| Tue 24 Jun 2003, 13:07 | | Naspers Limited - Financial Report |
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Naspers Limited
(Registration number 1925/001431/06)
ISIN ZAE000015889 JSE share code: NPN
("Naspers")
PRELIMINARY REPORT
Summary of the audited results of the Naspers group for the year
ended 31 March 2003:
Abridged Income Statement
Year ended Year ended
31 March 2003 31 March 2002
R"m R"m
Revenue 11 187 9 837
Earnings before interest, tax,
depreciation and amortisation (Ebitda) 1 191 709
Depreciation (664) (636)
Operating profit before amortisation
and impairment 527 73
Amortisation (342) (374)
Impairment of programme rights (155) -
Operating profit/(loss) 30 (301)
Finance costs (223) (412)
Share of equity-accounted results 169 158
Income from investments - 4
Exceptional items 61 5
Profit/(Loss) before tax 37 (546)
Tax (159) (148)
Minority interest (162) 328
Net loss from continuing operations (284) (366)
Loss from discontinuing operations (141) (605)
Profit/(Loss) arising on discontinuance of operations 751 (952)
Net income/(loss) attributable to shareholders 326 (1 923)
Earnings/(Loss) per N ordinary share (cents) 185 (1 320)
Headline loss per N ordinary share (cents) (19) (313)
Headline earnings/(loss) per N ordinary share
from continuing operations (cents) 1 (162)
Core headline loss per N ordinary share (cents) (63) (120)
Fully-diluted earnings/(loss) per N ordinary
share (cents) 185 (1 320)
Proposed dividend per N ordinary share (cents) 30 25
Proposed dividend per A ordinary share (cents) 6 5
Number of shares issued ("000)
- at year-end 258 151 148 084
- weighted average 176 556 145 692
- fully-diluted weighted average 182 161 151 297
Abridged Balance Sheet
31 March 31 March
2003 2002
R"m R"m
ASSETS
Non-current assets 6 904 10 108
Property, plant and equipment 3 592 4 502
Goodwill and other intangibles 2 225 3 614
Investments and loans 734 1 424
Programme and film rights 227 509
Deferred tax 126 59
Current assets 5 276 6 538
TOTAL ASSETS 12 180 16 646
EQUITY AND LIABILITIES
Share capital and reserves 3 511 1 386
Minority interest 301 4 364
Non-current liabilities 3 097 5 118
Transmission equipment and other leases 2 277 3 032
Loans - interest bearing 412 1 528
- non-interest bearing 191 365
Post-retirement medical liabilities 146 126
Deferred tax 71 67
Current liabilities 5 271 5 778
TOTAL EQUITY AND LIABILITIES 12 180 16 646
Net asset value per N ordinary share (cents) 1 360 936
Abridged Statement of Changes in Equity
Year ended Year ended
31 March 31 March
2003 2002
R"m R"m
Balance at beginning of year 1 386 2 553
Movement in treasury shares (731) 3
Share capital and premium issued 3 395 227
Foreign currency translation (828) 556
Adjustments to prior-year goodwill - 8
Net income/(loss) attributable to shareholders 326 (1 923)
Dividends (37) (38)
Balance at end of year 3 511 1 386
Abridged Cash Flow Statement
Year ended Year ended
31 March 31 March
2003 2002
R"m R"m
Cash generated by continuing operations 1 406 228
Cash utilised in discontinuing operations (277) (574)
Dividends paid (63) (38)
Cash flow from operating activities 1 066 (384)
Cash flow from investment activities 234 (1 088)
Cash flow from financing activities (637) 819
Net movement in cash and cash equivalents 663 (653)
Analysis of Exceptional Items
Year ended Year ended
31 March 31 March
2003 2002
R"m R"m
Profit/(Loss) on sale of investments 127 (25)
(Loss)/Profit on dilution of interests in investments (1) 53
Asset impairments and write-offs (65) (23)
61 5
Calculation of Headline Loss
Year ended Year ended
31 March 31 March
2003 2002
R"m R"m
Net income/(loss) attributable to shareholders 326 (1 923)
Adjusted for:
- (profit)/loss arising on discontinuance of
operations (751) 952
- exceptional items after tax and minorities 29 91
- write-off of programme rights 70 -
- amortisation of goodwill after minorities 293 423
Headline loss (33) (457)
Loss from discontinuing operations 35 221
Headline profit/(loss) from continuing operations 2 (236)
Adjusted for:
- forex translation differences (86) (9)
- creation of deferred tax assets (58) 10
- amortisation of intangible assets 31 60
Core headline loss (111) (175)
Supplementary Information
31 March 31 March
2003 2002
R"m R"m
Dividends received - 4
Finance costs 223 412
- interest received (123) (86)
- interest paid 560 523
- net foreign exchange differences (214) (25)
Investments and loans 734 1 424
- listed investments 619 329
- unlisted investments 115 315
- marketable securities - 780
Market value of listed investments 1 254 1 573
Directors" valuation of unlisted investments 115 315
Commitments 1 079 1 202
- capital expenditure 110 89
- programme and film rights 782 881
- network and other services commitments 186 202
- decoder commitments 1 30
Operating lease commitments 627 1 351
At year-end, as part of our continuing foreign currency hedging strategy, M-Net
and SuperSport ceded foreign exchange contracts totaling US$49,9 million to the
group. These contracts have maturities up to 31 March 2005 and are at an average
rate of R12,16.
Commentary
GROUP OVERVIEW
During the past year, our group focused on improving margins in its established
businesses and driving new ventures to profitability. Relatively fewer new
opportunities were developed. Most business units contributed well to improve
the group"s earnings.
Over the past financial year the following events occurred:
* MIH Limited (MIHL) sold its interest in OpenTV. This transaction was
accounted for as a discontinuing operation and a profit of R751 million was
recorded. This profit includes the release of foreign currency translation
reserves of R673 million.
* The group completed a re-organisation in terms of which the minority
interests in MIH Holdings Limited (MIHH) and MIHL were swopped for shares in
Naspers itself. The process concluded with the secondary listing of Naspers on
the Nasdaq. Goodwill of R1,8 billion, as well as other intangible assets of
R0,5 billion, were created on the balance sheet. The latter includes brand names
and patents. In terms of South African Generally Accepted Accounting Practice
(SA GAAP), this goodwill will be amortised, but with no effect on headline
earnings. Intangible assets are also amortised, but this does have the effect of
reducing headline earnings.
FINANCIAL REVIEW
Conditions in most markets in which the group operates, remain tough. In this
environment, our focus on improving margins in our mature businesses, and
driving new ventures to profitability, resulted in operating profits before
amortisation and impairment growing to R527 million.
The income statement reflects an amortisation charge of R342 million. Some
R276 million of this relates to the amortisation of goodwill and R66 million to
the amortisation of other intangible assets. Neither charge had any impact on
cash flow.
The write-off of programme rights of R155 million reflects pre-payments to
certain Greek football teams to broadcast their matches in the future. Given the
confused state of Greek football, this may not be recoverable and the board
believes it prudent to provide for.
Finance costs at R223 million were lower than last year, partially due to
lower levels of borrowing in the group. The stronger rand, for which we can
claim no credit, resulted in favourable translation gains that reduced finance
costs by R214 million (2002: R25 million).
Whilst a firmer rand will be of benefit to our South African units which have
foreign currency input costs, the group follows a policy of covering forward its
expenses denominated in foreign currency, which will dampen the beneficial
impact. In addition, the stronger local currency also resulted in our earnings
from our offshore units translating into fewer rand.
Exceptional items total R61 million. This comprises mainly a profit of
R121 million on the sale and revaluation of Liberty Media shares and a charge of
R67 million for the group"s share of SuperSport"s impairment of its MIHL shares.
The tax charge of R159 million includes a once-off net credit of R118 million
relating to the creation of a deferred tax asset in a group company, as
prescribed by SA GAAP.
Cash generated from continuing operations amounted to R1,4 billion.
On 31 March 2003, the group had net consolidated cash resources of R2,1 billion
and interest-bearing liabilities of R1,0 billion, excluding capitalised
satellite and other transmission equipment leases.
Headline earnings from continuing operations amounted to R2 million, compared
to a loss of R236 million last year. However, as prescribed by SA GAAP, this
headline earnings figure includes the following items which, in the opinion of
the board, reduces the utility of this metric as a measure of true operating
performance:
Unrealised currency gains R86 million
Creation of deferred tax assets R58 million
Amortisation of intangible assets (R31) million
R113 million
The group leases satellite capacity, mainly denominated in US dollars. SA GAAP
requires that these future liabilities be aggregated and translated to the rand
equivalent at year-end, resulting in an unrealised translation gain or loss. We
do not believe that this reflects the real world, where additional cost incurred
in future years because of currency fluctuations would be recovered by either
price increases or cost reductions. Then the creation of a deferred tax asset
provides a once-off artificial boost to headline earnings and is unlikely to be
repeated in future. On the other hand, the charge relating to the amortisation
of intangible assets reflects an accounting convention that has no commercial
relevance.
The net impact of the above is that headline earnings from continuing
operations was favourably impacted by R113 million, because of prescribed
accounting conventions. We believe it may be useful for shareholders to apply a
metric such as "core headline earnings" that adjusts for these items, both
positive and negative. This could serve as a more dependable yardstick for true
operating performance. On this basis, the core headline loss would
be R111 million, compared to a loss of R175 million in the prior year.
SEGMENTAL REVIEW
Revenues and operating profits of the key business segments were as follows:
Operating profit
before amortisation and
Revenue impairment
2003 2002 2003 2002
R"m R"m % R"m R"m %
Continuing operations
Subscriber platforms
- pay television 6 329 5 591 13 443 161 175
- internet 894 547 63 (244) (464) 47
Print media 2 387 2 102 14 296 273 8
Technology 391 475 (18) 49 81 (40)
Book publishing 631 610 3 (20) 22 -
Private education 553 511 8 22 13 69
Corporate services 2 1 100 (19) (13) (46)
11 187 9 837 14 527 73
Operating profit
2003 2002
R"m R"m %
Continuing operations
Subscriber platforms
- pay television 229 138 66
- internet (452) (752) 40
Print media 289 268 8
Technology 14 49 (71)
Book publishing (24) 20 -
Private education (7) (11) 36
Corporate services (19) (13) (46)
30 (301)
SUBSCRIBER PLATFORMS
Pay television
In the aggregate, the pay-television subscriber base is mature and grew by only
40 000 households during the year. The group now manages just over two million
pay-television subscribers, of whom 67% are on the digital base. As a
consequence, pay-television revenues increased by only 13%. A sustained focus on
efficiencies, cost management and the migration of subscribers from analogue to
the digital services, saw operating profits before amortisation and impairment
grow to R443 million.
Africa:
The pay-television market in South Africa is fully mature and we do not expect
further growth, although the migration from analogue to digital services
continues. Growth opportunities do exist on the rest of the continent. For the
continent in aggregate the subscriber base grew to 1,3 million households. M-Net
and SuperSport both reported growth in headline earnings.
Mediterranean:
In Greece, the launch of a competing platform in 2001 created confusion and
drove up costs significantly. The competitor has now ceased broadcasting and our
focus is on driving this business to profitability. Over the past year, our
digital service, Nova, added 39 000 subscribers to end the year on 139 000.
However, the region closed on 310 000 subscribers, marginally down from last
year because of the decline in analogue subscribers. Once the market stabilises
and costs are reduced to viable levels, subscriber growth should resume, but
risks remain.
Thailand:
UBC in Thailand grew its subscriber base by 24 000 to 437 000 homes. The
business, which is equity accounted, reported an operating profit before
amortisation of R106 million and is also cash flow positive.
Internet
The internet was our fastest growing business with revenues up by 63%, whilst
operating losses before amortisation were almost halved to R244 million.
In Africa, M-Web maintained its leading position with 247 000 subscribers.
Research shows that M-Web subscribers now spend 23% more time online than in the
previous year, confirming the growing role the internet is assuming in the daily
lives of subscribers. A negative element is that the dial-up market in South
Africa has stagnated, largely due to the high cost of telephone calls locally.
However, growth occurred in other segments. The consumer e-commerce platform,
Kalahari.net, almost doubled revenues to R32 million over the past year.
CommerceZone, the procurement platform, assisted the group to cut operating
costs. External clients have now joined this online platform.
The group"s principal activity in China is an interest in Tencent, an
operator of communication, community and wireless services based on its instant-
messaging platform "QQ". This is a young business, which, although profitable
and cash flow positive, is nonetheless still in a development phase and is
constantly refining its business model.
In Thailand, the group has 248 000 subscribers accessing its service on a pre
paid basis and 17 000 on a post-paid billing basis. Growth over the past few
months has been encouraging.
Whilst the group"s internet business has now reached a critical mass, we
anticipate further investment as the industry evolves.
PRINT MEDIA
Most sectors of the South African magazine and newspaper markets are
overtraded and the circulation of magazine titles generally remained under
pressure. Media24 compensated for this by attention to content quality and cost
reduction.
Exceptions are the Sunday Sun and Daily Sun titles, which were conceived to
attract buyers who would otherwise not be regular readers of newspapers. Their
formula of content written in a language that their readers find familiar, sold
at a price they can afford, is proving popular.
In aggregate, our print media revenues grew by 14% and operating profits
by 8%. Financially, the newspaper, printing and distribution divisions contained
costs well and performed satisfactorily.
TECHNOLOGY
Globally, the conditional access market faces harsh conditions, placing
pressure on margins. These factors, coupled to a stronger rand, led to both
revenues and operating profits declining sharply at Irdeto Access.
The group continues to invest in the development of a concept branded Entriq
- a service, which allows an operator to sell niche content in a secure mode to
subscribers via the internet in such a way that payment could be collected for
it.
BOOK PUBLISHING
The book publishing business had a poor year with revenues growing a
meagre 3%. This, in addition to the liquidation of CNA and provisioning for
stock write-downs, resulted in an operating loss before amortisation
of R20 million. This business is being re-organised.
PRIVATE EDUCATION
Educor had a satisfactory year, with modest revenue growth, but operating
profits before amortisation growing by 69%. Student enrolments for the current
academic year were up on the previous year on most campuses.
DIVIDEND
The board has recommended that the annual dividend be increased to 30 cents
(previously 25 cents) per N ordinary share, and 6 cents per unlisted A ordinary
share. The dividends are payable to shareholders recorded in the books on
12 September 2003 and will be paid on 15 September 2003. The last date to trade
cum dividend will be Friday 5 September 2003.
WELKOM SHARE SCHEME
Our economic empowerment scheme, Welkom, was launched in 1998, when equity
markets were surging, with 17 000 previously disadvantaged individuals
participating. This scheme was scheduled to terminate in September 2003. Given
the reduced state of the equity markets at present, the board believes it is in
the interest of both the participants and the group that the scheme be extended
for a further three years. Further details will be included in the annual
report.
PROSPECTS
The year ahead may prove to be adventurous. On the one hand, the South
African economy appears in better shape than most, whilst some other markets may
start to recover. On the other hand, the global geopolitical scene is unstable
and great uncertainty surrounds the course the Sars epidemic will take. All of
these factors may have fundamental economic consequences for our markets.
Against this background, it would be presumptuous to predict performance for
the year ahead. However, we are conscious that each set of economic
circumstances offers some opportunities to those who seek them out and adapt
fast enough.
As indicated above, the introduction of some accounting standards will result
in volatile earnings being reported in future years. We, as a public company,
have no choice but to conform to these standards, even if the result is
sometimes commercially nonsensical. However, where possible, we will attempt
also to report results in a format that shareholders may find easier to follow.
CORPORATE GOVERNANCE
Naspers is committed to the principles advocated in the King Report on
Corporate Governance for South Africa 2002 (King II). The directors recognise
the need to conduct the business of the enterprise with integrity and in
accordance with Generally Accepted Corporate Practices. Accordingly, the board
has reviewed King II and the requisite improvements to the group"s corporate
governance procedures and policies have either been made or are in the process
of being implemented. Details of this will be included in the annual report.
Additionally, in our new position as a registered company with the American SEC,
we will be required to comply with the rules embodied in the Sarbanes-Oxley Act.
ACCOUNTING POLICIES
The accounting policies used in this report comply in all material aspects
with statements of SA GAAP and are consistent with those applied in the prior
year. A copy of the unqualified audit opinion of the auditors,
PricewaterhouseCoopers Inc., is available for inspection at the registered
office of the company.
On behalf of the board:
Ton Vosloo Koos Bekker
Chairman Managing director
24 June 2003
Directors:
T Vosloo (chairman), JF Malherbe (vice-chairman),
JP Bekker (managing director), JJM van Zyl, E Botha, LM Taunyane,
LN Jonker, NP van Heerden, SJZ Pacak, BJ van der Ross, GJ Gerwel,
HSS Willemse.
Company secretary:
GM Coetzee
Transfer secretaries:
Ultra Registrars Limited
Fifth Floor, 11 Diagonal Street
Johannesburg, 2001
(PO Box 4844, Johannesburg 2000)
Registered office: 40 Heerengracht
Cape Town, 8001
(PO Box 2271, Cape Town, 8000)
