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NPN
NPN
Naspers - Summary of the audited results of the Naspers group for the
year ended 31 March 2006
Naspers Limited
(Registration number: 1925/001431/06)
ISIN: ZAE000015889
JSE share code: NPN
("Naspers")
Provisional Report
Summary of the audited results of the Naspers group for the year ended 31
March 2006
Commentary
GROUP OVERVIEW AND PROSPECTS
The Naspers group continues to benefit from past investments coming to
fruition and a positive macro-environment in many of its key markets.
These primary factors have resulted in top-line revenues growing 16% to
R15,7 billion and core headline earnings growing by 67% to R1,9 billion.
After four years of rapid earnings and cash flow growth, some strategic
investments are required in the year ahead to deliver growth in ensuing
years. We are targeting, in particular, broadband services in China and
North America, and digital video broadcast-handheld (DVB-H) in Africa. We
plan this in the knowledge that such investments will reduce short-term
earnings and cash flow growth. In addition, we will invest in the further
development of existing businesses and expand into new markets and
opportunities.
In recent years, the group has experienced strong macro-economic growth
in our key markets. Over the past few years, economic management of
especially the South African and Chinese economies has been particularly
impressive. Future growth will be reliant on continued economic expansion
in our markets, which is uncertain.
Geographically the group is focused on the BRICSA countries (Brazil,
Russia, India, China, South and sub-Saharan Africa), which we believe
present above average growth opportunities. To date we have been
successful in establishing a firm presence in Africa and China.
Subsequent to year-end, we acquired a 30% equity stake in a leading
Brazilian media company, Abril, for a cash consideration of US$422
million. This allows participation in the expanding Brazilian media
market. We also established development offices in Russia and India and
are pursuing opportunities in these and other markets.
As mentioned before, the group plans to step up investment in broadband
and mobile technologies and services. Both represent opportunities for
delivering media content in new formats.
FINANCIAL REVIEW
Group revenues grew by 16% to R15,7 billion. This came largely from net
growth in pay-television subscribers of 163 000 and an increase in
advertising revenues of 22%.
Operating profit improved by 22% to R3 billion, with aggregate operating
margins at 19%.
The net finance cost of R11 million includes net interest income of R181
million earned on cash held in the group, an imputed interest cost on
finance leases - mostly for satellite capacity - of R177 million,
unrealised foreign exchange losses of R22 million on foreign denominated
finance leases and fair value adjustments on foreign exchange contracts
and other derivatives, which reflect a net gain of R7 million.
The group"s share of earnings from its equity-accounted associates,
including the investment in Tencent, increased to R151 million.
The taxation charge of R935 million is substantially higher than last
year, partly a function of the increased profitability of the group and
partly the creation of deferred tax assets last year of R470 million,
which then reduced the net tax charge.
An accounting profit of some R1 billion was recorded on the sale of our
interest in UBC and is reflected as a profit arising on the
discontinuance of operations.
Last year we reported headline earnings of R2,02 billion and indicated to
shareholders that this figure was artificially boosted by the creation of
deferred tax assets of R470 million and fair value adjustments relating
to foreign exchange contracts of R360 million. As expected, neither of
these items recurred to this extent in the current year. As a
consequence, headline earnings for this year reflects a modest growth of
6% to R2,14 billion.
Core headline earnings, which we believe reflects true, sustainable
earnings performance, grew by 67% to R1,97 billion. An analysis of core
headline earnings is shown in the adjacent section "Calculation of
Headline and Core Headline Earnings".
The group balance sheet remains sound. The group generated free cash flow
of R1,9 billion (2005: R1,4 billion) in the current year.
DIVIDEND
The board has recommended that the annual dividend be increased by 71% to
120 cents (previously 70 cents), per N ordinary share and 24 cents
(previously 14 cents), per unlisted A ordinary share. If approved by
shareholders, the dividends are payable to shareholders recorded in the
books on 8 September 2006 and will be paid on 11 September 2006. The last
date to trade cum dividend will be on 1 September 2006.
ELECTRONIC MEDIA
Pay television
In aggregate, the pay-television segment grew revenues by 15% and
operating profit before amortisation and other gains and losses by 29%.
This growth was largely driven by an increase in the aggregate subscriber
base of 163 000 to just above two million.
These segmental results exclude UBC which was sold during the year and is
treated, for IFRS reporting purposes, as a discontinued operation.
South Africa:
The South African operation reflected some growth, increasing by a net
103 000 to 1,25 million subscribers. The lower priced bouquet aimed at
the emerging market (DStv Compact) grew to 42 000 subscribers.
MultiChoice launched the personal video recorder (PVR) in October 2005,
selling some 28 000 units. In the coming year, we intend to make a
substantial investment in the development of a DVB-H platform in South
Africa.
Sub-Saharan Africa:
The sub-Saharan Africa subscriber base grew by 50 000 to 385 000,
primarily from expansion in the Angolan market. Our businesses in sub-
Saharan Africa continue to be plagued by regulatory pressures and
processes.
Mediterranean:
This base grew by 10 000 to 374 000 subscribers. Migration from analogue
to digital continues, with 69% of subscribers now using digital services.
During the year, ten new channels were added to the Nova platform.
Seasonal churn remains an issue.
Internet
The internet segmental results for the current year exclude Tencent as
this investment is now equity accounted. The prior year figures include
Tencent"s operations for three months to June 2004.
The internet segment reflected revenue growth of 29% (52% adjusting for
Tencent"s accounting treatment). Operating losses before amortisation and
other gains and losses increased to R98 million, mostly attributed to the
development of the internet portal business in Thailand and Sportscn in
China. The internet operation in South Africa remains profitable.
Tencent is the leading instant-messaging (IM) platform in China, and
increasingly one of the leaders in this category worldwide. The business
has shown strong growth with peak simultaneous online user accounts for
IM services reaching 19,6 million, and active IM user accounts increasing
to 220 million (some users have more than one account).
The internet segment, including our equity-accounted share of Tencent"s
earnings, is profitable.
Conditional access
Irdeto, the content security solution business, reported record shipments
of almost six million devices leading to a growth in revenues of 38%.
Irdeto recently acquired a competitor, Philips CryptoTec and continued
its expansion into the rapidly developing mobile TV segment. Its
pioneering agreement with TU Media in Korea is the first such mobile TV
service launched in the world. Irdeto will capitalise on its lead by
further developing its technology for safe-guarding content in the
broadband, internet and mobile environment.
Entriq
The consumption of broadband media on the internet is becoming the
dominant form of internet use. This is evidenced by the almost doubling
of Entriq"s revenue to R66 million.
Extensive investment continued in content protection, subscriber
management technologies and application service provider services for
such broadband markets. Major clients that Entriq has secured include
NBC, Viacom, MTV, ProSieben and the Intel ViiV-platform.
Entriq has also developed a broadband product, MediaZone, where niche
content is aggregated and offered to the market for subscription.
Substantial investment is expected in the short term to consolidate on
the progress that Entriq has achieved in its technologies.
PRINT MEDIA
Newspapers, magazines and printing
This segment benefited from strong organic growth and robust economic
conditions, resulting in revenue growing by 18% to R3,9 billion.
Newspaper titles such as Daily Sun, Son and Soccer Laduuuuuma continued
to show good circulation growth. Additional printing presses are being
installed to cope with capacity demands.
The magazine segment also experienced a good year with a number of new
titles being launched in South Africa.
A new printing plant, Paarl Web Gauteng, was commissioned and is
performing to expectation. An empowerment partner, Kurisani, has invested
in this business.
Book publishing and private education
The book publishing business, Via Afrika, had a reasonable year with the
school book publishers recording an excellent performance.
In contrast, the private education business turned in a mixed
performance. The core distance education business, International Colleges
Group, had a satisfactory year, whilst a number of growth initiatives
were launched with varying levels of success. This was also the last year
of the teach-out of Lyceum colleges, closed some years ago. The face-to-
face business, Damelin, continued with its repositioning and focus on the
further education and training sector.
BLACK ECONOMIC EMPOWERMENT (BEE)
Our understanding is that the Codes of Good Practice should be finalised
shortly. The South African operations have already started work to ensure
compliance with these Codes. In respect of equity ownership, we intend to
attract the required level of ownership through an offering to a broad
base of BEE participants, including individuals, groupings and our own
BEE staff. Further announcements in this regard will be made shortly.
ACCOUNTING POLICIES
The financial results are prepared in accordance with International
Financial Reporting Standards (IFRS), the requirements of the South
African Companies Act, Act 61 of 1973, and the Listings Requirements of
JSE Limited (Listings Requirements).
In terms of the Listings Requirements the group is required to prepare
its consolidated financial statements in accordance with IFRS for the
year ended 31 March 2006.
The date of transition to IFRS was 1 April 2004. The group"s opening
balance sheet at 1 April 2004 has been restated in accordance with IFRS1,
"First-time Adoption of IFRS". The effect of the transition from South
African Statements of Generally Accepted Accounting Practice to IFRS on
the group"s equity at 1 April 2004 and 31 March 2005 and its net profit
for the year ended 31 March 2005 has been disclosed with the group"s 30
September 2005 interim results in a separate document entitled
"Transition to IFRS". This information is available on the group"s
website at www.naspers.com.
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
Cape Town
27 June 2006
Segmental Review
Revenue
Year ended 31 March
2006 2005
R"m R"m %
Electronic media 10 219 8 732 17
- pay television 8 903 7 747 15
- internet 898 696 29
- conditional access 352 255 38
- Entriq 66 34 94
Print media 5 500 4 782 15
- newspapers, magazines 3 983 3 374 18
and printing
- book publishing and 1 517 1 408 8
private education
Corporate services (13) 4 -
15 706 13 518 16
Operating profit before
amortisation and other
gains/(losses)
Year ended 31 March
2006 2005
R"m R"m %
Electronic media 2 503 1 945 29
- pay television 2 761 2 133 29
- internet (98) (52) 88
- conditional access 5 (47) (111)
- Entriq (165) (89) 85
Print media 652 636 3
- newspapers, magazines 616 550 12
and printing
- book publishing and 36 86 (58)
private education
Corporate services (55) (43) 28
3 100 2 538 22
Segmental Review
Ebitda
Year ended 31 March
2006 2005
R"m R"m %
Electronic media 2 937 2 356 25
- pay television 3 105 2 465 26
- internet (34) 11 -
- conditional access 19 (35) -
- Entriq (153) (85) 80
Print media 811 779 4
- newspapers, magazines 745 665 12
and printing
- book publishing and 66 114 (42)
private education
Corporate services (52) (42) 24
3 696 3 093 20
Operating profit
Year ended 31 March
2006 2005
R"m R"m %
Electronic media 2 467 1 916 29
- pay television 2 785 2 120 31
- internet (153) (68) 125
- conditional access - (47) -
- Entriq (165) (89) 85
Print media 595 604 (1)
- newspapers, magazines 612 528 16
and printing
- book publishing and (17) 76 (122)
private education
Corporate services (58) (51) 14
3 004 2 469 22
Abridged Consolidated Income Statement
Year Year
ended ended
31 March 31 March
2006 2005
R"m R"m
Revenue 15 706 13 518
Cost of providing services and sale of (8 754) (7 726)
goods
Selling, general and administration (3 948) (3 311)
expenses
Other gains/(losses) - net - (12)
Operating profit 3 004 2 469
Finance costs - net (11) (216)
Share of equity-accounted results 151 88
Profit/(loss) on sale of investments 74 (1)
Dilution profits - 368
Profit before taxation 3 218 2 708
Taxation (935) (257)
Profit after taxation 2 283 2 451
Profit from discontinued operations 32 50
Profit arising on discontinuance of 1 032 -
operations
Profit for the year 3 347 2 501
Attributable to:
Naspers shareholders 3 190 2 384
Minority shareholders 157 117
3 347 2 501
Core headline earnings for the period 1 975 1 185
(R"m)
Core headline earnings per N ordinary 696 427
share (cents)
Headline earnings for the period (R"m) 2 146 2 024
Headline earnings per N ordinary share 756 730
(cents)
Fully diluted headline earnings per N 715 690
ordinary share (cents)
Earnings per N ordinary share (cents) 1 124 860
Fully diluted earnings per N ordinary 1 063 814
share (cents)
Net number of shares issued ("000)
- At period-end 290 555 282 590
- Weighted average for the period 283 719 277 294
- Fully diluted weighted average 300 243 293 126
Abridged Consolidated Balance Sheet
31 March 31 March
2006 2005
R"m R"m
ASSETS
Non-current assets 7 272 6 839
Property, plant and equipment 3 689 3 445
Goodwill and other intangible assets 1 159 1 226
Investments and loans 1 383 1 231
Programme and film rights 171 48
Derivative financial instruments 33 32
Deferred taxation 837 857
Current assets 10 067 7 204
TOTAL ASSETS 17 339 14 043
EQUITY AND LIABILITIES
Share capital and reserves 7 118 4 866
Minority interest 172 227
Non-current liabilities 3 372 2 968
Capitalised finance leases 1 444 1 740
Liabilities- interest-bearing 722 423
- non-interest-bearing 551 176
Post-retirement medical liability 153 161
Deferred taxation 502 468
Current liabilities 6 677 5 982
Net asset value per N ordinary share 2 450 1 722
(cents)
Abridged Consolidated Statement of Changes in Equity
Year Year
ended ended
31 March 31 March
2006 2005
R"m R"m
Balance at beginning of year 5 093 2 012
Movement in treasury shares 65 38
Share capital and premium issued 106 761
Foreign currency translation 18 (4)
Movement in fair value reserve (24) 41
Movement in cash flow hedging reserve (1) 24
Movement in share-based compensation 135 34
reserve
Transactions with minority (1 113) (106)
shareholders
Net profit for the period 3 347 2 501
Dividends (336) (208)
Balance at end of year 7 290 5 093
Abridged Consolidated Cash Flow Statement
Year Year
ended ended
31 March 31 March
2006 2005
R"m R"m
Cash flow from operating activities 3 166 2 368
Cash flow from investment activities (335) (877)
Cash flow from financing activities 25 (514)
Net increase in cash and cash 2 856 977
equivalents
Calculation of Headline and Core Headline Earnings
Year Year
ended ended
31 March 31 March
2006 2005
R"m R"m
Net profit attributable to 3 190 2 384
shareholders
Adjusted for:
- impairment of goodwill and other 69 14
assets
- (profit)/loss on sale of property, (17) (7)
plant and equipment
- (profit)/loss on sale of (64) 1
investments
- discontinuance of operations (1 032) -
- dilution profits - (368)
Headline earnings 2 146 2 024
Adjusted for:
- creation of deferred tax assets (42) (470)
- amortisation of intangible assets 48 40
- IAS39 fair value adjustments (145) (360)
- profit from discontinued (32) (49)
operations
Core headline earnings 1 975 1 185
Supplementary Information
Year Year
ended ended
31 March 31 March
2006 2005
R"m R"m
Depreciation of property, plant and 596 556
equipment
Amortisation of intangible assets 96 57
Share-based payment expenses (IFRS2) 135 129
Other gains/(losses) - net - (12)
- profit on sale of property, plant 17 7
and equipment
- impairments of goodwill and (69) (14)
intangible assets
- impairments of tangible assets - (6)
- dividends received 2 1
- fair value adjustment on 50 -
shareholders" liability
Finance costs 11 216
- net interest income (181) (62)
- interest on finance leases 177 172
- net foreign exchange differences 22 (2)
- net fair value adjustments on (7) 108
derivative instruments
Investments and loans 1 383 1 239
- listed investments 1 249 1 126
- unlisted investments 134 113
Market value of listed investments 6 506 3 208
Directors" valuation of unlisted 134 113
investments
Commitments 2 860 3 924
- capital expenditure 445 447
- programme and film rights 1 426 1 483
- network and other services 364 385
commitments
- operating lease commitments 359 1 511
- set-top box commitments 266 98
Directors
T Vosloo (chairman), J P Bekker (managing director), J J M van Zyl, L N
Jonker, N P van Heerden, S J Z Pacak, B J van der Ross, G J Gerwel, H S S
Willemse, F du Plessis, F T M Phaswana, R C C Jafta
Company secretary
G M Coetzee
Registered office Transfer secretaries
40 Heerengracht, Cape Town, Ultra Registrars
8001 (Proprietary) Limited
(PO Box 2271, Cape Town, Fifth Floor, 11 Diagonal
8000) Street, Johannesburg, 2001
(PO Box 4844, Johannesburg,
2000)
ADR programme
The Bank of New York maintains a Global BuyDIRECT(TM) plan for Naspers
Limited. For additional information, please visit The Bank of New York"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 Shareholder
Relations Department - Global BuyDIRECT(TM) Church Street Station, P O
Box 112588, New York, NY 10286-1258, USA.
For a more detailed exposition, visit the Naspers website at
www.naspers.com
Date: 27/06/2006 08:15:15 AM Produced by the JSE SENS Department
