MultiChoice evades tax questions

MultiChoice evaded questions about its tax rates and why equity holders took a R258 million loss while the non-controlling interest holders enjoyed R313 million from its profit for the period.

MultiChoice recently released its results for the six months ended 30 September 2022, showing an increase in revenue and operating profit but a large decrease in profit after tax.

The group’s revenue was up R1.8 billion to R28.6 billion, bolstered by a 28% increase in Rest of Africa’s revenue.

MultiChoice’s South African operations let the group down, with revenue declining from R17.8 billion to R17.4 billion.

The technology segment also performed poorly because of chip shortages and global supply chain disruptions.

Irdeto’s revenues were down 13% year-on-year to R0.7 billion. However, it still contributed R0.4 billion to group trading profit as strong cost containment resulted in healthy margins.

Apart from its strong African growth and relatively poor South African and Technology performances, two things in the results stood out:

• MultiChoice’s effective tax rate increased significantly over the reporting period.

• MultiChoice shareholders took a R258 million loss, while the non-controlling interest holders took a R313 million profit.

Daily Investor asked MultiChoice for feedback on its much higher tax rate and its taxable profits for tax purposes for the reporting period.

We also asked why MultiChoice equity holders suffered a loss while the non-controlling interest holders enjoyed a profit.

MultiChoice would not answer these questions. Instead, it said, “all the answers are in our latest trading statement and interim results announcement.”

When we asked MultiChoice where we could find the answers in these documents, the company did not respond.

We could not find any explanation of the profit for non-controlling interest and the loss for ordinary shareholders.

This would normally occur when the parent company made a loss while subsidiaries made strong profits.

However, as MultiChoice is a holding company, the parent company has few operations on its own which could make a loss.

MultiChoice would not give clarity regarding this.

MultiChoice did explain that the effective tax rate has increased from the prior period, primarily due to increased foreign exchange losses.

Another reason was an increase in uncertain tax positions recognised and withholding taxes in the Rest of Africa segment.

However, we could find no explanation for why it happened and why there was such a big spike in the effective tax rate.

We could also not find details on MultiChoice Group’s taxable profits for tax purposes in the reports.