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NPN
NPN
NPN - Naspers Limited - Interim Report for the six months ended
30 September 2007
Naspers Limited
(Registration Number: 1925/001431/06)
ISIN: ZAE000015889
JSE Share Code: NPN
("Naspers")
Interim Report
The reviewed results of the Naspers group for the six months ended 30
September 2007 are as follows:
Commentary
GROUP OVERVIEW
The group continues to make steady progress on a variety of fronts. The
financial results, reflected below, show good growth especially in light of
higher interest rates and slowing consumer spend in South Africa. The
international businesses, particularly those in sub-Saharan Africa, China and
Russia also continue to reflect strong growth. The group recorded revenue
growth of 19% to R10,5 billion and core headline earnings growth of 32% to
R1,75 billion over the period.
As part of its growth strategy, the group continues to pursue investment
opportunities, largely in emerging markets, which, at present, offer greater
growth prospects. Major transactions include:
- Gadu-Gadu:
Gadu-Gadu operates the leading instant-messaging platform in Poland. The
company is listed on the Warsaw Stock Exchange. In October, MIH launched
a tender offer to shareholders of Gadu-Gadu to acquire their shares. The
tender offer is scheduled to close on 21 December 2007. Shareholders
holding 55% of Gadu-Gadu have given an irrevocable commitment to tender
their shares. Assuming that all shareholders accept the tender offer,
the total investment consideration will approximate US$155 million.
- Afsat:
In October, the group concluded the acquisition of Afsat Communications
Limited, the leading African satellite internet service provider. Afsat
is active in over 26 countries in east, west and southern Africa.
- Mail.ru:
In October, the group acquired a further 2,6% interest in Mail.ru for
US$26 million, increasing its holding to just below 33%.
In addition to the above, the group invested R479 million (2006: R449
million) in the development of new technologies, products and services.
This investment was lower than anticipated due to the slow deployment of
mobile television services, which are dependent on the issue of
commercial licences by regulatory authorities.
Cash flows remain positive and we have a strong balance sheet to fund
opportunities that may arise.
Looking forward, we anticipate that growth in consumer spending in South
Africa will slow further, placing pressure mostly on advertising and
circulation revenues. The other major economies in which we operate
remain in a growth phase. As indicated elsewhere in this report,
increased competition is experienced in the pay-television business. We
expect this to intensify in the period ahead. The group remains focused
both on pursuing investment opportunities and developing new products
and services. In the past few months we executed a number of
transactions that we believe will add value to the group over the long
term. We have a number of transactions in our investment pipeline that
we are currently pursuing, and hope that some will be concluded in the
current financial year.
Whilst the roll-out of new products and services, such as mobile
television, has been slower than anticipated, we do anticipate an
acceleration of business development expenditure in the second half of
the financial year. Whilst these development activities have a negative
short-term impact on earnings and cash flows, we believe they will
deliver long-term value.
FINANCIAL REVIEW
The electronic media businesses continued to grow strongly, recording
revenue growth of 21%. This was largely from net pay-television
subscriber growth over the period of 109 000, whilst the internet
businesses also contributed strongly. The performances of Tencent in
China and Mail.ru in Russia were particularly strong.
The print media business has started to feel the effects of a slowdown
in advertising revenues. This is evident from print advertising
revenues, which, after growing at some 19% per annum over the past three
years, experienced slower growth of 12% in the period under review.
Overall the print media business grew revenues by 14%.
Operating profit before amortisation and other gains/losses grew 22% to
R2,38 billion (2006: R1,95 billion).
Net finance income for the period was R548 million compared with a net
cost of R458 million last year. As analysed below, this includes
interest income on net cash deposits of R316 million, imputed interest
on finance leases of R63 million, preference dividend income of R160
million and an aggregate amount of R135 million in respect of foreign
currency translation differences. Interest income on the capital raised
in March 2007 amounted to approximately R216 million. This interest
income is not expected to recur as cash is deployed to fund investment
opportunities. Included in the prior period was a foreign currency
translation loss of R260 million, which arose from partly settling a net
investment in a foreign subsidiary.
The group tax charge increased by 63% to R927 million, a function of the
increased profitability of the group.
The net effect of all the above is headline earnings for the period of
R1,59 billion and core headline earnings of R1,75 billion. The
calculation of headline and core headline earnings is detailed below.
ELECTRONIC MEDIA
Pay television
The pay-television business continued to grow, recording a net increase
of 109 000 subscribers in the six-month period to 30 September 2007.
This generated a 21% increase in revenue to R6,36 billion.
The past six months witnessed the arrival of additional competition
across our various African markets. This is starting to translate into
higher content costs and pressure on margins as the group vigorously
defends its market position.
Besides organic growth in its existing and new markets, this business
unit is focused on expanding into mobile television services.
South Africa:
The South African subscriber base grew by 81 000 over the period to 1
473 000. The lower priced Compact bouquet was strengthened with
additional channels and the acquisition of South African Premier Soccer
League rights. The Compact bouquet grew to 159 000 subscribers.
Easyview, at R20 per month, was enhanced with additional channels in
October 2007. The number of personal video recorders showed strong
growth closing on 186 000 subscribers.
In addition to licensing MultiChoice South Africa, the Independent
Communications Authority of South Africa (Icasa) announced that it will
be issuing four new licences. The terms and conditions that will apply
to each of these licences are currently being formulated by Icasa and we
anticipate that these additional pay-television operators will launch
services in 2008.
The trial mobile television broadcast service continues to make
progress. We are pursuing the requisite licence ahead of a full
commercial launch in the near future.
The Competition Tribunal recently approved the acquisition by Naspers of
Johncom`s 39% stake in M-Net and SuperSport.
Sub-Saharan Africa:
During the period, a new sub-Saharan Africa direct-to-home (DTH)
competitor and a new Nigerian terrestrial/DTH competitor emerged.
Despite this, the MultiChoice sub-Saharan subscriber base grew by 30 000
subscribers in the period to 500 000 households. Growth continues to
come mostly from Angola and Nigeria. The recently introduced lower
priced family bouquet showed good growth.
Several African countries have moved fast in the issuing of mobile
television licences, with the result that mobile television broadcast
services have been launched in Namibia, Nigeria and Kenya. Licences are
being pursued in other African countries.
Mediterranean:
In Greece, the subscriber base remains stable at 330 000 households
after the summer churn period. Key local and international soccer rights
were renewed and tiering was introduced. Several new IPTV players,
whilst still at an embryonic stage, launched services in a strategic
alliance with NetMed. A new broadcast bill came into being, paving the
way for a digital migration strategy in Greece.
Following a review of our strategic investment priorities we initiated a
formal process to explore a possible sale of the Greek and Cypriot pay-
television business.
Internet
The internet segment recorded revenue growth of 22% to R654 million.
Largely because of the investment cost of developing the Indian
operation as well as pursuing other opportunities, a net operating loss
before amortisation and other gains/losses of R49 million was incurred.
The revenue and operating profits of Tencent and Mail.ru are not
included in the segmental analysis as they are treated as associates.
Our share of their earnings is reflected as: "Share of equity-accounted
results" in the income statement.
In China, Tencent continues to serve the largest online community in the
country with its leading instant-messaging platform, QQ. During the
period, total active user accounts grew from 254 million to 289 million
with peak concurrent user accounts increasing from 28,5 million to 32,6
million. Other growth areas were the blogging service, Qzone, which grew
from 62 million to 84 million active user accounts, and QQ Pets, which
grew from 54 million to 89 million. Tencent contributed R218 million to
group core headline earnings.
In Russia, Mail.ru continued to grow above expectation. Active users
grew from 29,7 million to 35,3 million generating 4,3 billion page views
per month. E-mail users grew from 25,6 to 30,7 million users and online
photos viewed grew from 315 million to 351 million. Mail.ru contributed
positively to group core headline earnings.
The MWeb operations in South Africa remained stable with 330 000
subscribers. The business remains profitable.
In India, we have identified two key areas as possible drivers: local
search and youth. During the period, we launched 21 different products
into the market. India is fiercely competitive with large international
players present in the market. The development of this business will
take time.
Conditional access
This business continues to perform well, reflecting revenue growth of
17%. This growth was fuelled from the digital television segment
(satellite, cable and terrestrial) worldwide. Irdeto shipped 26% more
smart cards compared with the same period last year and signed
agreements with 75 customers during the period under review. The revenue
related to these customers is expected to be earned in the second half
of the year and beyond.
Irdeto continues to invest in research and development to remain
competitive and to stay ahead of those in the market seeking to pirate
its products.
Broadband technologies
The global growth of broadband has created opportunities for delivery of
content, applications and other broadband services. Against this
backdrop we continue to invest in cross-platform broadband media
solutions for distributing media content to broadband connected PCs,
mobile devices and TVs.
PRINT MEDIA
Revenue from the print media segment increased by 14% to just below R3
billion, and operating profit before amortisation and other gains/losses
grew by 4% to R276 million.
Newspapers, magazines and printing
In South Africa, both newspapers and magazines experienced a slowdown in
advertising revenues. Circulation is under pressure in a competitive
market and growth is mostly restricted to titles aimed at the emerging
market, including Daily Sun, City Press and Soccer Laduuuuuma!. Growing
magazine titles include Move!, National Geographic Kids and Tuis/Home.
We obtained 50% interests in the magazine Real, aimed at female readers
in the emerging market, as well as SA Jagter/Hunter. In South Africa we
launched Destiny, a high-end female business magazine in partnership
with Khanyi Dhlomo and in Kenya we launched Adam, a male interest
magazine. We decided to discontinue a number of marginal titles.
In October, irregularities with declared circulation numbers in two of
our twelve magazine publishing units were uncovered. Media24 moved
decisively to address the problem, to discipline the relevant staff and
to introduce additional preventative measures. In view of the important
long-term relations with advertising partners, it was decided to refund
advertisers proportionately to the circulation overstatement. The total
amount has not been finalised, but is not material.
The printing business recorded strong growth as a result of increased
capacity, despite competitive market conditions. Our internet publishing
business, grouped together under the umbrella of 24.com, is developing
satisfactorily.
Abril S.A., the leading magazine publisher in Brazil, had a slow first
half of the year. Due to a decline in the share price of the Hong Kong-
listed Beijing Media Corporation, we recorded a further impairment
charge of R68 million on this investment.
Book publishing and private education
Marketing expenses in our school book business decreased during the
period due to the slowdown in the implementation of the new curriculum.
This resulted in operating losses being lower than in the comparative
period and confirms the seasonal nature of the school text book
publishing business. The general book publishers traded satisfactorily,
but the book market remains tough. During the period, Van Schaik
Bookstores was sold to Johncom.
In addition, and as previously announced, an agreement was concluded to
dispose of the private education assets as a going concern. This
transaction is subject to certain conditions and is expected to be
effective in the first quarter of 2008. The business has been accounted
for as a discontinued operation in accordance with IFRS 5 "Non-current
Assets Held for Sale and Discontinued Operations". Educor incurred a net
loss of R82 million during the period ended 30 September 2007. The group
also recorded an impairment charge of R81 million in order to reflect
the investment at its fair value at 30 September 2007. The group has
restated its results accordingly.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Condensed interim financial statements for the six months ended 30
September 2007 have been prepared in accordance with IAS 34 "Interim
Financial Reporting", and in compliance with the Listings Requirements
of the JSE Limited. The accounting policies used to prepare the interim
results are consistent with those applied in the previous period and
IFRS. These condensed interim financial statements have been reviewed by
the company`s auditor, PricewaterhouseCoopers Inc., whose report is
available for inspection at the registered office of the company.
SECONDARY LISTING
During the period Naspers terminated its secondary listing on the Nasdaq
Stock Market and listed a Depository Receipt programme on the London
Stock Exchange.
On behalf of the board:
Ton Vosloo
Chairman
Cape Town
27 November 2007
Segmental Review
Revenue
Six months ended 30 September
2007 2006 %
R`m R`m Change
Electronic media 7 492 6 206 21
- pay television 6 357 5 268 21
- internet 654 538 22
- conditional access 445 379 17
- broadband technologies 36 21 71
Print media 2 998 2 622 14
- newspapers, magazines and 2 569 2 283 13
printing
- book publishing 429 339 27
Corporate services 7 (3) -
10 497 8 825 19
Ebitda
Six months ended 30 September
2007 2006 %
R`m R`m Change
Electronic media 2 389 1 941 23
- pay television 2 426 1 924 26
- internet (20) 48 -
- conditional access 62 56 11
- broadband technologies (79) (87) 9
Print media 375 350 7
- newspapers, magazines and 384 389 1
printing
- book publishing (9) (39) 77
Corporate services (24) (34) -
2 740 2 257 21
Operating profit before
amortisation and other
gains/losses
Six months ended 30 September
2007 2006 %
R`m R`m Change
Electronic media 2 128 1 715 24
- pay television 2 215 1 738 27
- internet (49) 24 -
- conditional access 51 48 6
- broadband technologies (89) (95) 6
Print media 276 265 4
- newspapers, magazines and 289 307 6
printing
- book publishing (13) (42) 69
Corporate services (25) (35) -
2 379 1 945 22
Operating profit
Six months ended 30 September
2007 2006 %
R`m R`m Change
Electronic media 2 057 1 761 17
- pay television 2 205 1 844 20
- internet (79) (5) -
- conditional access 20 17 18
- broadband technologies (89) (95) 6
Print media 234 252 7
- newspapers, magazines and 247 298 17
printing
- book publishing (13) (46) 72
Corporate services (26) (38) -
2 265 1 975 15
Consolidated Income Statement
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2007 2006 2007
Reviewed Reviewed Audited
R`m R`m R`m
Revenue 10 497 8 825 19 005
Cost of providing (5 409) (4 546) (10 408)
services and sale of
goods
Selling, general and (2 800) (2 420) (4 869)
administration expenses
Other (losses)/gains - (23) 116 -
net
Operating profit 2 265 1 975 3 728
Net finance 548 (458) (368)
income/(costs)
Share of equity- 126 93 339
accounted results
Profit on sale of - - 4
investments
Impairment of equity- (68) (150) (176)
accounted investment
Profit before taxation 2 871 1 460 3 527
Taxation (927) (569) (1 249)
Profit after taxation 1 944 891 2 278
Loss from discontinued (82) (16) (87)
operations
Loss arising on (81) - -
discontinuance of
operations
Profit for the period 1 781 875 2 191
Attributable to:
Naspers shareholders 1 454 824 1 999
Minority shareholders 327 51 192
1 781 875 2 191
Core headline earnings 1 745 1 322 2 875
for the period (R`m)
Core headline earnings 506 455 972
per N ordinary share
(cents)
Headline earnings for 1 588 1 276 2 560
the period (R`m)
Headline earnings per N 461 439 866
ordinary share (cents)
Fully diluted headline 448 415 832
earnings per N ordinary
share (cents)
Earnings per N ordinary 422 284 676
share (cents)
Fully diluted earnings 411 268 649
per N ordinary share
(cents)
Net number of shares
issued (`000)
- At period-end 348 527 291 355 344 632
- Weighted average for 344 632 290 555 295 756
the period
- Fully diluted 354 111 307 394 307 847
weighted average
Condensed Consolidated Balance Sheet
30 September 30 September 31 March
2007 2006 2007
Reviewed Reviewed Audited
R`m R`m R`m
ASSETS
Non-current assets 16 041 11 345 16 015
Property, plant and 4 077 3 991 4 089
equipment
Goodwill and other 1 596 1 495 1 551
intangible assets
Investments and loans 9 894 5 006 9 663
Deferred taxation 474 614 506
Other non-current assets - 239 206
Current assets 16 620 8 099 16 169
Assets classified as 411 - -
held for sale
TOTAL ASSETS 33 072 19 444 32 184
EQUITY AND LIABILITIES
Share capital and 21 809 9 032 21 143
reserves
Minority shareholders` 516 192 427
interest
Total equity 22 325 9 224 21 570
Non-current liabilities 2 543 2 782 3 086
Capitalised finance 1 107 1 628 1 448
leases
Liabilities - interest- 658 241 748
bearing
- non-interest-bearing 423 496 580
Post-retirement medical 183 150 195
liability
Deferred taxation 172 267 115
Current liabilities 7 933 7 438 7 528
Liabilities classified 271 - -
as held for sale
TOTAL EQUITY AND 33 072 19 444 32 184
LIABILITIES
Net asset value per N 6 257 3 100 6 135
ordinary share (cents)
Condensed Consolidated Cash Flow Statement
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2007 2006 2007
Reviewed Reviewed Audited
R`m R`m R`m
Cash flow from operating 1 949 1 598 3 523
activities
Cash flow utilised in (1 010) (4 083) (5 394)
investment activities
Cash flow (utilised (922) (1 416) 6 407
in)/from financing
activities
Net movement in cash and 17 (3 901) 4 536
cash equivalents
Foreign exchange (256) 491 534
translation adjustments
Cash and cash 11 481 6 411 6 411
equivalents at beginning
of period
Cash and cash 11 242 3 001 11 481
equivalents at end of
period
Calculation of Headline and Core Headline Earnings
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2007 2006 2007
Reviewed Reviewed Audited
R`m R`m R`m
Net profit attributable 1 454 824 1 999
to shareholders
Adjusted for:
- impairment of 10 - 114
goodwill and other
assets
- profit on sale of (14) (8) (8)
property, plant and
equipment
- discontinuance of 79 - -
operations
- loss on sale of - 308 279
investments
- impairment of equity- 68 150 176
accounted investments
1 597 1 274 2 560
Total tax effects of 3 2 (4)
adjustments
Total minority interest (12) - 4
of adjustments
Headline earnings 1 588 1 276 2 560
Adjusted for:
- loss from 69 14 63
discontinued operations
- creation of deferred - (35) (30)
tax assets
- amortisation of 159 51 173
intangible assets
- fair value (71) 16 109
adjustments and currency
translation differences
Core headline earnings 1 745 1 322 2 875
Supplementary Information
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2007 2006 2007
Reviewed Reviewed Audited
R`m R`m R`m
Depreciation of 361 313 652
property, plant and
equipment
Amortisation of 91 86 171
intangible assets
Share-based payment 114 80 196
expenses (IFRS 2)
Other (losses)/gains - (23) 116 -
net
- profit on sale of 4 7 9
property, plant and
equipment
- impairments of - - (10)
goodwill and intangible
assets
- impairments of (7) (1) (75)
tangible assets
- dividends received 1 3 4
- fair value (21) 107 72
adjustment on
shareholders`
liabilities
Net finance (548) 458 368
(income)/costs
- interest received (405) (126) (283)
- interest paid 89 69 110
- interest on finance 63 78 174
leases
- net foreign exchange (110) 337 372
differences
- net fair value (25) 100 65
adjustments on
derivative instruments
- preference dividends (160) - (70)
received
Investments and loans 9 906 5 006 9 665
- listed investments 1 533 1 407 1 543
- unlisted investments 8 373 3 599 8 122
Market value of listed 28 147 11 384 15 123
investments
Directors` valuation of 8 373 3 599 8 122
unlisted investments
Commitments 5 777 3 394 5 478
- capital expenditure 603 382 887
- programme and film 2 713 2 070 2 024
rights
- network and other 1 746 339 1 899
services commitments
- operating lease 568 472 470
commitments
- set-top box 147 131 198
commitments
Condensed Consolidated Statement of Changes in Equity
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2007 2006 2007
Reviewed Reviewed Audited
R`m R`m R`m
Balance at beginning of 21 570 7 204 7 204
period
Movement in treasury (148) 9 (210)
shares
Share capital and 213 (137) 7 433
premium issued
Foreign currency (354) 1 562 1 231
translations
Movement in cash flow (51) 65 24
hedging reserve
Movement in share-based 78 60 146
compensation reserve
Transactions with (16) (30) 4 003
minority shareholders
Net profit for the 1 781 875 2 191
period
Dividends (748) (384) (452)
Balance at end of period 22 325 9 224 21 570
Directors
T Vosloo (chairman), F-A du Plessis, GJ Gerwel, RCC Jafta, LN Jonker, SJZ
Pacak, FTM Phaswana, BJ van der Ross, NP van Heerden, JJM van Zyl, HSS
Willemse
Company secretary
GM Coetzee
Registered office
40 Heerengracht, Cape Town 8001
(PO Box 2271, Cape Town 8000)
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
11 Diagonal Street, Johannesburg 2001
(PO Box 4844, Johannesburg 2000)
ADR programme
The Bank of New York maintains a GlobalBuyDIRECT TM plan for Naspers Limited.
For additional information, please visit the Bank of New York`s website at
www.globalbuydirect.com or call Shareholder Relations at 1-888-BNY-ADRS or 1-
800-345-1612 or write to: The Bank of New York, Shareholder Relations
Department - GlobalBuyDIRECT TM, Church Street Station, P O Box 11258, New
York, NY 10286-1258, USA
Important information
This report contains forward-looking statements. While these forward-looking
statements represent our judgements and future expectations, a number of
risks, uncertainties and other important factors could cause actual
developments and results to differ materially from our expectations. These
include key factors that could adversely affect our businesses and financial
performance. We are not under any obligation to (and expressly disclaim any
such obligation to) update or alter our forward-looking statements whether as
a result of new information, future events or otherwise. Investors are
cautioned not to place undue reliance on any forward-looking statements
contained herein.
For a more detailed exposition, visit the Naspers website at www.naspers.com
Date: 27/11/2007 09:00:01 Produced by the JSE SENS Department.
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