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NPN
NPN
NPN - Naspers - The Reviewed Results Of The Naspers Group For The Six Months
Ended 30 September 2008
Naspers Limited
(Registration Number: 1925/001431/06)
ISIN: ZAE000015889 & Share Code: NPN
ISIN: US 6315121003 & LSE ADS code: NPSN
("Naspers" or "the group")
Interim Report
The reviewed results of the Naspers group for the six months ended 30 September
2008 are as follows:
Commentary
GROUP OVERVIEW
The group recorded robust revenue growth of 32% for the period. New developments
coupled with the cost of growing the pay-television subscriber base and finance
costs resulted in core headline earnings remaining relatively constant. A key
area of growth was in the internet segment, where recent investments such as
Allegro/Ricardo and Gadu-Gadu performed well. Our associates, mail.ru and
Tencent, also reported good growth.
The pay-television businesses, traditionally not sensitive to the economic
cycle, continued to grow with the equated subscriber base increasing by 171 000
households. Our technology business increased revenues by 51% as a result of
organic growth and acquisitions.
Advertising revenues comprise 16% of our total revenue base, so the recent
downward pressure on advertising revenues, which grew by 5% on a comparative
basis, has a limited impact on the group.
Looking ahead, it is expected that the recent market turmoil will slow consumer
spending. However, we expect the major emerging markets in which we operate to
continue growing, albeit at a slower pace. Our businesses will adapt their
strategies to this trend.
Strategic investments made over the past few years in internet and pay-
television operations have positioned us well for the years ahead. Current
market conditions may present us with further investment opportunities. The
group has a strong balance sheet.
FINANCIAL REVIEW
Revenue growth of 32% in the aggregate was recorded over the period. The key
driver came from existing operations, which increased by 19%, whilst new
acquisitions added 13%. Growth in the internet segment was boosted by the
inclusion of Allegro and Ricardo (forming part of Tradus). Pay-television
revenues increased by 28% as a result of the expansion of its subscriber base by
a net 171 000 households. Print media in South Africa remained subdued, with
revenues growing by only 4%.
Our operating profit before amortisation and other gains/losses increased by 7%
to R2,4 billion (2007: R2,2 billion). The reduction in certain margins arose
from growing our pay-television subscriber base and developing new services.
Total development costs were R638 million (2007: R551 million).
Net interest costs for the period were R133 million, compared with income of
R268 million in the prior period. This arises from funding new acquisitions in
the last quarter of the prior year with debt. Other finance income includes
preference dividends of R191 million (2007: R160 million) and foreign exchange
mark-to-market losses of R102 million compared with mark-to-market gains of R104
million in the prior period.
Our share of the equity-accounted results of our associates, mainly Tencent,
mail.ru and Abril, increased to R405 million (2007: R126 million).
The impairment of equity-accounted investments refers mostly to our withdrawal
from a German mobile TV project. A R2,6 billion profit arising on the
discontinuance of operations relates to the sale of pay-television businesses in
Greece and Cyprus. Proceeds of approximately R4,3 billion were used to reduce
the group`s long-term debt.
The net effect of the above is that core headline earnings for the period grew
to R1,76 billion. A "Calculation of Headline and Core Headline Earnings" is
detailed below.
ELECTRONIC MEDIA
Pay television
Overall, the pay-television segment expanded revenues by 28%, owing to excellent
subscriber growth of 171 000 during the period. Operating margins diminished due
to costs of growing the subscriber base and strengthening our products.
In South Africa the subscriber base grew by 79 000 net equated subscribers to 1
649 000. The mid-priced Compact bouquet delivered firm growth to 369 000. A
slowdown in consumer spending impacted advertising revenues, which showed a
marginal decline.
In sub-Saharan Africa a focus on local content and our coverage of the Olympics
delivered exceptional growth of 92 000 net equated subscribers, taking the
cumulative base to 630 000. The Compact bouquet stands at 247 000. More
competition across the continent is reflected in higher prices for content and
subsequently lower margins.
Mobile TV licences were obtained in Ghana, Kenya, Namibia and Nigeria.
Construction of DVB-H networks in these markets continues.
Internet
The internet segment recorded revenue of R1,8 billion, which increased sharply
owing to the inclusion of Allegro/Ricardo and Gadu-Gadu. An operating profit
before amortisation and other gains/losses of R113 million was recorded.
The e-commerce operations of Allegro (Eastern Europe) and Ricardo (Western
Europe) generated revenues of R887 million. Both of the largest markets, Poland
and Switzerland, delivered sound growth. Ricardo launched new services in
Austria and Greece, whilst Allegro concluded investments in the Czech Republic
and Hungary.
Gadu-Gadu in Poland now has 14 million unique users. A casual gaming portal was
recently added and further expansion is planned.
In China Tencent performed ahead of expectations with growth on all platforms.
The Olympics increased traffic to almost one billion page views per day and peak
concurrent users exceeded 45 million. The total number of active users now
exceeds 350 million. The addition of several new games contributed to steady
growth. Tencent`s contribution to core headline earnings increased to R504
million (2007: R226 million).
In India ibibo continues to develop its internet business, focussing on social
media, search and advertising. An agreement was concluded with Tencent whereby
the two companies will jointly develop the Indian business.
In Russia mail.ru grew its base to 45 million active e-mail users. This business
contributed R38 million (2007: R20 million) to our core headline earnings.
Technology
Irdeto continued to build its conditional access business, delivering over 8,3
million units in the period. Overall revenue increased by 51%, thanks to organic
growth and the inclusion of acquisitions. The Entriq business was integrated
into the Irdeto group, now bringing all our technology businesses under one
umbrella. The inclusion of new acquisitions and development costs in the Entriq
and BSS businesses have seen operating profit before amortisation and other
gains/losses decrease by 29%.
PRINT MEDIA
The print media operations in South Africa generated marginal revenue growth of
4%. In light of depressed macro-economic conditions, costs are being cut and
headcount reduced. Prudent capital expenditure disciplines are also in place.
Circulation and readership of newspaper and magazine publications mostly held up
particularly in the emerging markets. Advertising feels the pinch of the
recession more directly.
Our printing business, Paarl Media, achieved revenue growth of 7%, although
margins were affected by lower print volumes and exchange rates. The book
publishing business is operating satisfactorily, but reflects a decline in
revenue because of the sale of some businesses in the prior year.
In Brazil Abril continues to steam ahead. Revenues in local currency grew by 27%
and Abril`s contribution to our core headline earnings increased to R71 million.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Condensed interim financial statements for the six months ended 30 September
2008 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 unqualified report is available for
inspection at the registered office of the company.
Preference dividend income was previously included in interest received, but has
been reclassified to other finance income to better reflect its nature.
SUBSEQUENT EVENTS
The group announced on 2 June 2008 that it had initiated an auction process to
dispose of its internet service provider (ISP) business, MWEB. On 10 November
2008 the group announced that an agreement had been concluded for the sale of
MWEB`s sub-Saharan Africa business excluding South Africa ("MWEB Africa"). The
purchase price places a value of approximately R610 million on the MWEB Africa
group.
As regards MWEB`s operations in South Africa, the group decided to terminate the
auction process for this unit. A better price will probably be obtainable once
the contraction in credit markets clears.
FINANCIAL DIRECTOR
Steve Pacak, the financial director of Naspers, has been with the group for over
20 years. The board has granted him a three-month sabbatical from 1 January 2009
until he resumes his duties on 1 April 2009. Steve will accordingly resign all
his group directorships for the duration of his sabbatical. Steve Ward,
currently CFO of MIH, will act as chief financial officer of Naspers in Steve
Pacak`s absence.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Managing director
Cape Town
26 November 2008
Segmental Review
Revenue
Six months ended 30 September
2008 2007 %
R`m R`m Change
Pay television 6 981 5 447 28
Internet 1 831 654 +100
Technology 725 481 51
Print 3 108 2 998 4
Corporate services 7 7 -
12 652 9 587 32
Ebitda
Six months ended 30 September
2008 2007 %
R`m R`m Change
Pay television 2 309 2 200 5
Internet 195 (20) +100
Technology (24) (17) (41)
Print 418 375 11
Corporate services (103) (24) -
2 795 2 514 11
Operating profit before amortisation
and other gains/(losses)
Six months ended 30 September
2008 2007 %
R`m R`m Change
Pay television 2 099 2 044 3
Internet 113 (49) +100
Technology (49) (38) (29)
Print 303 276 10
Corporate services (104) (25) -
2 362 2 208 7
Operating profit
Six months ended 30 September
2008 2007 %
R`m R`m Change
Pay television 1 887 2 034 (7)
Internet (43) (79) 46
Technology (127) (69) (84)
Print 283 234 21
Corporate services (102) (26) -
1 898 2 094 (9)
Consolidated Income Statement
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2008 2007 2008
Reviewed Reviewed Audited
R`m R`m R`m
Revenue 12 652 9 587 20 518
Cost of providing services (6 703) (4 787) (10 778)
and sale of goods
Selling, general and (4 034) (2 683) (5 877)
administration expenses
Other (losses)/gains - net (17) (23) 15
Operating profit 1 898 2 094 3 878
Interest received 321 402 826
Interest paid (454) (134) (324)
Other finance income - net 38 286 503
Share of equity-accounted 405 126 654
results
Profit on sale of 34 - 16
investments
Impairment of equity- (216) (68) (279)
accounted investments
Profit before taxation 2 026 2 706 5 274
Taxation (837) (883) (1 378)
Profit after taxation 1 189 1 823 3 896
Profit from discontinued 127 39 243
operations
Profit/(loss) arising on 2 568 (81) (82)
discontinuance of
operations
Profit for the period 3 884 1 781 4 057
Attributable to:
Naspers shareholders 3 560 1 454 3 418
Minority shareholders 324 327 639
3 884 1 781 4 057
Core headline earnings for 1 763 1 706 3 996
the period (R`m)
Core headline earnings per 476 495 1 130
N ordinary share (cents)
Fully diluted core 470 482 1 104
headline earnings per N
ordinary share (cents)
Headline earnings for the 1 272 1 588 3 806
period (R`m)
Headline earnings per N 343 461 1 076
ordinary share (cents)
Fully diluted headline 339 448 1 051
earnings per N ordinary
share (cents)
Earnings per N ordinary 961 422 967
share (cents)
Fully diluted earnings per 948 411 944
N ordinary share (cents)
Net number of shares
issued (`000)
- At period-end 371 449 348 527 370 558
- Weighted average for the 370 558 344 632 353 622
period
- Fully diluted weighted 375 517 354 111 362 106
average
Condensed Consolidated Balance Sheet
30 September 30 September 31 March
2008 2007 2008
Reviewed Reviewed Audited
R`m R`m R`m
ASSETS
Non-current assets 40 194 16 041 41 822
Property, plant and 4 529 4 077 4 541
equipment
Goodwill and other 22 311 1 596 24 183
intangible assets
Investments and loans 12 773 9 894 12 507
Deferred taxation 482 474 466
Other non-current assets 99 - 125
Current assets 12 601 16 620 12 940
Assets classified as held 537 411 2 030
for sale
TOTAL ASSETS 53 332 33 072 56 792
EQUITY AND LIABILITIES
Share capital and reserves 34 884 21 809 31 909
Minority shareholders` 1 298 516 1 238
interest
Total equity 36 182 22 325 33 147
Non-current liabilities 7 904 2 543 13 053
Capitalised finance leases 924 1 107 1 112
Liabilities - interest- 5 640 658 10 629
bearing
- non-interest-bearing 434 423 189
Post-retirement medical 149 183 142
liability
Deferred taxation 757 172 981
Current liabilities 9 057 7 933 8 935
Liabilities classified as 189 271 1 657
held for sale
TOTAL EQUITY AND LIABILITIES 53 332 33 072 56 792
Net asset value per N 9 391 6 257 8 611
ordinary share (cents)
Condensed Consolidated Statement of Changes in Equity
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2008 2007 2008
Reviewed Reviewed Audited
R`m R`m R`m
Balance at beginning of 33 147 21 570 21 570
period
Movement in treasury shares (9) (148) (2 180)
Share capital and premium 46 213 4 752
issued
Foreign currency (828) (354) 3 529
translations
Movement in fair value - - 1 849
reserve
Movement in cash flow (95) (51) 218
hedging reserve
Movement in share-based (12) 78 155
compensation reserve
Transactions with minority 940 (16) 24
shareholders
Net profit for the period 3 884 1 781 4 057
Dividends (891) (748) (827)
Balance at end of period 36 182 22 325 33 147
Condensed Consolidated Cash Flow Statement
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2008 2007 2008
Reviewed Reviewed Audited
R`m R`m R`m
Cash flow from operating 1 449 1 949 4 411
activities
Cash flow generated 3 313 (1 010) (18 331)
from/(utilised) in
investment activities
Cash flow (utilised (6 259) (922) 8 856
in)/from financing
activities
Net movement in cash and (1 497) 17 (5 064)
cash equivalents
Foreign exchange (64) (256) 908
translation adjustments
Cash and cash equivalents 7 325 11 481 11 481
at beginning of period
Cash and cash equivalents 5 764 11 242 7 325
at end of period
Included in:
- Cash and cash 5 728 11 199 6 690
equivalents
- Assets classified as 36 43 635
held for sale
5 764 11 242 7 325
Calculation of Headline and Core Headline Earnings
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2008 2007 2008
Reviewed Reviewed Audited
R`m R`m R`m
Net profit attributable to 3 560 1 454 3 418
shareholders
Adjusted for:
- impairment of goodwill 19 10 48
and other assets
- profit on sale of assets (20) (14) (15)
- discontinuance of (2 568) 79 82
operations
- gain on loan settlement - - (87)
- loss on sale of 46 - 512
investments
- impairment of equity- 216 68 348
accounted investments
1 253 1 597 4 306
Total tax effects of 9 3 (486)
adjustments
Total minority interest of 10 (12) (14)
adjustments
Headline earnings 1 272 1 588 3 806
Adjusted for:
- (profit)/loss from (121) (3) 48
discontinued operations
- treasury-settled share 124 33 47
scheme charges
- creation of deferred tax - - (244)
assets
- amortisation of 363 159 410
intangible assets
- fair value adjustments 125 (71) (71)
and currency translation
differences
Core headline earnings 1 763 1 706 3 996
Supplementary Information
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2008 2007 2008
Reviewed Reviewed Audited
R`m R`m R`m
Depreciation of property, 433 306 662
plant and equipment
Amortisation of 448 91 375
intangible assets
Share-based payment 168 111 184
expenses (IFRS 2)
Other (losses)/gains - (17) (23) 15
net
- profit on sale of 3 4 8
property, plant and
equipment
- impairments of goodwill - - (20)
and intangible assets
- impairments of tangible (19) (7) (28)
assets
- dividends received 1 1 1
- gain on loan settlement - - 87
- fair value adjustment (2) (21) (33)
on shareholders`
liabilities
Net finance 95 (554) (1 005)
costs/(income)
- interest received (321) (402) (826)
- interest paid 404 82 224
- interest on finance 50 52 100
leases
- net foreign exchange 102 (104) (91)
differences
- net fair value 51 (22) (76)
adjustments on derivative
instruments
- preference dividends (191) (160) (336)
received
Investments and loans 12 773 9 894 12 507
- listed investments 2 701 1 533 2 282
- unlisted investments 10 072 8 361 10 225
Market value of listed 37 527 28 147 29 306
investments
Directors` valuation of 10 072 8 361 10 225
unlisted investments
Commitments 10 098 5 777 8 682
- capital expenditure 357 603 642
- programme and film 6 791 2 713 4 804
rights
- network and other 2 187 1 746 2 138
services commitments
- operating lease 664 568 802
commitments
- set-top box commitments 99 147 296
Analysis of equity-
accounted results
Tencent 504 226 615
Abril 71 40 150
mail.ru 38 20 49
Other (29) (5) (42)
Contribution to core 584 281 772
headline earnings
Intangible amortisation (88) (115) (214)
Deferred tax assets - - 244
created
Discontinued operations - (33) (62)
Contribution to headline 496 133 740
earnings
Impairment of assets (10) (6) (18)
Sale of investments (81) (1) (68)
Share of equity-accounted 405 126 654
results
Directors
T Vosloo (chairman), J P Bekker (managing director), F-A du Plessis, G J
Gerwel, R C C Jafta,
L N Jonker, S J Z Pacak, T M F Phaswana, L P Retief, B J van der Ross, N P
van Heerden,
J J M van Zyl, H S S Willemse
Company secretary
G Kisbey-Green
Registered office Transfer secretaries
40 Heerengracht, Cape Town Link Market Services South Africa
8001 (Proprietary) Limited
(P O Box 2271, Cape Town 11 Diagonal Street, Johannesburg,
8000) 2001
(P O Box 4844, Johannesburg 2000)
ADR programme
The Bank of New York Mellon maintains a GlobalBuyDIRECT TM plan for Naspers
Limited. For additional information, please visit the Bank of New York Mellon`s
web site 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 Mellon, Shareholder
Relations Department - GlobalBuyDIRECT TM, Church Street Station, P O Box 11258,
New York, NY 10286-1258, USA.
Important information
The 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.
For a more detailed exposition, visit the Naspers website at www.naspers.com
26 November 2008
Sponsor: Investec Bank Limited
Date: 26/11/2008 09:00:02 Produced by the JSE SENS Department.
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