High content costs, ringgit slump hit Astro’s 2Q results

KUCHING: Astro Malaysia Holdings Bhd’s (Astro) second quarter of the financial year 2018 (2QFY18) and overall first half of FY18 (1HFY18) results were hit by higher content costs from the 2018 FIFA World Cup as well as the ringgit’s weakness against the dollar, analysts observed.

Astro’s 2QFY19 normalised earnings, which amounted to RM46.6 million, translated to a drastic decline of 80.8 per cent year- on- year ( y- o- y), missing both analysts and consensus’ expectations.

In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) explained: “The appalling results were mainly attributable to higher content cost in relation to the broadcast of the 2018 FIFA World Cup, higher cost of merchandise sales, and higher net finance cost.”

By segments, the research team noted that Astro’s 1HFY19 television segment revenue fell by 1.8 per cent y-o-y to RM2,407.1 million following lower package take- up and lower advertising expenditure (adex) revenue.

The re s e a rch arm at AmInvestment Bank Bhd (AmInvestment) also noted that Astro’s 1HFY19 revenue fell one per cent due to weaker subscription revenue impacted by lower package take-up and softer adex during the tax holiday period as there was a reduced need to advertise.

However, it noted that this was offset by higher merchandise sales, licensing income and sales of programme broadcast rights.

Coupled with higher content costs arising from FIFA World Cup, MIDF Research pointed out that Astro’s television segment’s profit before tax (PBT) declined by 65.5 per cent y-o-y to RM191.2 million.

The company’s radio segment was also not spared from the softer adex environment as revenue and PBT declined 15 and 18 per cent respectively, AmInvestment said.

“Despite this, radio listenership rose five per cent and radex share grew one percentage point to 75 per cent,” it added.

As for Astro’s home shopping segment, it noted that revenue and PBT improved 34 and 25 per cent respectively as the number of products sold rose on the back of sales campaigns held in 1HFY19.

“In 1HFY19, Go Shop’s registered customers increased 36 per cent y-o-y to 1.5 million,” it added.

Despite higher content costs, AmInvestment pointed out that the 2018 FIFA World Cup was Astro’s best ever as revenue was 50 per cent higher and viewership reaching an all-time high of 11.6 million in 2018 (a 40 per cent increase compared with 2014 FIFA World Cup).

It also noted that Astro has secured exclusive broadcast rights to the English Premier League (EPL) for the next three seasons until 2021/22, with all 380 matches set to be available live in HD on Astro TV and Astro GO.