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NASPERS LIMITED - INTERIM REPORT
NASPERS LIMITED
(Registration number 1925/001431/06)
ISIN: ZAE000015889 JSE share code: NPN
(`Naspers`)
INTERIM REPORT
The reviewed results of the Naspers group for the six months ended
30 September 2004 are as follows:
Abridged Income Statement
Six months Six months Year
ended ended ended
30 Sept 2004 30 Sept 2003 31 March 2004
Reviewed Reviewed Audited
R`m R`m R`m
Revenue 6 707 6 120 12 804
Earnings before
interest, tax,
depreciation and
amortisation
(Ebitda) 1 529 1 149 2 439
Depreciation (276) (314) (635)
Operating profit before
amortisation and
impairment 1 253 835 1 804
Amortisation (27) (197) (484)
Impairment of
programming rights - - (31)
Operating profit 1 226 638 1 289
Finance costs (123) (385) (664)
Share of profit of
associates 34 1 3
Exceptional items 345 31 48
Profit before taxation 1 482 285 676
Taxation (358) (176) (176)
Minority interest (60) (89) (128)
Net profit attributable
to shareholders 1 064 20 372
Core headline earnings
for the period (R`m) 519 267 534
Core headline earnings
per N ordinary share (cents) 188 103 207
Headline earnings for
the period (R`m) 716 156 779
Headline earnings per N
ordinary share (cents) 259 60 302
Fully diluted headline
earnings per N ordinary share 243 60 294
Earnings per N ordinary
share (cents) 385 8 144
Fully diluted earnings
per N ordinary share (cents) 361 8 140
Net number of shares
issued (`000)
- At period-end 278 816 258 385 261 619
- Weighted average for
the period 276 658 258 099 257 814
- Fully diluted weighted
average 294 485 259 751 265 188
Abridged Cash Flow Statement
Six months Six months Year
ended ended ended
30 Sept 2004 30 Sept 2003 31 March 2004
Reviewed Reviewed Audited
R`m R`m R`m
Cash generated from
operations 609 372 1 746
Dividends paid (178) (82) (109)
Cash flow from operating
activities 431 290 1 637
Cash flow from investment
activities (52) (376) (555)
Cash flow from financing
activities 68 (187) (555)
Net movement in cash and
cash equivalents 447 (273) 527
Abridged Statement of Changes in Equity
Six months Six months Year
ended ended ended
30 Sept 2004 30 Sept 2003 31 March 2004
Reviewed Reviewed Audited
R`m R`m R`m
Balance at beginning of
period 3 183 3 138 3 138
Movement in treasury shares (32) 6 79
Share capital and premium
issued 760 - -
Foreign currency
translations 43 (154) (299)
Movement in fair value
reserve 20 6 (9)
Movement in cash flow
hedging reserve 18 (15) (20)
Net profit attributable to
shareholders 1 064 20 372
Dividends (106) (78) (78)
Balance at end of period 4 950 2 923 3 183
Analysis of Exceptional Items
Six months Six months Year
ended ended ended
30 Sept 2004 30 Sept 2003 31 March 2004
Reviewed Reviewed Audited
R`m R`m R`m
(Loss)/profit on sale of
investments (19) 33 23
Profit/(loss) on dilution
of interest in investments 364 (2) 8
Reversal of asset
impairment - - 17
Net exceptional items 345 31 48
Abridged Balance Sheet
30 Sept 2004 30 Sept 2003 31 March 2004
Reviewed Reviewed Audited
R`m R`m R`m
ASSETS
Non-current assets 6 778 6 549 6 314
Property, plant and equipment 3 228 3 496 3 274
Goodwill and other intangibles 2 422 2 531 2 491
Investments and loans 847 231 52
Programme and film rights 73 118 40
Deferred taxation 208 173 457
Current assets 6 903 6 067 6 778
TOTAL ASSETS 13 681 12 616 13 092
EQUITY AND LIABILITIES
Share capital and reserves 4 950 2 923 3 183
Minority interest 221 205 235
Non-current liabilities 3 073 3 208 2 873
Capitalised finance leases 1 847 2 081 1 921
Liabilities - interest-bearing 781 670 572
- non-interest-bearing 154 178 129
Post-retirement medical liability 169 163 171
Deferred taxation 122 116 80
Current liabilities 5 437 6 280 6 801
TOTAL EQUITY AND LIABILITIES 13 681 12 616 13 092
Net asset value per N ordinary share (cents) 1 775 1 131 1 216
Calculation of Headline Earnings
Six months Six months Year
ended ended ended
30 Sept 2004 30 Sept 2003 31 March 2004
Reviewed Reviewed Audited
R`m R`m R`m
Net profit attributable to
shareholders 1 064 20 372
Adjusted for :
- impairment of programme
rights - - 31
- exceptional items after
tax (348) (31) (44)
- amortisation of goodwill - 167 420
Headline earnings 716 156 779
Adjusted for :
- currency translation
differences 12 (25) (51)
- creation of deferred tax
assets - 3 (204)
- amortisation of
intangible assets 20 33 54
- AC133 fair value
adjustments (229) 100 (44)
Core headline earnings 519 267 534
Supplementary Information
Six months Six months Year
ended ended ended
30 Sept 2004 30 Sept 2003 31 March 2004
Reviewed Reviewed Audited
R`m R`m R`m
Finance costs 123 385 664
- net interest
(received)/paid (32) 71 154
- interest on finance
leases 78 86 187
- net foreign exchange
differences 17 (67) (63)
- net fair value
adjustments on
derivatives (AC133) 60 295 386
Investments and loans 980 231 476
- listed investments 906 137 137
- unlisted investments 74 94 339
Market value of listed
investments 2 122 137 137
Director s` valuation of
unlisted investments 74 94 339
Commitments 1 575 1 805 1 743
- capital expenditure 184 220 394
- programme and film
rights 1 135 1 191 995
- network and other
commitments 241 352 165
- decoder commitments 15 42 189
Operating lease commitments 573 637 631
GROUP OVERVIEW
The unusually favourable business climate previously reported to shareholders
continued into the period under review. Most of our business units performed
above expectation. Operating profit before amortisation and impairment charges
for the period grew to R1 253 million, and core headline earnings to R519
million.
FINANCIAL REVIEW
Revenues for the period were relatively stable - up 10%. This modest growth was
again largely due to the strength of the rand - 28% of the group`s revenues are
generated from outside of South Africa. Operating profit expanded to R1 226
million.
Finance costs of R123 million include fair value adjustments on derivative
instruments of R60 million, a book charge required by AC133, and currency
losses of R17 million. Interest on borrowings and imputed interest on finance
leases totalled R46 million, against R157 million in the previous period.
The share of profit of associates arises mostly from our investment in Tencent
following its June listing. Exceptional items of R345 million relates primarily
to the dilution profit arising on the listing of Tencent. A tax charge of R358
million reflects the higher level of profitability in the group.
The net effect of the above is headline earnings of R716 million. We have
previously cautioned shareholders on factor s which under- mine the credibility
of headline earnings as a measure of sustainable operating performance. These
factor s are analysed below in the `Calculation of Headline Earnings`, but the
major issue in the period under review relates to fair value adjustments
required in terms of accounting standard AC133. These adjustments, in our view,
ignore economic reality and have inflated headline earnings for the period by
R229 million.
Adjusting for this, and for other items prescribed by South African Generally
Accepted Accounting Practice (SA GAAP), we estimate core headline earnings to
be R519 million. This, in the opinion of our board, is a more reliable measure
of sustainable operating per- formance.
The group generated R431 million cash from operating activities. On 30
September 2004, the group had net consolidated cash of R2,1 billion, excluding
capitalised satellite and other leases.
SEGMENTAL REVIEW
Revenue
Six months ended 30 Sept
2004 2003 %
R`m R`m change
Subscriber platforms 4 522 4 204 8
- pay television 3 970 3 544 12
- internet 422 525 (20)
- technology 130 135 (4)
Print media 1 599 1 358 18
Book publishing and
private
education 585 557 5
Corporate services 1 1 -
6 707 6 120 10
Ebitda
Six months ended 30 Sept
2004 2003 %
R`m R`m change
Subscriber platforms 1 198 927 29
- pay television 1 188 853 39
- internet 68 85 (20)
- technology (58) (11) (427)
Print media 332 222 50
Book publishing and
private
education 14 13 8
Corporate services (15) (13) (15)
1 529 1 149 33
Operating profit before
amortisation and impairment
Six months ended 30 Sept
2004 2003 %
R`m R`m change
Subscriber platforms 996 689 45
- pay television 1 021 664 54
- internet 40 42 (5)
- technology (65) (17) (282)
Print media 274 165 66
Book publishing and private
education (1) (5) 80
Corporate services (16) (14) (14)
1 253 835 50
Operating profit
Six months ended 30 Sept
2004 2003 %
R`m R`m change
Subscriber platforms 970 514 89
- pay television 1 006 591 70
- internet 38 (38) -
- technology (74) (39) (90)
Print media 274 157 75
Book publishing and private
education (2) (19) 89
Corporate services (16) (14) (14)
1 226 638 92
SUBSCRIBER PLATFORMS
Pay television
The aggregate pay-television subscriber base grew by 60 000 over the period,
split evenly between South Africa and the offshore operations. The group now
manages some 2,2 million pay-television subscriber s, 74% of whom subscribe to
digital services.
Pay-television revenues were up 12% and operating profits before amortisation
and impairment grew to R1 021 million.
In South Africa, the subscriber base lifted by 30 000 to 1,1 million homes. In
sub-Saharan Africa, the subscriber base grew by 20 000 to 312 000.
Our Greek pay-television business did very well to consolidate its recover y.
The subscriber base for the Mediterranean region now numbers 348 000 subscriber
s, and this business unit reached profitability for the first time.
In Thailand, the UBC subscriber base expanded marginally to 448 000. Cable
redistribution and copyright piracy remain barrier s to growth.
Internet
Tencent`s results were only included in the segmental review up to June 2004.
In June, Tencent listed on the Hong Kong Stock Exchange and our effective
holding diluted to 36%. As a consequence, this investment is now equity
accounted. The decline in group internet revenues for the period arises mainly
from this change in accounting for Tencent.
Tencent continued to perform well over the past six months, despite increased
competition, and reported total revenues of US$69 million. Operating profits
increased to US$27 million. The core QQ instant-messaging platform has grown to
some 119 million active users.
Registered subscriptions to fee-based value-added internet services declined by
9% to 6,6 million, whilst subscriptions for value- added mobile and
telecommunications services remained flat at 12,5 million. This modest
performance is a result of renewed efforts to remove inactive user accounts,
new double confirmation subscriber procedures and billing systems introduced by
the Chinese mobile operator s. These factor s are expected to continue to
affect registered subscriptions during the months ahead.
In South Africa, the MWEB subscriber base remained stable at 240 000 subscribers
with the business generating a small operating profit before amortisation and
impairment of R27 million. The lack of internet innovation in South Africa as a
result of the Telkom monopoly on fixed-line telephony remains a factor
retarding the mar ket`s development. MWEB made an offer to purchase the inter-
net business of Tiscali for R320 million. This transaction is subject to
regulatory approval.
In China, the Sportscn portal grew revenues by 141% and reported an
operating loss of R7 million as it continued to expand its operations. In
Thailand, the operating loss before amortisation was reduced to R11 million.
Technology
The technology unit had a 4% decline in revenues, a consequence of the strong
rand. This unit reported an increased operating loss of R74 million flowing
from increased research and development spend in both Irdeto Access and Entriq.
Irdeto Access grew its revenues in US dollar terms, its trading currency, by
9%.
PRINT MEDIA
Revenue grew by 18% over the period. Buoyant advertising conditions and
improved margins boosted operating profit before amortisation and impairment.
New publications continued to grow. Daily Sun, Wegbreek, a new travel magazine,
and tuis, a new home decor and garden monthly, all exceeded expectations with
circulation figures. The Wisden Cricketer debuted in November as a monthly
magazine.
Local versions of Drum and True Love were launched in Kenya, whilst the
Nigerian version of True Love will appear in December.
Construction has commenced on a new commercial and magazine printing plant in
Gauteng. Presses have been ordered, with the first expected to be operational
in mid-2005.
BOOK PUBLISHING AND PRIVATE EDUCATION
The book publishing and private education businesses reported improved
profitability on the back of moderate revenue growth of 5%.
The general book market experienced a slowdown in sales and the benefit of the
strong rand in respect of imported books was passed on to customer s. Some
delays occurred at various provincial education departments in issuing school
book order s.
Face-to-face private education enrolments have seen a decline, whilst the
distance education businesses experienced more positive trading conditions. For
some time the group has been pruning marginal educational businesses that
cannot be integrated with the main trademarks.
As previously indicated, the book and private education businesses have been
more closely integrated resulting in beneficial cost reductions.
PROSPECTS
In general, the markets in which our major business units operate are in
expansive phases of the economic cycle. We foresee this continuing for the
remainder of the present financial year. However, business cycles are prone to
turn and shareholders should antic- ipate leaner times sometime in the future.
The group continues to seek new growth opportunities, particularly in the
rest of Africa and in Asian markets. Costs will be incurred in further
developing Irdeto Access`s product portfolio, as well as in the development of
Entriq and of the Sportscn business in China.
As regards black economic empowerment (BEE), the group views this as a major
imperative for the year ahead. We trust that the South African government will
issue clear guidelines for the economy as a whole, and that Balkanisation as a
result of conflicting charter s can be avoided. A broad-based BEE scheme is
planned for the year ahead.
ACCOUNTING POLICIES
These abridged, consolidated interim financial statements comply with South
African Statements of Generally Accepted Accounting Practice and were prepared
in accordance with AC127 - Interim Financial Reporting. 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 2004, except
for the adoption of AC140 - Business Combinations and the revised statements
AC128 - Impairment of Assets and AC129 - Intangible Assets. These statements
have been applied prospectively from 1 April 2004 in terms of their respective
transitional pro- visions. In terms of AC129 goodwill is no longer amortised.
The effect of the adoption of AC140 and AC128 was immaterial for the period
under review.
These interim financial statements have been reviewed by the company`s auditors,
PricewaterhouseCoopers Inc., whose report is available for inspection at
the registered offices of Naspers.
On behalf of the board:
Ton Vosloo Koos Bekker
Chairman Managing director
29 November 2004
(For a more detailed exposition, visit the Naspers website at www.naspers.com)
Directors
T Vosloo (chairman), JP Bekker (managing director), E Botha, F du Plessis,
GJ Gerwel, RCC Jafta, LN Jonker, SJZ Pacak, FTM Phaswana, BJ van der Ross,
NP van Heerden, JJM van Zyl, HSS Willemse.
Company secretary
GM Coetzee
Registered office
40 Heerengracht, Cape Town 8001
(PO Box 2271, Cape Town 8000)
Transfer secretaries
Ultra Registrars (Proprietary) Limited
Fifth Floor, 11 Diagonal Street,
Johannesburg 2001
(PO Box 4844, Johannesburg 2000)
Naspers`s mission is to build shareholder value by operating subscriber
platforms that provide content, services and the means of communication to
paying users; to sell related technologies and services and to be useful to the
communities we serve.
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