuma Nathi and Phuthuma Nathi 2 will thus receive a dividend of R600m (2010: R200m) and R300m (2010: R100m) respectively. Phuthuma Nathi and Phuthuma Nathi 2 will in turn declare preference dividends of R600m (2010: R200m) and R300m (2010: R100m) respectively in terms of their preference share agreements.