| Tue 29 Jun 2010, 9:00 | | NPN - Naspers Limited - Provisional report |
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NPN
NPN
NPN - Naspers Limited - Provisional report
Naspers Limited
(Registration number: 1925/001431/06)
("Naspers")
ISIN ZAE000015889
JSE share code: NPN
LSE share code: NPSN
PROVISIONAL REPORT
Summary of the audited results of the Naspers group for the year ended 31 March
2010
Commentary
Over the past year the Naspers group continued to grow. Most emerging markets in
which we operate survived the global economic downturn reasonably well,
particularly when compared to developed economies.
The internet industry showed bold growth in emerging markets. Our pay-television
operations held up well whilst the technology business returned to operating
profitability. Print businesses globally, including our own, suffered in the
recession. Overall, however, it was a good year for the group.
In summary, Naspers recorded a 5% increase in revenues to R28bn for the past
financial year. Operational profit climbed 10% to R5,4bn, whilst core headline
earnings grew 22% to R5,3bn.
The internet segment, comprising mainly Allegro in Central Europe, Tencent in
China and Mail.ru in Russia, continued to reflect growth, with revenues up 24%.
Our pay-television businesses largely proved resilient to prevailing economic
conditions and recorded revenue growth of 12%, with slightly lower operating
margins as we invested to grow the subscriber base. Irdeto, the TV technology
business, felt economic headwinds, but nevertheless cut costs.
The print media businesses, however, suffered a 5% decline in its top line
because of pressure on advertising revenues.
Free cash flow of R4,1bn (2009: R2,4bn) was recorded. The financial position
remains healthy with consolidated gearing, excluding satellite transponder
leases, of 5%.
Looking ahead, we mostly have resilient businesses in emerging markets that are
still expanding. Competition in pay TV, regulation and consumer spending levels
remain challenges.
We plan to continue growing the group through a combination of organic growth
and acquisitions, focusing on internet.
FINANCIAL REVIEW
The past financial year was characterised by tough economic conditions and a
strong rand which negatively impacts reported results when translating other
currencies.
Revenue growth of 5% in the aggregate was recorded over the period. This muted
growth was partly the result of pressure on print media, but mainly the
consequence of a stronger rand. Based on a stable currency, we estimate revenue
growth would have been 11%.
Our operational profit increased by 10% to R5,4bn (2009: R4,9bn). Using a stable
currency we estimate operational profit growth would have been 17%. Group
margins improved largely due to cost management.
Net interest costs for the year increased to R535m (2009: R306m), the result of
funding new acquisitions with debt and available cash balances.
Naspers`s share of the equity-accounted results of our associates, mainly
Tencent, Mail.ru and Abril, increased to R2,1bn (2009: R1,5bn).
The profit on sale of investments relates mainly to MWEB`s business in the rest
of Africa. These proceeds are once-off in nature.
The net effect of all the above is that core headline earnings for the year grew
22% to R5,3bn.
During the year, MultiChoice launched the W7 satellite resulting in an increase
in our transponder leases and commitments.
SEGMENTAL REVIEW
This review includes our consolidated subsidiaries plus the proportional
consolidation of our economic interest in associates. This allows for improved
analysis of the contribution of all our investments to the group`s results.
Our primary measurement of profitability is defined as operational profit, which
excludes other gains/losses and amortisation of intangible assets (other than
software). It includes the finance cost on transponder leases which the group
treats as an operating cost.
Internet
In aggregate, the internet segment recorded revenue up by 24% to R9,2bn.
Operational profit grew to R2,4bn.
In China, Tencent performed ahead of expectations with revenue growth of 49%.
The number of peak concurrent users now stands at around 105 million. Tencent`s
contribution to core headline earnings increased by 76% to R2,1bn.
The strong rand had a significant effect on the other internet businesses where,
nominally, revenues were marginally up and operational profits down. Calculated
on a stable currency basis, we estimate that both revenues and operational
profits would have advanced 19%.
The Allegro platform in Poland delivered solid growth. In local currency, the
gross merchandising value transacted on the platform grew by 20%, generating
revenue of 24% higher. New services were launched.
In India, ibibo, our joint venture with Tencent, is developing social gaming and
e-commerce platforms.
In Russia, Mail.ru expanded its base to 81 million active email users. This
business contributed R70m (2009: R87m) to our core headline earnings. The
decrease relates mainly to the impact of the strong rand. Mail.ru has acquired
Astrum, the online games platform operator in Russia.
In Latin America, BuscaPe was added to the group in September 2009. This unit is
currently growing its core comparison shopping business and broadening its base
with new services, including electronic payments, classified advertising and
affiliate advertising networks.
In South Africa, 24.com remains a leading local internet publisher, growing its
users by 34%.
Pay television
Overall, the pay-television segment expanded revenues by 12%, due to subscriber
growth of 634 000 net households. After a satisfactory festive season,
subscriber growth did slow in the last quarter of the financial year. Operating
margins were slightly lower due to the cost of building the subscriber base, as
well as higher content costs resulting from increased competition and more local
production.
In South Africa the base grew by 450 000 to 2,85 million homes. The service now
offers nine different bouquet offerings and three high definition channels. With
a strong content offering of soccer, general entertainment and movies, the mid-
priced Compact bouquet attracted many customers. Advertising revenues were
marginally better. The coming year will see even more competitors entering this
market.
In the other 47 countries in the rest of Africa, a focus on local content and
additional sport delivered 184 000 additional subscribers, taking the base to
1,1 million homes. The Compact and Family bouquets stand at 447 000. Hausa and
Yoruba language content was added in Nigeria. SuperSport is now one of the main
funders of local sports leagues across the African continent, which means higher
content costs for the group. However, if African sport is to become globally
competitive, it needs funding by someone.
Mobile TV operations were launched in Ghana, Kenya, Namibia and Nigeria, whilst
we still await a licence in South Africa.
Technology
Irdeto delivered some 15,8 million conditional access units in the period, a 5%
increase. Revenues in other divisions were flat due to the global slow-down.
Consolidation of various technology businesses into Irdeto has reduced operating
costs, and the segment reversed an operational loss last year into a profit of
R47m.
Print media
Our print media operations in South Africa recorded a top-line decline of 5%.
Circulation of newspapers and magazines held up remarkably, but advertising felt
the blows. In a recession people read more, but advertisers spend less.
Operating costs have been reduced and capital expenditure reigned in. We were
able to grow market share marginally.
In Brazil, the magazine publisher Abril also experienced a challenging year,
particularly for advertising. This was largely offset through cost controls.
Abril`s contribution to our core headline earnings amounted to R318m (2009:
R414m), partly influenced by the strong rand and a higher tax charge.
DIVIDEND NUMBER 81
The board recommends that the annual dividend be increased 14% to 235 cents
(previously 207 cents) per N ordinary share, and 47 cents (previously 41 cents)
per unlisted A ordinary share. If approved by shareholders at the annual general
meeting to be held on Friday, 27 August 2010, dividends will be payable to
shareholders recorded in the books on Thursday, 23 September 2010, and will be
paid on Monday, 27 September 2010. The last date to trade cum dividend will be
on Thursday, 16 September 2010. The shares will therefore trade ex dividend from
Friday, 17 September 2010.
Share certificates may not be dematerialised or rematerialised between Friday,
17 September 2010 and Thursday, 23 September 2010, both days inclusive.
CORPORATE GOVERNANCE
The impact of the new South African Companies Act and the King Report on
Governance for South Africa 2009 (King III) was a focus over the past year.
Subsequent to the year-end the Naspers board approved a plan to address aspects
of King III, the implementation of which is well under way. Where appropriate
for the group, the necessary changes to our governance policies and practices
will be made. If any principles or practices are found to be inappropriate for
the group, the reason for not implementing or not complying with King III`s
recommendations will be disclosed.
Naspers will produce an integrated report for the financial year ended 31 March
2011 and also report on the application of King III.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Financial results for the year ended 31 March 2010 have been prepared in
accordance with IAS 34 and 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. Except as noted
below, accounting policies used are consistent with those applied in the
previous annual financial statements and IFRS. These results have been audited
by the company`s auditor, PricewaterhouseCoopers Inc., whose unqualified report
is available for inspection at the registered office of the company.
The group adopted the following new standards, amendments and circulars for the
year ended 31 March 2010:
- The revised IAS 1 "Presentation of Financial Statements" was issued, requiring
certain changes to existing disclosures as well as the introduction of the
"statement of comprehensive income". These changes had no effect on the
financial position or results of the group.
- IFRS 8 "Operating Segments" replaced IAS 14 "Segment Reporting". Segment
information is now presented on the same basis as for internal management
reporting purposes. The only significant change is that the results of our
investments in associates are now proportionately consolidated for segmental
reporting and Tencent is shown as a separate reportable segment. The amendment
to IFRS 8 which allows an entity not to disclose segmental assets, if not
reviewed by management, has been early adopted. Comparative information was
restated accordingly.
- IAS 23 "Borrowing Cost (Revised)" requires entities to capitalise qualifying
interest cost. This amendment had no material effect on the group.
- Circular 3/2009 "Headline Earnings" was issued by the South African Institute
of Chartered Accountants. The circular was changed to incorporate the latest
amendments and revisions to IFRS. This circular is effective for the current
year, but had no material effect on the group.
Core headline earnings exclude once-off and non-operating items. We remain of
the view that it is an appropriate measure of the group`s sustainable operating
performance. This measure is not a defined term under IFRS and may not be
comparable with similarly titled measures reported by other companies.
SIGNIFICANT ACQUISITIONS
In September 2009 the group acquired 94,8% of Brazilian e-commerce group,
BuscaPe.com Inc. for approximately R2,7bn. This was funded from existing debt
facilities. A put option of R89m over minorities is part of the purchase
consideration. The preliminary purchase price allocation is: tangible assets
R180m, intangible assets R394m, liabilities R228m and the balance to goodwill.
During October 2009 the group acquired 51% of Korbitec (Proprietary) Limited (an
electronic platform for attorneys, banks and other players in the property value
chain) for cash of R158m with an additional R51m contingent consideration. The
preliminary purchase price allocation shows: tangible assets R48m, intangible
assets R135m, liabilities R21m and the balance to goodwill. Minorities` share of
the above is R79m.
During November 2009 the group made a further cash investment of R771m into
Mail.ru as a result of its acquisition of Astrum Online Entertainment Holdings.
The group`s shareholding was diluted from 42% to 39%.
Subsequent to the initial 83% interest acquired in Bankier.pl in August 2009,
the group also acquired the remaining minorities. The total consideration of
R178m was allocated as follows: tangible assets R52m, intangible assets R33m and
the balance to goodwill.
The group also made some other acquisitions for a combined cost of approximately
R522m. Revenues and profits from all acquisitions were not significant to
consolidated results.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Managing director
Cape Town
29 June 2010
Revenue
Segmental 2010 2009 %
Review R`m R`m Change
Pay television 16 659 14 858 12
Internet 9 181 7 411 24
- Tencent 4 874 3 281 49
- Other 4 307 4 130 4
Print 10 204 10 722 (5)
Technology 1 207 1 514 (20)
Economic interest 37 251 34 505 8
Corporate services
Less: Associates (9 253) (7 815) 18
Consolidated 27 998 26 690 5
Ebitda
Segmental 2010 2009 %
Review R`m R`m Change
Pay television 5 744 5 197 11
Internet 2 804 1 973 42
- Tencent 2 542 1 588 60
- Other 262 385 (32)
Print 1 232 1 389 (11)
Technology 98 (75) +100
Economic interest 9 878 8 484 16
Corporate services (230) (210) 10
Less: Associates (3 152) (2 248) 40
Consolidated 6 496 6 026 8
Operational profit
Segmental 2010 2009 %
Review R`m R`m Change
Pay television 5 171 4 624 12
Internet 2 423 1 626 49
- Tencent 2 363 1 447 63
- Other 60 179 (66)
Print 896 1 062 (16)
Technology 47 (139) +100
Economic interest 8 537 7 173 19
Corporate services (232) (213) 9
Less: Associates (2 858) (2 020) 42
Consolidated 5 447 4 940 10
Note: Operational profit excludes amortisation of intangible assets (other than
software) and other gains/losses and includes the finance cost on transponder
leases.
Year ended Year ended
31 March 31 March
Reconciliation of Operational 2010 2009
Profit to Operating Profit R`m R`m
Operational profit 5 447 4 940
Finance cost on transponder leases 93 109
Amortisation (1 135) (1 179)
Other gains/(losses) - net (364) (87)
Operating profit 4 041 3 783
Note: For a reconciliation of operating profit to profit before taxation, refer
to the "Consolidated income statement".
Year ended Year ended
31 March 31 March
Consolidated Income 2010 2009 %
Statement R`m R`m Change
Revenue 27 998 26 690 5
Cost of providing services and sale of (14 438) (13 531)
goods
Selling, general and administration (9 155) (9 289)
expenses
Other gains/(losses) - net (364) (87)
Operating profit 4 041 3 783 7
Interest received 348 572
Interest paid (883) (878)
Other finance income/(costs) - net 114 3
Share of equity-accounted results 2 058 1 473 40
Profit on sale of investments 144 36
Impairment of equity-accounted (62) (214)
investments
Profit before taxation 5 760 4 775 21
Taxation (1 808) (1 436)
Profit after taxation 3 952 3 339 18
Profit from discontinued operations - 3 092
Profit for the year 3 952 6 431
Attributable to:
Equity holders of the group 3 257 5 761
Minority shareholders 695 670
3 952 6 431
Core headline earnings for the period 5 319 4 373 22
(R`m)
Core headline earnings per N ordinary 1 426 1 179 21
share (cents)
Fully diluted core headline earnings per 1 386 1 169 19
N ordinary share (cents)
Headline earnings for the period (R`m) 3 297 3 065 8
Headline earnings per N ordinary share 884 826 7
(cents)
Fully diluted headline earnings per N 859 819 5
ordinary share (cents)
Earnings per N ordinary share (cents) 873 1 553
Fully diluted earnings per N ordinary 848 1 540
share (cents)
Net number of shares issued (`000)
- At period-end 374 308 372 451
- Weighted average for the period 372 951 371 004
- Fully diluted weighted average 383 820 374 108
Year ended Year ended
Condensed Consolidated 31 March 31 March
Statement of Comprehensive 2010 2009
Income R`m R`m
Profit for the year 3 952 6 431
Total other comprehensive income, net of tax, (2 047) (4 123)
for the year
Translation of foreign operations (1 918) (3 544)
Cash flow hedges (560) (347)
Share of associates` other comprehensive 250 (258)
income and reserves
Tax on other comprehensive income 181 26
Total comprehensive income for the year 1 905 2 308
Attributable to:
Equity holders of the group 1 308 1 648
Minority shareholders 597 660
1 905 2 308
Year ended Year ended
Condensed Consolidated 31 March 31 March
Statement of Changes 2010 2009
in Equity R`m R`m
Balance at beginning of the year 35 217 33 147
Changes in share capital and premium
Movement in treasury shares (1 041) (405)
Share capital and premium issued 433 123
Changes in reserves
Total comprehensive income for the year 1 308 1 648
Movement in share-based compensation reserve 498 445
Movement in existing control business (334) 548
combination reserve
Direct retained earnings movement (22) (9)
Dividends paid to Naspers shareholders (773) (669)
Changes in minority interest
Total comprehensive income for the year 597 660
Dividends paid to minorities (311) (307)
Movement in minority interest in reserves 62 36
Balance at end of the year 35 634 35 217
Comprising:
Share capital and premium 14 466 15 074
Retained earnings 16 823 14 361
Share-based compensation reserve 1 573 927
Existing control business combination reserve 98 331
Hedging reserve (408) (116)
Valuation reserve 1 844 1 843
Foreign currency translation reserve (736) 1 171
Minority interest 1 974 1 626
Total 35 634 35 217
Year ended Year ended
31 March 31 March
Condensed Consolidated 2010 2009
Statement of Financial Position R`m R`m
ASSETS
Non-current assets 44 342 40 873
Property, plant and equipment 6 490 4 754
Goodwill and other intangible assets 21 596 20 916
Investment in associates 11 942 10 667
Other investments and loans 3 500 3 609
Deferred taxation 814 871
Other non-current assets - 56
Current assets 13 126 13 687
TOTAL ASSETS 57 468 54 560
EQUITY AND LIABILITIES
Share capital and reserves 33 660 33 591
Minority shareholders` interest 1 974 1 626
Total equity 35 634 35 217
Non-current liabilities 10 892 8 991
Capitalised finance leases 1 736 865
Liabilities - interest-bearing 6 983 5 934
- non-interest-bearing 51 118
Post-retirement medical liability 178 155
Derivatives 684 543
Deferred taxation 1 260 1 376
Current liabilities 10 942 10 352
TOTAL EQUITY AND LIABILITIES 57 468 54 560
Net asset value per N ordinary share (cents) 8 993 9 019
Year ended Year ended
31 March 31 March
Condensed Consolidated 2010 2009
Statement of Cash Flows R`m R`m
Cash flow from operating activities 5 622 3 913
Cash flow (utilised in)/generated from (5 156) 1 217
investment activities
Cash flow generated from/(utilised in) 235 (6 839)
financing activities
Net movement in cash and cash equivalents 701 (1 709)
Foreign exchange translation adjustments (678) 187
Cash and cash equivalents at beginning of the 5 803 7 325
year
Cash and cash equivalents at end of the year 5 826 5 803
Year ended Year ended
31 March 31 March
Calculation of Headline 2010 2009
and Core Headline Earnings R`m R`m
Net profit attributable to shareholders 3 257 5 761
Adjusted for:
- insurance proceeds (369) (113)
- impairment of property, plant, equipment and 225 117
other assets
- impairment of goodwill and intangible assets 384 22
- (profit)/loss on sale of property, plant and (156) 27
equipment
- profit on sale of intangibles (73) -
- discontinuance of operations - (2 965)
- profit on sale of investments (120) (10)
- remeasurements included in equity-accounted 30 -
earnings
- impairment of equity-accounted investments 62 214
3 240 3 053
Total tax effects of adjustments 7 5
Total minority interest of adjustments 50 7
Headline earnings 3 297 3 065
Discontinued operations - (129)
Headline earnings from continuing operations 3 297 2 936
Adjusted for:
- treasury-settled share scheme charges 418 258
- prior year withholding taxes 121 -
- reversal/(creation) of deferred tax assets 253 (58)
- amortisation of intangible assets 922 958
- Welkom Yizani refinancing 330 -
- fair value adjustments and currency (22) 279
translation differences
Core headline earnings 5 319 4 373
Year ended Year ended
31 March 31 March
2010 2009
Supplementary Information R`m R`m
Depreciation of property, plant and equipment 878 910
Amortisation 1 213 1 246
- intangible assets 1 135 1 179
- software 78 67
Interest on finance leases 93 109
Other gains/(losses) - net (364) (87)
- loss on sale of property, plant and (47) (25)
equipment
- impairment of goodwill and intangible assets (384) (18)
- impairment of tangible assets (225) (143)
- Welkom Yizani refinancing (330) -
- insurance proceeds 369 113
- profit on transponder lease settlement 253 -
- fair value adjustment on shareholders` - (14)
liability
Other finance income/(costs) - net 114 3
- net foreign exchange differences and fair (154) (374)
value adjustments on derivatives
- preference dividends received 268 377
Investments and loans 15 442 14 276
- listed investments 4 646 3 591
- unlisted investments 10 796 10 685
Market value of listed investments 92 843 44 491
Directors` valuation of unlisted investments 10 796 10 685
Commitments 18 626 14 205
- capital expenditure 527 359
- programme and film rights 8 698 8 063
- network and other services commitments 656 480
- transponder leases 7 689 4 290
- operating lease commitments 697 701
- set-top box commitments 359 312
Share of equity-accounted results 2 058 1 473
Dilution profits (64) -
Sale of assets 23 17
Sale of investments 77 8
Contribution to headline earnings 2 094 1 498
Amortisation on intangible assets 180 179
Treasury-settled share scheme charges 148 -
Reversal of deferred taxation 101 -
Contribution to core headline earnings 2 523 1 677
Tencent 2 148 1 217
Mail.ru 70 87
Abril 318 414
Other (13) (41)
Directors
T Vosloo (chairman)
J P Bekker (managing director)
F-A du Plessis
G J Gerwel
R C C Jafta
L N Jonker
D Meyer
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
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 Mellon maintains a GlobalBuyDIRECTTM plan for Naspers
Limited. For additional information, visit the Bank of New York Mellon`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 Mellon, Shareholder Relations
Department - GlobalBuyDIRECTTM, Church Street Station, PO 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 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: 29/06/2010 09:00:01 Produced by the JSE SENS Department.
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