| Tue 27 Nov 2001, 0:00 | | Mih Holdings Limited - Interim Report |
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MIH HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/005613/06)
Share code: MHH ISIN: ZAE000018941
("MIHH" or "the group")
INTERIM REPORT
The unaudited results for the six months ended 30 September 2001 were as
follows:
FINANCIAL AND OPERATIONAL HIGHLIGHTS
* Group revenue for the six months from continuing operations was R3,0
billion (2000: R2,5 billion).
- Subscriber Platforms' revenue for the period increased to R2,5 billion
(2000: R2,2 billion).
- Revenue from MIH Technology was adversely affected by the global
slowdown in technology sales. The increase to R597 million (2000: R379
million) was mainly the result of strong growth (90%) in OpenTV revenues to
R398 million (2000: R209 million).
* Management's objective of driving the business towards profitability
remains a top priority, with aggressive cost-cutting, the discontinuing of
certain operations and scaling of operational expenditure in line with
revenues in all business units. Consolidated EBITDA loss for the six months
decreased to R21 million (2000: R42 million loss), in line with
expectations. This included a 80% growth in EBITDA in the core pay-TV
businesses to R298 million (2000: R166 million).
* The digital-television subscriber base continued to grow, reaching 1,2
million households representing 55% of the total subscriber base.
* OpenTV's interactive-television (iTV) software is now deployed in over 20
million decoders worldwide and by more than 48 network operators in 50
countries.
* A 46,5% interest in QQ was acquired by MIH Limited. With more than half a
billion daily messages being processed and one million paying subscribers.
QQ is the most pervasive instant-messaging platform in China.
* Antenna TV, the leading free-television operator in Greece, acquired an
equity stake in NetMed in October 2001, placing an enterprise value of
approximately R3,6 billion on the business.
* In July OpenTV acquired Static, an iTV, media and entertainment company
and creator of Playjam, an iTV and games channel that reaches nine million
homes.
CONDENSED CONSOLIDATED INCOME STATEMENTS
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2001 2000 2001
(Unaudited) (Unaudited) (Restated)
R'm R'm R'm
Net revenues 3 022 2 525 5 558
Cost of providing services (1 690) (1 430) (3 119)
Selling, general and administrative (1 353) (1 137) (2 603)
Loss before interest, tax,
depreciation and
amortisation (EBITDA) (21) (42) (164)
Depreciation (229) (133) (311)
Amortisation (957) (222) (936)
Operating loss (1 207) (397) (1 411)
Financial results, net (84) (20) (40)
Profit/(Loss) on marketable securities (55) - (335)
Equity results in joint ventures
and associates (39) (87) (227)
(Loss)/Profit on sale/dilution of
interests in subsidiaries/joint venture - 3 379 3 672
(Loss)/Profit before tax (1 385) 2 875 1 659
Income tax (23) (1) (53)
(Loss)/Profit after tax (1 408) 2 874 1 606
Minority interest 915 (902) 63
(Loss)/Profit from continuing
operations (493) 1 972 1 669
Discontinuing operations
Loss from discontinuing operations (108) (49) (232)
Impairment of goodwill (96) - -
Net (loss)/profit (697) 1 923 1 437
Per share amounts (cents)
(Loss)/Profit from continuing
operations
Basic (195,6) 784,8 663,5
Diluted (195,6) 764,4 648,5
Net (loss)/profit
Basic (276,7) 765,2 571,3
Diluted (276,7) 745,3 558,3
Headline profit/(loss)
Basic (113,3) (89,1) (230,5)
Diluted (113,3) (89,1) (230,5)
Number of shares in issue
Weighted average 251 711 941 251 318 000 251 475 569
Fully-diluted weighted average 251 711 941 258 019 000 257 301 537
Closing 264 682 294 264 682 294 264 682 294
CONDENSED CONSOLIDATED BALANCE SHEETS
30 September 31 March
2001 2001
(Unaudited) (Restated)
R'm R'm
ASSETS
Non-current assets 11 632 10 010
Property and equipment, net 2 893 2 136
Intangible assets, net 7 174 6 720
Long-term investments 1 177 793
Programme and film rights 388 361
Current assets 4 370 4 538
Total assets 16 002 14 548
EQUITY AND LIABILITIES
Capital and reserves 2 142 2 534
Minority interest 7 041 6 947
Total liabilities 6 819 5 067
Non-current liabilities 2 908 2 140
Transponder and other leases 2 420 1 680
Long-term debt - other 170 161
Programme and film rights 316 298
Deferred tax 2 1
Current liabilities 3 911 2 927
Total equity and liabilities 16 002 14 548
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Retained Hedging translation
capital earnings reserve adjustments Total
R'm R'm R'm R'm R'm
At 1 April 2000
As previously reported 750 76 - 138 964
Effect of accounting for
shares issued to share
incentive scheme as
treasury shares (237) (95) - (8) (340)
As restated 513 (19) - 130 624
Treasury shares 5 - - - 5
Net profit - 1 923 - - 1 923
Translation adjustment - - - 151 151
At 30 September 2000 518 1 904 - 281 2 703
At 1 April 2001
As previously reported 750 1 478 - 626 2 854
Effect of accounting for
shares issued to share
incentive scheme as
treasury shares (229) (47) - (44) (320)
As restated 521 1 431 - 582 2 534
Opening balance
adjustment in respect
of adopting AC 133 - (6) 48 - 42
Treasury shares 3 - - - 3
Cash-flow hedges - - 17 - 17
Net loss - (697) - - (697)
Translation adjustment - - - 243 243
At 30 September 2001 524 728 65 825 2 142
CONDENSED CONSOLIDATED CASH FLOWS
Six months Six months
ended ended
30 September 31 September
2001 2000
(Unaudited) (Unaudited)
R'm R'm
Cash flows used in operating activities (304) (157)
Cash flows (used in)/from
investing activities (660) 263
Cash flows from financing activities 66 1 206
Net (decrease)/increase in cash
and cash equivalents (898) 1 312
Cash and cash equivalents
at beginning of period 2 638 1 870
Translation adjustments on cash
and cash equivalents 268 156
Cash and cash equivalents
at end of period 2 008 3 338
SUPPLEMENTARY INFORMATION
Unaudited Restated
30 September 31 March
2001 2000 2001
R'm R'm R'm
Finance results, net (84) (20) (40)
Dividend income 1 - 13
Interest income 89 101 218
Net foreign exchange losses (39) (30) (85)
Interest expense (135) (91) (186)
Headline loss is reconciled as follows:
Net profit for period (697) 1 923 1 437
Adjusted for:
Amortisation of goodwill 368 67 248
(Profit)/Loss on other investments 37 - 79
(Loss)/Profit on sale/dilution of interests
in subsidiaries/joint venture - (2 214) (2 344)
Loss on discontinuing operations 7 - -
Headline loss (285) (224) (580)
Long-term investments 1 177 560 793
Equity-accounted investments 295 233 202
Long-term private equity investments 215 72 234
Long-term bonds and
marketable securities 667 255 357
Market value of listed
investments (equity-accounted) 584 1 160 787
Directors' valuation of unlisted
investments 430 122 316
Capital expenditure 163 166 318
Commitments 1 680 1 408 1 848
Capital expenditure 8 10 26
Operating leases 691 547 633
Programme and film rights 904 801 834
Decoders 77 50 355
Net asset value per share (cents) 809,27 1 021,22 957,37
Operating profit/(loss)
six months ended 30 September
Segmental information 2001 2000
(additional) R'm R'm
Continuing operations
Subscriber Platforms
Television 125 67
Internet (241) (121)
MIH Technology
OpenTV (891) (321)
Mindport (76) 29
Corporate (40) (52)
Reconciling items - -
MIH group (1 123) (398)
Discontinuing operations
Mindport-Broadband (196) (96)
Non-consolidated joint ventures
Subscriber Platforms
Television (59) (122)
Internet (95) (167)
NOTES
1. These condensed consolidated interim financial statements are prepared in
accordance with AC 127 "Interim Financial Reporting". Except as described
below, the same accounting policies and methods of computation have been
followed in this interim report as in the annual financial statements for
the year ended 31 March 2001. These interim financial statements should be
read in conjunction with the annual financial statements for the year ended
31 March 2001. With effect from 1 April 2001 the group adopted AC 133
"Financial Instruments - Recognition and Measurement". The effect of
adopting this standard in respect of forward exchange contracts is
summarised in the condensed consolidated statement of changes in
shareholders' equity.
In addition, the group changed its accounting policy pertaining to share
trust transactions and has accounted for the share trust transactions as
treasury shares. The effect of adopting this interpretation is summarised in
the condensed consolidated statement of changes in shareholders' equity.
2. The claim by a supplier against certain of the company's subsidiaries
referred to in the company's annual financial statements for the year ended
31 March 2001 is still in process. The board and its advisers remain
confident that the company will be successful in defending this action.
INTRODUCTION
The group provides subscription services on television, internet and
mobile-communication platforms in Africa, the Mediterranean and Asia. These
subscriber platforms are supported by the group's technology businesses,
which provide interactive, encryption, customer and billing, and other
related services. Advances in digital television, the internet and wireless
technologies have created opportunities to build value through the provision
of online and interactive services to be delivered anywhere, anytime.
REVIEW OF OPERATIONS
The results of all entities controlled and managed by the group have been
included in the segmental disclosure.
SEGMENTAL INFORMATION Net revenue EBITDA
Six months ended Six months ended
30 September 30 September
2001 2000 2001 2000
R'm R'm R'm R'm
Continuing operations
Subscriber Platforms
Television 2 472 2 152 298 166
Internet 33 28 (116) (109)
MIH Technology
OpenTV 398 209 (97) (93)
Mindport 199 170 (45) 41
Corporate - - (61) (47)
Reconciling items (80) (34) - -
MIH group 3 022 2 525 (21) (42)
Discontinuing operations
Mindport-Broadband 36 55 (161) (91)
Non-consolidated joint ventures
Subscriber Platforms
Television 524 412 50 49
Internet 177 161 (61) (136)
SUBSCRIBER PLATFORMS
African continent and adjacent territories
The television subscriber base for Africa ended the six-month period at
1,4 million homes. The digital base grew by 70 000 to 870 000 households,
representing 61% of the African base and establishing a solid platform for
the roll-out of interactive television services (iTV). Growth in revenues
from new (higher revenue) digital subscribers was partially offset by churn
in analogue subscribers. The group continued to scale the business by
cutting operational costs in line with revenues. These austerity measures
have resulted in EBITDA increasing year-on-year to R303 million (2000: R187
million).
M-Net reaffirmed its position as Africa's premier channel provider for
entertainment pay-television with its broadcast of leading international
series, first-time-on-television movies and, recently, reality television
through the successful launch of Big Brother.
This programme demonstrated the power to attract consumers by providing
services across television, internet and telephony platforms. During the
first month of broadcasting Big Brother the website recorded 25 million page
impressions, 240 000 registered users, 500 000 votes on the popularity poll
and 150 000 votes per eviction.
SuperSport continued to satisfy its viewers with three channels covering
more than 70 different genres of sport. Recently it created a new pan-
African sports channel focusing mainly on soccer. Extensive coverage of
local and international rugby, cricket, golf and tennis was offered.
M-Web Africa maintained its dial-up subscriber base at 245 000, in the
face of a free internet service launched in January 2001. Since its
delisting from the JSE Securities Exchange South Africa ("JSE") the process
of integrating the consumer services of M-Web's internet operations into the
television platform has progressed well. Consistent with the group's high
focus on driving towards break even, M-Web Africa reduced EBITDA losses over
the period by R75 million to R61 million (2000: R136 million loss).
Mediterranean
The television platform in Greece and Cyprus traditionally experiences
analogue churn during the summer months and ended the period with 323 000
households. The launch of a competing platform in Greece resulted in lower
analogue seasonal reconnections and a slower-than-expected growth of the
digital base, which ended the period with 72 600 subscribers. This has
resulted in an EBITDA loss of R5,4 million (2000: R20,4 million loss).
In October 2001 Antenna TV, Greece's leading free-television operator,
joined forces with NetMed. Antenna TV acquired a minority stake in NetMed,
placing an enterprise value of approximately US$400 million (R3,6 billion)
on the business. As part of the strategic alliance Antenna TV will provide
NetMed with attractive local thematic programming from its extensive
libraries.
Thailand
United Broadcasting Corporation Public Company Limited (UBC) ended the
period with 389 700 subscribers. Pay-television penetration of the total
number of Thai television households is still low at 2,5%.
Since June UBC has undertaken cost-cutting exercises and an 18% price
increase on its popular Gold package has allowed it to invest in growing its
subscriber base. EBITDA for the six months ended 30 September 2001 was R49,9
million (2000: R48,7 million).
M-Web Thailand's traffic exceeds five million page views per day over 11
consumer-focused web sites and provides services to 230 000 paying accounts.
Management focuses on developing the business, while curtailing operational
cash burn.
Indonesia
With one million e-mail users and 1,3 million page views per day, M-Web
Indonesia attracts approximately 60% of traffic in that market. Cash burn is
relatively low and management continues to focus on operational efficiencies
to drive towards operational break even while developing the business.
China
MIH Limited acquired a 46,5% stake in QQ for US$32 million (R289
million). With more than half a billion daily messages being processed and
one million paying subscribers, QQ is the most pervasive instant-messaging
platform in China. Instant-messaging has become an important communications
service and community-building tool worldwide.
In line with its priority of scaling each business in an effort to drive
efficiencies, the group decided to focus on building its vertical niche
portals. SportsCN sports portal attracts more than 4,8 million page views
and 200 000 unique visitors per day.
MIH TECHNOLOGY
OpenTV
OpenTV's software has been deployed worldwide in over 20 million
decoders, of which over four million were rolled out during the six-month
period. OpenTV now has 48 network operators in 50 countries committed to or
using its software, and 36 decoder manufacturers are licensed to distribute
OpenTV software. Since January 2001 OpenTV added ten network operators to
its global client base, including six cable networks.
In July OpenTV acquired Static, an iTV entertainment company and creator
of the iTV games channel Playjam, for approximately 2,7 million OpenTV
shares and R118 million cash. Static aims to provide OpenTV with recurring
revenue streams through Playjam, which currently reaches some nine million
homes across digital-television networks in Europe and was recently launched
in the USA.
OpenTV's revenue grew by 90% to R398 million (2000: R209 million), with
an EBITDA loss of R96,8 million (2000: R93,4 million loss).
Mindport
Irdeto Access
During the six months under review Irdeto Access personalised over one
million digital smartcards, taking the total number deployed to seven
million. It now has 60 clients in 50 countries.
Irdeto Access revenue of R199 million (2000: R170 million) has been
impacted by the global slowdown in technology sales and the lack of growth
in its clients' subscriber businesses.
Mindport-Broadband
The recent technology slowdown, exacerbated by the events of September 11
and its impact on the roll-out of broadband services, has led Mindport to
concentrate its efforts on its existing client base, to reduce costs and
make optimum use of resources. The stand-alone Mindport businesses for the
broadband initiatives and the integrated business system software product
will be discontinued. Technologies which have established business
initiatives under way will continue to be developed and supported by
Mindport.
GROUP RESULTS
Group consolidated revenues for the six months was R3,0 billion (2000:
R2,5 billion), reflecting the increase in the digital subscriber base and
higher revenues from MIH Technology sales.
EBITDA performance from Subscriber Platforms for the period was strong,
contributing R182 million (2000: R57 million), up 219% year-on-year, which,
after adjusting for the effects of satellite leases and foreign exchange
transactions, was 156%. This was offset by increased spending on developing
OpenTV and other MIH Technology businesses, which, on a combined basis,
contributed a R142 million EBITDA loss (2000: R52 million loss). The group's
EBITDA loss for the period, after reflecting the above, was R21 million
(2000: R42 million loss).
The decision to discontinue Mindport-Broadband businesses has resulted in
a loss on discontinuing operations of R108 million and an impairment of
related goodwill of R98 million.
The net loss for the period under review amounted to R697 million, after
accounting for the following material items:
* The amortisation and depreciation charge increased to R1,2 billion (2000:
R355 million), arising principally from goodwill on the merger arrangement
between OpenTV and Spyglass Inc.
* The equity-accounted losses of joint ventures and associates of R39
million (2000: R87 million loss), which mainly reflect our share of the
losses of associated Subscriber Platform companies.
Net group cash and liquid assets (including long-term bonds of R667
million and marketable securities of R344 million) at the end of the period
amounted to R3,0 billion (2000: R3,5 billion).
STRATE
MIHH shares are scheduled to be converted to Share Transactions Totally
Electronic (STRATE), an electronic settlement platform for share
transactions on the JSE, on 24 December 2001 (the dematerialisation date).
Trading for electronic settlement begins on 21 January 2002. Five business
days later, i e on 28 January 2002, electronic settlement of MIHH trades
will take place for the first time.
Directorate changes since publication of the annual report
With effect from 21 August 2001 Messrs J D T Stofberg and A M Rosenzweig
resigned as directors and Mr C J Sidego resigned as an alternate director of
the company. In addition, with effect from 21 August 2001, Mr C J Sidego was
appointed as a director of the company.
OUTLOOK
The group will continue to focus on building the value of its
subscription services, supported by its technology businesses. Management's
target is to attain a positive EBITDA from continuing operations in the
second half of this financial year. Management also aims to reach group
consolidated EBITDA break even in the next financial year.
On behalf of the board
T Vosloo J P Bekker
Chairman Director
27 November 2001
Directors Transfer secretaries
T Vosloo (chairman) Mercantile Registrars Limited
J P Bekker 11 Diagonal Street
J S Craib JOHANNESBURG
S J Z Pacak 2001
K B Sibiya (PO Box 1053, Johannesburg 2000)
C J Sidego
S F Ward (British)
Company secretary Registered office
G Kisbey-Green 251 Oak Avenue
Randburg 2194
(PO Box 1502, Randburg 2125)
www.mihholdings.co.za
Further information can be obtained at www.mih.com
