26 Nov 2009 07:00
Naspers Limited
(Registration Number: 1925/001431/06)
ISIN: ZAE000015889 JSE Share Code: NPN
LSE Share Code: NPSN
("Naspers" or "the group")
interim report
The reviewed results of the Naspers group for the six months ended 30 September 2009 are as follows:
Commentary
Over the past six months the group experienced satisfactory growth. Core headline earnings for the period grew by 36% to R6,48 per N ordinary share. Shareholders are reminded that the board considers core headline earnings an appropriate indicator of the sustainable operating performance of the group, as it adjusts for non-recurring and non-operational items.
Consolidated operating profit before amortisation and other gains/losses increased by 19% to R2,8bn, reflecting a net improvement in operating margins. Growth was driven by the internet and pay-television segments, whilst the print businesses remained under pressure.
Recently the group acquired a 91% interest in BuscaPé, an e-commerce platform operating in Latin America. Several smaller transactions were also concluded.
Looking ahead, we plan to grow the group through a combination of organic expansion from existing businesses, the application of new technologies and the pursuit of some acquisitions within our field of interest and expertise.
FINANCIAL REVIEW
Consolidated revenue growth of 6% to R13,5bn was recorded over the period. Costs were closely managed and, as a consequence, consolidated operating profit before amortisation and other gains/losses expanded by 19% to R2,8bn (2008: R2,4bn).
"Other losses" include a write-down of R330m flowing from the refinancing of the Welkom Yizani black economic empowerment scheme in Media24. The Naspers board decided to assist our 107 000 emerging co-shareholders at a time when print ventures are struggling globally.
Our earnings from equity-accounted associates grew to R872m, mostly via Tencent and Mail.ru.
A profit of R107m arose from the sale of M-Web's sub-Saharan Africa business.
The net result of the above was core headline earnings of R2,4bn - an increase of 37% on the prior period.
Free cash flow was positive at R1,6bn (2008: R759m). Our financial position remains sound, with total consolidated net debt, excluding satellite leases, of R2,6bn. This represents a net debt:equity ratio of 8%.
The group recently extended to March 2013 an offshore revolving credit facility with a syndicate of banks and increased the size of the facility to US$1,6bn. The current drawdown on the facility is US$948m.
SEGMENTAL REVIEW
This review includes consolidated subsidiaries and our economic interest in associated companies, as permitted by recently introduced accounting standards.
Pay television
The pay-television segment proved resilient in tough economic conditions. Revenue increased by 15% to R8bn, largely by growth of 352 000 gross subscribers for the six-month period. Operating margins held despite cost pressures from growing the subscriber base and increased sports content costs. SuperSport is now the largest funder of sport in Africa.
In South Africa the base grew by 238 000 gross to 2 639 000 households. Decoders were subsidised and lower-priced tiers promoted in the emerging market. The Compact bouquet delivered growth of 132 000 gross subscribers. Advertising revenues, however, decreased in line with consumer spending.
In the rest of sub-Saharan Africa our base grew by 114 000 gross to 1 030 000 homes. The lower-priced Compact/Family bouquets now reach 391 000 homes. Several competitors are active in the market. Operating results from the sub-Saharan business were affected by a strong rand and a devaluation of the naira in Nigeria.
Internet
Overall the internet segment performed well, growing revenues by 29% and operating profit before amortisation and other gains/losses by 49%.
A major profit driver was Tencent, which upped revenues to R2,2bn and operating profit before amortisation and other gains/losses to R1,1bn. Platform statistics include active user accounts up to 485m and peak simultaneous instant messaging users of 75m. Online gaming revenues were robust.
The other internet activities, in aggregate, reported lower operating profit before amortisation and other gains/losses of R53m - largely the effect of a firm rand, volatility in some currencies like the rouble and zloty, as well as development costs of new products or markets.
The e-commerce operations of Allegro (Eastern Europe) and Ricardo (Western Europe) continued expanding. Gross merchandising value grew 39% in local currency. Both businesses developed their product offerings through organic growth and selective bolt-on acquisitions. A consequence was that operating profit before amortisation and other gains/losses showed a marginal decline.
In Russia Mail.ru expanded its user base to 75m unique visitors. This business is diversifying its revenue streams and continues to perform ahead of expectations.
Print media
Globally print operations felt the full impact of economic headwinds.
The operations in South Africa showed no topline growth due to weak advertising revenues, whilst operating profits before amortisation and other gains/losses were down 27%. In general, the circulation of our magazines and newspapers proved remarkably resilient. The book publishing business suffered due to government spending patterns. Our printing business, Paarl Media, had only marginal revenue growth. There is a focus on cost and efficiencies. Capital expenditure has declined and working capital is being tightly managed.
In Brazil Abril experienced similar trends, with marginal revenue growth and a 42% lower operating profit in local currency. Abril has also implemented tougher cost controls, the benefits of which will follow.
Technology
Generally, orders from existing conditional access clients held up. However, new sales slowed and client projects were slow, with India and Africa exceptions. The consolidation of technology assets reduced costs. As a consequence, whilst revenues were down, operating performance improved.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Our financial results for the six months ended 30 September 2009 have been prepared in accordance with IAS 34 "Interim Financial Reporting", 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, the accounting policies used for the interim results are consistent with those applied in the previous annual financial statements and IFRS. These results have been reviewed by the company's auditor, PricewaterhouseCoopers Inc., whose unqualified report is available for inspection at the registered office of the company.
During the prior year, we finalised the purchase price allocation for the acquisition of Tradus plc. The effect on the September 2008 results was as follows: goodwill decreased by R3,01bn, intangible assets increased by R3,45bn and deferred tax liabilities increased by R638m. Amortisation of intangible assets for the six months increased by R235m gross of deferred tax of R41m. Prior period information was restated accordingly.
The group recorded a provisional amount of R2,57bn profit from the sale of NetMed in September 2008. The final profit arising from the sale amounted to R2,97bn and the group restated the income statement for the period ended 30 September 2008 accordingly, with no effect on the statement of financial position.
The group adopted the following new standards, amendments and circulars for the period ended 30 September 2009:
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, with Tencent 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 borrowing costs. 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 period under review, but had no material effect on the group.
ACQUISITIONS
During September the group acquired 91% of Brazilian e-commerce group BuscaPé.com Inc. for approximately R2,6bn (US$342m), financed from existing facilities. The preliminary purchase price allocation: tangible assets R157m, intangible assets R41m, liabilities R227m and the balance to goodwill.
In August the group finalised a public tender offer to acquire 83% of Bankier.pl in Poland for cash of R145m (PLN53m). The preliminary purchase price allocation: tangible assets R44m, intangible assets R2m, liabilities R16m and the balance to goodwill.
The group made some smaller acquisitions for a combined cost of R245m. Revenues and profits from all acquisitions closed during the period were immaterial to the consolidated results.
SUBSEQUENT EVENTS
During October 2009 the group acquired 51% of Korbitec (Proprietary) Limited for R158m. Korbitec is a South African company who develops and commercialises software, with a focus on the e-commerce property sector.
On behalf of the board
| Ton Vosloo | Koos Bekker |
| Chairman | Managing director |
Cape Town
26 November 2009
Segmental Review
| Revenue | |||
| Six months ended 30 September | |||
| 2009 | 2008 | % | |
| R'm | R'm | Change | |
| Pay television | 8 019 | 6 985 | 15 |
| Internet | 4 061 | 3 144 | 29 |
| - Tencent | 2 175 | 1 199 | 81 |
| - Other internet | 1 886 | 1 945 | (3) |
| | 4 836 | 5 001 | (3) |
| Technology | 605 | 725 | (17) |
| Economic interest | 17 521 | 15 855 | 11 |
| Corporate services | - | - | - |
| Less: Associates | (4 066) | (3 203) | 27 |
| Consolidated | 13 455 | 12 652 | 6 |
| Ebitda | |||
| Six months ended 30 September | |||
| 2009 | 2008 | % | |
| R'm | R'm | Change | |
| Pay television | 2 911 | 2 309 | 26 |
| Internet | 1 255 | 865 | 45 |
| - Tencent | 1 118 | 628 | 78 |
| - Other internet | 137 | 237 | (42) |
| | 472 | 663 | (29) |
| Technology | 11 | (24) | +100 |
| Economic interest | 4 649 | 3 813 | 22 |
| Corporate services | (110) | (103) | - |
| Less: Associates | (1 315) | (915) | 44 |
| Consolidated | 3 224 | 2 795 | 15 |
| Operating profit before amortisation | |||
| and other gains/(losses) | |||
| Six months ended 30 September | |||
| 2009 | 2008 | % | |
| R'm | R'm | Change | |
| Pay television | 2 694 | 2 099 | 28 |
| Internet | 1 098 | 735 | 49 |
| - Tencent | 1 045 | 584 | 79 |
| - Other internet | 53 | 151 | (65) |
| | 327 | 484 | (32) |
| Technology | (11) | (49) | 78 |
| Economic interest | 4 108 | 3 269 | 26 |
| Corporate services | (113) | (104) | - |
| Less: Associates | (1 196) | (803) | 49 |
| Consolidated | 2 799 | 2 362 | 19 |
Note: The segmental review includes our share of our associates' results.
Consolidated Income Statement
| Six months | Six months | ||
| ended | ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| Reviewed | Reviewed | Audited | |
| R'm | R'm | R'm | |
| Revenue | 13 455 | 12 652 | 26 690 |
| Cost of providing services and sale of goods | (6 893) | (6 703) | (13 531) |
| Selling, general and administration expenses | (4 343) | (4 269) | (9 289) |
| Other losses - net | (293) | (17) | (87) |
| Operating profit | 1 926 | 1 663 | 3 783 |
| Interest received | 195 | 321 | 572 |
| Interest paid | (345) | (454) | (878) |
| Other finance income - net | 179 | 38 | 3 |
| Share of equity-accounted results | 872 | 405 | 1 473 |
| Profit on sale of investments | 107 | 34 | 36 |
| Impairment of equity-accounted investments | - | (216) | (214) |
| Profit before taxation | 2 934 | 1 791 | 4 775 |
| Taxation | (1 051) | (796) | (1 436) |
| Profit after taxation | 1 883 | 995 | 3 339 |
| Profit from discontinued operations | - | 127 | 127 |
| Profit arising on discontinuance of operations | - | 2 965 | 2 965 |
| Profit for the period | 1 883 | 4 087 | 6 431 |
| Attributable to: | |||
| Naspers shareholders | 1 579 | 3 763 | 5 761 |
| Minority shareholders | 304 | 324 | 670 |
| 1 883 | 4 087 | 6 431 | |
| Core headline earnings for the period (R'm) | 2 414 | 1 763 | 4 373 |
| Core headline earnings per N ordinary share (cents) | 648 | 476 | 1 179 |
| Fully diluted core headline earnings per N ordinary share (cents) | 634 | 470 | 1 169 |
| Headline earnings for the period (R'm) | 1 466 | 1 078 | 3 065 |
| Headline earnings per N ordinary share (cents) | 394 | 291 | 826 |
| Fully diluted headline earnings per N ordinary share (cents) | 385 | 287 | 819 |
| Earnings per N ordinary share (cents) | 424 | 1 015 | 1 553 |
| Fully diluted earnings per N ordinary share (cents) | 415 | 1 002 | 1 540 |
| Net number of shares issued ('000) | |||
| - At period-end | 373 451 | 371 449 | 372 451 |
| - Weighted average for the period | 372 451 | 370 558 | 371 004 |
| - Fully diluted weighted average | 380 852 | 375 517 | 374 108 |
Consolidated Statement of Comprehensive Income
| Six months | Six months | ||
| ended | ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| Reviewed | Reviewed | Audited | |
| R'm | R'm | R'm | |
| Profit for the period | 1 883 | 4 087 | 6 431 |
| Total other comprehensive income, net of tax for the period | (1 817) | (921) | (3 871) |
| Translation of foreign operations | (1 318) | (826) | (3 544) |
| Cash flow hedges | (654) | (97) | (347) |
| Share of associates' other comprehensive income | - | - | (6) |
| Tax on other comprehensive income | 155 | 2 | 26 |
| Total comprehensive income for the period | 66 | 3 166 | 2 560 |
| Attributable to: | |||
| Naspers shareholders | (142) | 2 859 | 1 900 |
| Minority shareholders | 208 | 307 | 660 |
| 66 | 3 166 | 2 560 |
Condensed Consolidated Statement of Changes in Equity
| Six months | Six months | ||
| ended | ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| Reviewed | Reviewed | Audited | |
| R'm | R'm | R'm | |
| Balance at beginning of period | 35 217 | 33 147 | 33 147 |
| Changes in share capital and premium | |||
| Movement in treasury shares | (435) | (9) | (405) |
| Share capital and premium issued | - | 46 | 123 |
| Changes in reserves | |||
| Total comprehensive income for the period | (142) | 2 859 | 1 900 |
| Movement in share-based compensation reserve | 247 | (17) | 445 |
| Movement in business combination reserve | (260) | 575 | 548 |
| Share of associates' reserve movements | - | - | (252) |
| Direct retained earnings movement | (11) | (1) | (9) |
| Dividends paid to Naspers shareholders | (773) | (669) | (669) |
| Changes in minority interest | |||
| Total comprehensive income for the period | 208 | 307 | 660 |
| Dividends paid to minorities | (249) | (222) | (307) |
| Movement in minority interest in reserves | (43) | (26) | 36 |
| Balance at end of period | 33 759 | 35 990 | 35 217 |
| Comprising: | |||
| Share capital and premium | 14 639 | 15 393 | 15 074 |
| Share-based compensation reserve | 1 174 | 465 | 927 |
| Business combination reserve | 71 | 609 | 331 |
| Hedging reserve | (480) | 107 | (116) |
| Valuation reserve | 1 844 | 1 849 | 1 843 |
| Foreign currency translation reserve | (188) | 3 898 | 1 171 |
| Retained earnings | 15 157 | 12 371 | 14 361 |
| Minority interest | 1 542 | 1 298 | 1 626 |
| Total | 33 759 | 35 990 | 35 217 |
Condensed Consolidated Statement of Financial Position
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| Reviewed | Reviewed | Audited | |
| R'm | R'm | R'm | |
| ASSETS | |||
| Non-current assets | 41 198 | 40 640 | 40 873 |
| Property, plant and equipment | 4 616 | 4 529 | 4 754 |
| Goodwill and other intangible assets | 22 179 | 22 757 | 20 916 |
| Investments and loans | 13 757 | 12 773 | 14 276 |
| Deferred taxation | 646 | 482 | 871 |
| Other non-current assets | - | 99 | 56 |
| Current assets | 12 684 | 12 601 | 13 001 |
| Assets classified as held for sale | 21 | 537 | 686 |
| TOTAL ASSETS | 53 903 | 53 778 | 54 560 |
| EQUITY AND LIABILITIES | |||
| Share capital and reserves | 32 217 | 34 692 | 33 591 |
| Minority shareholders' interest | 1 542 | 1 298 | 1 626 |
| Total equity | 33 759 | 35 990 | 35 217 |
| Non-current liabilities | 10 364 | 8 542 | 8 991 |
| Capitalised finance leases | 542 | 924 | 865 |
| Liabilities - interest-bearing | 7 504 | 5 640 | 5 934 |
| - non-interest-bearing | 50 | 101 | 118 |
| Post-retirement medical liability | 169 | 149 | 155 |
| Derivatives | 975 | 333 | 543 |
| Deferred taxation | 1 124 | 1 395 | 1 376 |
| Current liabilities | 9 780 | 9 057 | 10 088 |
| Liabilities classified as held for sale | - | 189 | 264 |
| TOTAL EQUITY AND LIABILITIES | 53 903 | 53 778 | 54 560 |
| Net asset value per N ordinary share (cents) | 8 627 | 9 340 | 9 019 |
Reconciliation of Ebitda to Operating Profit
| Six months ended | ||
| 30 September | ||
| 2009 | 2008 | |
| R'm | R'm | |
| Ebitda | 3 224 | 2 795 |
| Depreciation | (425) | (433) |
| Operating profit before amortisation and other losses | 2 799 | 2 362 |
| Amortisation | (580) | (682) |
| Other losses | (293) | (17) |
| Operating profit | 1 926 | 1 663 |
Note: For a reconcilation of operating profit to profit before taxation, refer to the "Consolidated Income Statement."
Condensed Consolidated Statement of Cash Flows
| Six months | Six months | ||
| ended | ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| Reviewed | Reviewed | Audited | |
| R'm | R'm | R'm | |
| Cash flow from operating activities | 2 254 | 1 449 | 3 913 |
| Cash flow (utilised in)/generated from investment activities | (3 012) | 3 313 | 1 217 |
| Cash flow from/(utilised in) financing activities | 992 | (6 259) | (6 839) |
| Net movement in cash and cash equivalents | 234 | (1 497) | (1 709) |
| Foreign exchange translation adjustments | (520) | (64) | 187 |
| Cash and cash equivalents at beginning of period | 5 803 | 7 325 | 7 325 |
| Cash and cash equivalents at end of period | 5 517 | 5 764 | 5 803 |
| Included in: | |||
| - Cash and cash equivalents | 5 517 | 5 728 | 5 724 |
| - Assets classified as held for sale | - | 36 | 79 |
| 5 517 | 5 764 | 5 803 |
Calculation of Headline and Core Headline Earnings
| Six months | Six months | ||
| ended | ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| Reviewed | Reviewed | Audited | |
| R'm | R'm | R'm | |
| Net profit attributable to shareholders | 1 579 | 3 763 | 5 761 |
| Adjusted for: | |||
| - insurance proceeds | (175) | - | (113) |
| - impairment of goodwill and other assets | 153 | 19 | 139 |
| - (profit)/loss on sale of assets | (15) | (20) | 27 |
| - discontinuance of operations | - | (2 965) | (2 965) |
| - (profit)/loss on sale of investments | (72) | 46 | (10) |
| - impairment of equity-accounted investments | - | 216 | 214 |
| 1 470 | 1 059 | 3 053 | |
| Total tax effects of adjustments | (4) | 9 | 5 |
| Total minority interest of adjustments | - | 10 | 7 |
| Headline earnings | 1 466 | 1 078 | 3 065 |
| Discontinued operations | - | (121) | (129) |
| Headline earnings from continuing operations | 1 466 | 957 | 2 936 |
| Headline earnings | 1 466 | 1 078 | 3 065 |
| Adjusted for: | |||
| - profit from discontinued operations | - | (121) | (129) |
| - treasury-settled share scheme charges | 134 | 124 | 258 |
| - reversal/(creation) of deferred tax assets | 132 | - | (58) |
| - amortisation of intangible assets | 436 | 557 | 958 |
| - refinancing of the Welkom Yizani empowerment scheme | 330 | - | - |
| - fair value adjustments and currency translation differences | (84) | 125 | 279 |
| Core headline earnings | 2 414 | 1 763 | 4 373 |
Supplementary Information
| Six months | Six months | ||
| ended | ended | Year ended | |
| 30 September | 30 September | 31 March | |
| 2009 | 2008 | 2009 | |
| Reviewed | Reviewed | Audited | |
| R'm | R'm | R'm | |
| Depreciation of property, plant and equipment | 425 | 433 | 910 |
| Amortisation of intangible assets | 580 | 682 | 1 246 |
| Interest on finance leases | 38 | 50 | 109 |
| Other losses - net | (293) | (17) | (87) |
| - profit/(loss) on sale of property, plant and equipment | 14 | 3 | (25) |
| - impairments of goodwill and intangible assets | (3) | - | (18) |
| - insurance proceeds | 175 | - | 113 |
| - impairments of tangible assets | (150) | (19) | (143) |
| - refinancing of the Welkom Yizani empowerment scheme | (330) | - | - |
| - fair value adjustment on shareholders'liabilities | 1 | (1) | (14) |
| Other finance income - net | 179 | 38 | 3 |
| - net foreign exchange differences and fair value adjustments on derivatives | 36 | (153) | (374) |
| - preference dividends received | 143 | 191 | 377 |
| Investments and loans | 13 757 | 12 773 | 14 276 |
| - listed investments | 3 494 | 2 701 | 3 591 |
| - unlisted investments | 10 263 | 10 072 | 10 685 |
| Market value of listed investments | 77 427 | 37 527 | 44 491 |
| Directors' valuation of unlisted investments | 10 263 | 10 072 | 10 685 |
| Commitments | 15 842 | 10 098 | 14 205 |
| - capital expenditure | 643 | 357 | 359 |
| - programme and film rights | 6 030 | 6 791 | 8 063 |
| - network and other services commitments | 573 | 315 | 480 |
| - transponder leases | 7 732 | 1 872 | 4 290 |
| - operating lease commitments | 576 | 664 | 701 |
| - decoder commitments | 288 | 99 | 312 |
| Analysis of equity-accounted results | |||
| Tencent | 936 | 504 | 1 217 |
| Mail.ru | 54 | 38 | 87 |
| Abril | 8 | 71 | 414 |
| Other | (8) | (29) | (41) |
| Contribution to core headline earnings | 990 | 584 | 1 677 |
| Intangible amortisation | (83) | (88) | (179) |
| Contribution to headline earnings | 907 | 496 | 1 498 |
| Impairment of assets | - | (10) | - |
| Sale of assets | - | - | (17) |
| Sale of investments | (35) | (81) | (8) |
| Share of equity-accounted results | 872 | 405 | 1 473 |
ADR programme
The Bank of New York Mellon maintains a GlobalBuyDIRECT TM plan for Naspers Limited. For additional information, please visit the Bank of New York Mellon's web site 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 - GlobalBuyDIRECT TM, Church Street Station, P O 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.
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 | Transfer secretaries |
| 40 Heerengracht, Cape Town 8001 | Link Market Services South Africa (Proprietary) Limited |
| (PO Box 2271, Cape Town 8000) | 11 Diagonal Street, Johannesburg 2001 |
| (P O Box 4844, Johannesburg 2000) |
For a more detailed exposition, visit the Naspers website at www.naspers.com