| Wed 25 Jun 2008, 9:00 | | NPN - Naspers Limited - Provisional Report - Summary of the audited results |
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NPN - Naspers Limited - Provisional Report - Summary of the audited results
of the Naspers group for the year ended 31 March 2008
Naspers Limited
(Registration Number: 1925/001431/06)
ISIN: ZAE000015889
JSE Share Code: NPN
LSE Share Code: NPSN
("Naspers")
Provisional Report
Summary of the audited results of the Naspers group for the year ended 31
March 2008
Commentary
GROUP OVERVIEW
Over the past year the group experienced growth, especially in the internet
sector. Performance of the core operations was solid and the development of
several business opportunities progressed. A number of new investments such
as Tradus and Gadu-Gadu are included in our financial results for the first
time.
The financial performance over the past year is analysed below. In summary,
revenues increased by 19% to R20,5 billion, largely driven by the pay-
television and internet businesses. Operating profit before amortisation and
other gains/losses expanded by 15%, despite increased development costs. Core
headline earnings grew by 38% and core headline earnings per N ordinary share
increased by 16% to R11,16 during the year.
Looking ahead, our growth strategy remains focused on three legs: organically
expanding existing businesses, developing new opportunities and seeking
attractive investments. Geographically, our attention remains mostly on the
emerging markets, as these still offer good opportunities for growth. The
group has made some substantial investments over the past two years and these
will be further developed. Our aim remains to deliver value to our
shareholders over the medium and longer term.
Financial performance in the period ahead will be influenced by the timing of
regulatory approvals for ventures such as mobile television and the
development of internet opportunities. Such services, when launched,
typically have an initial negative impact on both earnings and cash flows
until they start contributing. In the pay-television segment the level of
competition is also expected to intensify.
In South Africa we expect the slowdown in consumer spending to continue. This
will have a dampening effect on advertising and circulation revenues.
However, in the past pay television has proven resilient to the economic
cycle. The macro-economic conditions in our other principal markets like
China, Russia and Brazil are expected to remain buoyant in the year ahead.
FINANCIAL REVIEW
The group reported revenue growth of 19% to R20,5 billion. The star was the
internet segment, which grew by 42%. The pay-television segment expanded by
22% - subscriber growth over the period was 246 000 equated subscribers.
Operating profit before amortisation and other gains/losses grew by 15% to
R4,2 billion (2007: R3,7 billion). Included is R1,1 billion (2007: R876
million), which the group invested in developing new technologies, products
and services. This spend was lower than anticipated, due to the slower
rollout of mobile television services, which are dependent on the issuance of
commercial licences by regulatory authorities.
Net finance income for the period amounted to R1,0 billion, compared with net
finance costs of R338 million in the prior year. This includes interest
income earned on net cash deposits of R602 million. As the capital raised in
March 2007 was only deployed in the latter half of the current financial
year, interest income in the year ahead will be lower.
In the recent past the group acquired substantial minority stakes in
businesses in emerging markets such as China, Brazil and Russia. For
reporting purposes, these are equity-accounted and are excluded from the
segmental results. Tencent, Abril and Mail.ru have all recorded pleasing
growth, reflected in our share of earnings from equity-accounted associates
growing by 93% to R654 million.
The impairment of equity-accounted investments relates mostly to our
investment in Beijing Media Corporation Limited and Titan Media. Whilst
positive about the future prospects of these investments, we believe it
prudent to record an impairment charge.
The discontinued operations relate to the private education business, which
was sold, and also to the pay-television activities in Greece and Cyprus,
where sale agreements have been concluded and which we hope to close later
this year.
The net effect of all the above is that core headline earnings grew by 38%
for the period to R3,9 billion. The "Calculation of Headline and Core
Headline Earnings" is detailed below.
During the year a three-year revolving credit facility of US$1,4 billion was
raised to fund the Tradus acquisition. The balance sheet remains sound, with
a gearing ratio of 11%, excluding transponder leases. Free cash flow
generated by the group in the current year was R2,2 billion, similar to last
year.
INTERNET
The internet segment grew revenues by 42% to R1,6 billion. This increase came
from a solid performance by established operations and the inclusion of the
new investments in the current year. The operating loss was R142 million
before amortisation and other gains/losses and excludes our share of the
profits of equity-accounted associates. This loss arises largely from the
incurrence of R291 million (2007: R103 million) of development costs in the
current year, mainly relating to the development of our Indian business.
The acquisition of 100% of Tradus was concluded in March 2008. Tradus
operates leading trading platforms in 12 countries, offering online auction
and fixed-priced sales services to consumers. Its primary market is Poland,
with rapidly growing operations in Western, Central and Eastern Europe. Over
the past year registered users grew by 41% to 12 million. The gross
merchandise value of goods traded on its platform expanded by 45% to e1,6
billion and revenues grew 78% to e107 million. We have restructured the group
into two focused businesses with the Allegro brand focused on Eastern Europe
and Ricardo on the Western European markets.
In China Tencent strengthened its position with the QQ platform, attaining
317 million active registered user accounts. The QQ.com portal and wireless
service portals continued to build their market position. The QQ Game portal
reached 4 million peak simultaneous users. Tencent, which was recently
included in the Hong Kong Hang Seng Index, contributed R615 million to the
group`s core headline earnings.
In Russia Mail.ru is experiencing rapid growth. It almost doubled traffic to
its portal. The core offering of e-mail services has been growing at a
compounded rate of 59% over the past few years. Mail.ru contributed R49
million to our core headline earnings.
In December 2007 we acquired 97% of Warsaw-listed Gadu-Gadu, the leading
instant-messaging platform in Poland. Over the past year the number of active
instant-messaging users grew by 10% to 5,9 million. The social networking
site now has 3,2 million users.
In South Africa connectivity business MWEB maintained its position as the
leading internet service provider (ISP). In the rest of the sub-Saharan
Africa market our Afsat is the leading provider of networking solutions
through satellite technology. Since the group owns no other ISP services
anywhere else, offers of purchase for these services are being evaluated.
24.com remains the largest internet publisher in South Africa. MXit doubled
its revenue over the period, reaching more than 8 million users and launched
services abroad.
In India we invested R103 million to develop the greenfields social network
services and local search operation, ibibo. It is one of the fastest growing
Indian internet sites with 1,7 million registered users. ibibo recently
concluded an agreement to partner with Tencent in India.
Pay television
The pay-television segment grew revenues by 22%, largely the result of 246
000 additional equated subscribers. The total subscriber base, excluding the
Mediterranean region, encompasses 2,1 million homes. Operating profit before
amortisation and other gains/losses increased by 22%. Competition in both
South Africa and sub-Saharan Africa is set to intensify in the year ahead,
which will continue to exert pressure on content costs and operating margins.
South Africa:
Despite slowing consumer spending, the pay-television business experienced
subscriber growth. The equated base expanded by 178 000 to 1,57 million
households, whilst the personal video recorder (PVR) take-up increased from
133 000 to 242 000 homes. The lower-priced DStv Compact bouquet continued to
perform well. Two new lower-priced tiers, DStv Select and Easyview, were
launched to broaden the base.
DStv, M-Net and SuperSport made several changes to their programming line-ups
to improve their appeal to lower- income households. This included launching
new TV channels, own produced local programmes and the acquisition of
additional soccer leagues, bringing more sport to the viewing public.
SuperSport is now the prime funder of sports leagues on the African continent
as a whole.
Sub-Saharan Africa:
The subscriber base expanded by 68 000 to reach 539 000 homes. Growth was
primarily from the Nigerian and Angolan markets. As in South Africa, the
introduction of lower-priced family bouquets stimulated sales. The focus on
localisation of programming and a broader base of programme offering is
stimulating growth.
Mediterranean:
Shareholders have been advised that conditional agreements had been reached
with ForthNet SA, a leading Greek telecommunications company, for the sale of
our stake in NetMed, which holds the Greek and Cypriot pay-television
operations. On 14 May ForthNet shareholders approved a rights issue to partly
fund this transaction. It is currently expected that the transaction will
close later this year. As a consequence of these agreements, the
Mediterranean pay-TV business has been treated as a discontinued operation in
our financial results.
Mobile television:
These services allow consumers to receive a bouquet of TV channels on their
mobile phones. The development of this technology is at an early stage, but
worldwide launches are proliferating and business models are evolving. Value-
added internet type services on mobile phones are also growing. The group
will continue to develop products and services in this area. In the current
year R86 million was invested in the development of mobile television
services. This was lower than anticipated due to the delay in issuing a
licence in South Africa. In the interim we continue to make progress with
mobile TV trials in several major cities.
For the rest of the African continent full mobile TV services are now
operational in Nigeria, Kenya and Namibia. Licences have been secured in a
number of other countries.
PRINT MEDIA
Due to declining consumer spending in South Africa, the print media segment
had a tough year. After a number of years during which we launched new
projects and titles, a number of weaker titles were pruned this year.
Revenues grew by 8%, whilst operating profit before amortisation and other
gains/losses is 11% down on last year, largely the result of development
costs. In the year ahead the key focus will be on improving margins and cash
flows.
Newspapers, magazines and printing
Circulation growth of titles like Daily Sun, Son, and Soccer Laduuuuuma! that
are aimed at the emerging market, remain positive, as well as titles for some
niche markets, like Weg.
There was a marked slowdown in advertising support, particularly in the
magazine business. After circulation incidents affecting some magazine
titles, the affected advertisers were refunded.
The print media business, Paarl Media, experienced a solid year, with the new
plant in Gauteng exceeding original expectations.
In Brazil Abril performed well on the strength of, amongst others, a unique
magazine delivery network. The cable distribution service, TVA, was disposed
of during the period. Abril`s contribution to group core headline earnings
was R150 million.
Book publishing and education
Revenues and operating profits at the SA unit were reduced by the disposal of
retail assets, Van Schaik Retail and Afribooks. The performance of the
remaining assets was satisfactory.
The private education business, Educor, was sold during the year and has been
treated as a discontinued operation.
TECHNOLOGY
Irdeto grew its revenues from pay-TV, mobile TV and IPTV services by 24% to
R1 billion. Some 10,7 million smart cards and security chips were shipped
during the period. With the acquisition of a middleware company, IDway, and
the group`s customer care and billing business, Irdeto now provides an end-to-
end solution for its pay-television customers. In a further diversification
of its security foundation, Irdeto acquired Cloakware. This unit offers
software protection products via software applications.
Entriq continued to grow top-line revenues while expanding its abilities as a
technology provider, enabling content providers and aggregators to distribute
and be paid for entertainment and sports video over broadband. New customer
acquisition was generated from internal growth and the purchase of DayPort,
and on an operational level Entriq is being integrated with Irdeto.
DIVIDEND
The board has recommended that the annual dividend be increased by 15% to 180
cents (previously 156 cents) per N ordinary share, and 36 cents (previously
31 cents) per unlisted A ordinary share. If approved by shareholders, the
dividends will be payable to shareholders recorded in the books on 5
September 2008. It will be paid on 8 September 2008. The last date to trade
cum dividend will be on 31 August 2008.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The financial results are prepared in accordance with International Financial
Reporting Standards (IFRS), the requirements of the South African Companies
Act, No 61 of 1973, and in compliance with the Listings Requirements of the
JSE Limited (JSE). The accounting policies used to prepare the results are
consistent with those applied in the previous period, except for the changes
in accounting standards as indicated below. A copy of the unqualified audit
opinion of the auditor, PricewaterhouseCoopers Inc., is available for
inspection at the registered office of the company.
CHANGES IN ACCOUNTING STANDARDS
IFRS 7 "Financial Instruments: Disclosures" - The standard requires new
disclosures on financial instruments to those currently mandated by IAS 32
"Financial Instruments: Presentation".
Amendment to IAS 1 "Presentation of Financial Statements: Capital
Disclosures" - The amendment requires additional disclosures of the group`s
objectives, policies and processes for managing capital.
The group has provided the disclosures, including comparative information, in
the relevant notes to the annual financial statements for the year ended 31
March 2008.
Circular 8/2007 "Headline Earnings" - This replaces Circular 7/2002 "Headline
Earnings" and provides detailed guidance for calculating headline earnings as
required by the JSE. The circular was adopted by the group and had no
material effects on the group`s previously reported results.
SIGNIFICANT ACQUISITIONS
In March 2008 the group acquired 100% of the issued share capital of Tradus
plc., a company providing online consumer trading platforms and related
internet services that connect buyers and sellers. The consideration was
R15,3 billion, including acquisition costs of R74 million. The group is
finalising the purchase price allocation and has recorded the purchase
consideration, based upon a preliminary appraisal, as follows: net tangible
assets (R491 million), intangible assets (R461 million) and the balance to
goodwill.
In December 2007 the group acquired 97% of the issued share capital of Gadu-
Gadu SA, the leading instant messaging platform in Poland. The consideration
was R1,1 billion, including acquisition costs of R29 million. The group has
recorded the purchase consideration, based upon an appraisal, as follows: net
tangible assets (R191 million), intangible assets (R224 million) and the
balance to goodwill.
In December 2007 the group acquired 100% of the issued share capital of
Cloakware Inc., a company providing software security solutions, for a
consideration of R505 million. The group has recorded the purchase
consideration, based upon an appraisal, as follows: net tangible liabilities
(R204 million), intangible assets (R485 million) and the balance to goodwill.
The revenues and profits recorded from these acquisitions were not material
to the group`s consolidated results for the year.
In November 2007 the group finalised its acquisition of a 40% interest in M-
Net/SuperSport as announced in November 2006. The total consideration was
settled through the issuance of 21 601 667 Naspers N ordinary shares and R250
million in cash. The fair value of the shares issued was R180 per share on 30
November 2007. The group has recorded the purchase consideration, based upon
an appraisal, as follows: net tangible assets (R369 million), intangible
assets (R528 million) and the balance to goodwill.
DISCONTINUED OPERATIONS
In October 2007 Media24 announced that it had accepted an offer to sell its
private education business, Educor, which was sold as a going concern.
Media24 has retained certain minor assets. Educor incurred a net loss from
operations of R153 million during the year ended 31 March 2008. The group
also recorded a loss on discontinuance of operations of R82 million.
In October 2007 the group announced that it had initiated a formal process to
sell NetMed. In April 2008 the group made a further announcement that it had
entered into conditional sale agreements for the disposal of NetMed to
Forthnet SA. NetMed recorded a net profit from operations of R396 million
during the year ended 31 March 2008.
These transactions have been accounted for as discontinued operations in
accordance with IFRS 5 "Non-current Assets Held for Sale and Discontinued
Operations".
SUBSEQUENT EVENTS
The group announced on 2 June 2008 that it is initiating an auction process
of MWEB, its internet service provider business.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Chief Executive Officer
Cape Town
25 June 2008
Segmental Review
Revenue
2008 2007 %
R`m R`m Change
Pay television 11 542 9 427 22
Internet 1 624 1 143 42
Technology 1 081 866 25
Newspapers, magazines and 5 355 4 823 11
printing
Book publishing 916 983 (7)
Corporate services - (23) -
20 518 17 219 19
Ebitda
2008 2007 %
R`m R`m Change
Pay television 4 272 3 504 22
Internet (64) 19 -
Technology (126) (130) 3
Newspapers, magazines and 776 787 (1)
printing
Book publishing 82 119 (31)
Corporate services (40) (55) -
4 900 4 244 15
Operating profit before
amortisation and other
gains/losses
2008 2007 %
R`m R`m Change
Pay television 3 940 3 218 22
Internet (142) (30) -
Technology (168) (167) (1)
Newspapers, magazines and 575 619 (7)
printing
Book publishing 75 111 (32)
Corporate services (42) (58) -
4 238 3 693 15
Operating profit
2008 2007 %
R`m R`m Change
Pay television 3 845 3 146 22
Internet (234) (102) -
Technology (250) (226) (11)
Newspapers, magazines and 491 561 (12)
printing
Book publishing 69 96 (28)
Corporate services (43) (59) -
3 878 3 416 14
Abridged Consolidated Income Statement
Year ended Year ended
31 March 31 March
2008 2007
R`m R`m
Revenue 20 518 17 219
Cost of providing services and sale of (10 778) (9 164)
goods
Selling, general and administration (5 877) (4 531)
expenses
Other gains/(losses) - net 15 (108)
Operating profit 3 878 3 416
Net finance income/(costs) 1 005 (338)
Share of equity-accounted results 654 339
Profit on sale of investments 16 3
Impairment of equity-accounted investments (279) (176)
Profit before taxation 5 274 3 244
Taxation (1 378) (1 185)
Profit after taxation 3 896 2 059
Profit from discontinued operations 243 132
Loss arising on discontinuance of (82) -
operations
Profit for the year 4 057 2 191
Attributable to:
Naspers shareholders 3 418 1 999
Minority shareholders 639 192
4 057 2 191
Core headline earnings for the period 3 948 2 854
(R`m)
Core headline earnings per N ordinary 1 116 965
share (cents)
Headline earnings for the period (R`m) 3 806 2 560
Headline earnings per N ordinary share 1 076 866
(cents)
Fully diluted headline earnings per N 1 051 832
ordinary share (cents)
Earnings per N ordinary share (cents) 967 676
Fully diluted earnings per N ordinary 944 649
share (cents)
Net number of shares issued (`000)
- At period-end 370 558 344 632
- Weighted average for the period 353 622 295 756
- Fully diluted weighted average 362 106 307 847
Abridged Consolidated Balance Sheet
31 March 31 March
2008 2007
R`m R`m
ASSETS
Non-current assets 41 822 16 015
Property, plant and equipment 4 541 4 089
Goodwill and other intangible assets 24 183 1 551
Investments and loans 12 507 9 663
Deferred taxation 466 506
Other non-current assets 125 206
Current assets 12 940 16 169
Assets classified as held for sale 2 030 -
TOTAL ASSETS 56 792 32 184
EQUITY AND LIABILITIES
Share capital and reserves 31 909 21 143
Minority shareholders` interest 1 238 427
Total equity 33 147 21 570
Non-current liabilities 13 053 3 086
Capitalised finance leases 1 112 1 448
Liabilities - interest-bearing 10 629 748
- non-interest-bearing 189 580
Post-retirement medical liability 142 195
Deferred taxation 981 115
Current liabilities 8 935 7 528
Liabilities classified as held for sale 1 657 -
TOTAL EQUITY AND LIABILITIES 56 792 32 184
Net asset value per N ordinary share 8 611 6 135
(cents)
Abridged Consolidated Cash Flow Statement
Year ended Year ended
31 March 31 March
2008 2007
R`m R`m
Cash flow from operating activities 4 411 3 523
Cash flow utilised in investment (18 331) (5 394)
activities
Cash flow from financing activities 8 856 6 407
Net movement in cash and cash equivalents (5 064) 4 536
Foreign exchange translation adjustments 908 534
Cash and cash equivalents at beginning of 11 481 6 411
year
Cash and cash equivalents at end of year 7 325 11 481
Included in:
- Cash and cash equivalents 6 690 11 481
- Assets classified as held for sale 635 -
7 325 11 481
Calculation of Headline and Core Headline Earnings
Year ended Year ended
31 March 31 March
2008 2007
R`m R`m
Net profit attributable to shareholders 3 418 1 999
Adjusted for:
- impairment of goodwill and other 48 114
assets
- profit on sale of property, plant and (15) (8)
equipment
- discontinuance of operations 82 -
- gain on loan settlement (87) -
- loss on sale of investments 512 279
- impairment of equity-accounted 348 176
investments
4 306 2 560
Total tax effects of adjustments (486) (4)
Total minority interest of adjustments (14) 4
Headline earnings 3 806 2 560
Discontinued operations (258) (157)
Headline earnings from continuing 3 548 2 403
operations
Headline earnings 3 806 2 560
Adjusted for:
- creation of deferred tax assets (244) (30)
- treasury-settled share scheme charges 47 42
- amortisation of intangible assets 410 173
- fair value adjustments and currency (71) 109
translation differences
Core headline earnings 3 948 2 854
Discontinued operations 48 (26)
Core headline earnings from continuing 3 996 2 828
operations
Supplementary Information
Year ended Year ended
31 March 31 March
2008 2007
R`m R`m
Depreciation of property, plant and 662 550
equipment
Amortisation of intangible assets 375 170
Share-based payment expenses (IFRS 2) 184 191
Other gains/(losses) - net 15 (108)
- profit on sale of property, plant and 8 8
equipment
- impairments of goodwill and intangible (20) (10)
assets
- impairments of tangible assets (28) (75)
- dividends received 1 4
- gain on loan settlement 87 -
- fair value adjustment on shareholders` (33) (35)
liabilities
Net finance (income)/costs (1 005) 338
- interest received (826) (260)
- interest paid 224 97
- interest on finance leases 100 123
- net foreign exchange differences (91) 378
- net fair value adjustments on (76) 70
derivative instruments
- preference dividends received (336) (70)
Analysis of equity-accounted results
Tencent 615 343
Abril 150 99
Mail.ru 49 -
Other (42) (1)
Contribution to core headline earnings 772 441
Amortisation of intangible assets (214) (86)
Deferred tax assets created 244 -
Discontinued operations (62) (16)
Contribution to headline earnings 740 339
Impairments (18) -
Sale of investments (68) -
Share of equity-accounted results 654 339
Investments and loans 12 507 9 665
- listed investments 2 282 1 543
- unlisted investments 10 225 8 122
Market value of listed investments 29 306 15 123
Directors` valuation of unlisted 10 225 8 122
investments
Commitments 8 682 5 478
- capital expenditure 642 887
- programme and film rights 4 804 2 024
- network and other services commitments 2 138 1 899
- operating lease commitments 802 470
- set-top box commitments 296 198
Abridged Consolidated Statement of Changes in Equity
Year ended Year ended
31 March 31 March
2008 2007
R`m R`m
Balance at beginning of year 21 570 7 204
Movement in treasury shares (2 180) (210)
Share capital and premium issued 4 752 7 433
Foreign currency translations 3 529 1 231
Movement in fair value reserve 1 849 -
Movement in cash flow hedging reserve 218 24
Movement in share-based compensation 155 146
reserve
Transactions with minority shareholders 24 4 003
Net profit for the period 4 057 2 191
Dividends (827) (452)
Balance at end of year 33 147 21 570
Directors
T Vosloo (chairman), J P Bekker (CEO), F-A du Plessis,
G J Gerwel, R C C Jafta, L N Jonker, S J Z Pacak,
F T M Phaswana, B J van der Ross, N P van Heerden,
J J M van Zyl, H S S Willemse
Company secretary
G M Coetzee
Registered office Transfer secretaries
40 Heerengracht, Cape Town 8001 Link Market Services South Africa
(Proprietary) Limited
(P O Box 2271, Cape Town 8000) 11 Diagonal Street,
Johannesburg 2001
(P O Box 4844, Johannesburg 2000)
Important information
This report contains forward-looking statements as defined in the United
States Private Securities Litigation Reform Act of 1995. Words such as
"believe", "anticipate", "intend", "seek", "will", "plan", "could", "may",
"endeavour" and similar expressions are intended to identify such forward-
looking statements, but are not the exclusive means of identifying such
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.
ADR programme
The Bank of New York maintains a GlobalBuyDIRECT 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, Church Street Station, P O Box 11258, New York,
NY 10286-1258, USA
For a more detailed exposition, visit the Naspers website at www.naspers.com
25 June 2008
Sponsor: Investec Bank Limited
Date: 25/06/2008 09:00:01 Produced by the JSE SENS Department.
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