NPSN.L Regulatory News (NPSN)

27 Nov 2007 08:00

Naspers Limited27 November 2007 Naspers Limited(Registration Number: 1925/001431/06)ISIN: ZAE000015889JSE Share Code: NPN("Naspers") Interim Report The reviewed results of the Naspers group for the six months ended 30 September2007 are as follows: Commentary GROUP OVERVIEW The group continues to make steady progress on a variety of fronts. Thefinancial results, reflected below, show good growth especially in light ofhigher interest rates and slowing consumer spend in South Africa. Theinternational businesses, particularly those in sub-Saharan Africa, China andRussia also continue to reflect strong growth. The group recorded revenue growthof 19% to R10,5 billion and core headline earnings growth of 32% to R1,75billion over the period. As part of its growth strategy, the group continues to pursue investmentopportunities, largely in emerging markets, which, at present, offer greatergrowth prospects. Major transactions include: Gadu-Gadu: Gadu-Gadu operates the leading instant-messaging platform in Poland. The companyis listed on the Warsaw Stock Exchange. In October, MIH launched a tender offerto shareholders of Gadu-Gadu to acquire their shares. The tender offer isscheduled to close on 21 December 2007. Shareholders holding 55% of Gadu-Gaduhave given an irrevocable commitment to tender their shares. Assuming that allshareholders accept the tender offer, the total investment consideration willapproximate US$155 million. Afsat: In October, the group concluded the acquisition of Afsat Communications Limited,the leading African satellite internet service provider. Afsat is active in over26 countries in east, west and southern Africa. Mail.ru: In October, the group acquired a further 2,6% interest in Mail.ru for US$26million, increasing its holding to just below 33%. In addition to the above, the group invested R479 million (2006: R449 million)in the development of new technologies, products and services. This investmentwas lower than anticipated due to the slow deployment of mobile televisionservices, which are dependent on the issue of commercial licences by regulatoryauthorities. Cash flows remain positive and we have a strong balance sheet to fundopportunities that may arise. Looking forward, we anticipate that growth in consumer spending in South Africawill slow further, placing pressure mostly on advertising and circulationrevenues. The other major economies in which we operate remain in a growthphase. As indicated elsewhere in this report, increased competition isexperienced in the pay-television business. We expect this to intensify in theperiod ahead. The group remains focused both on pursuing investmentopportunities and developing new products and services. In the past few monthswe executed a number of transactions that we believe will add value to the groupover the long term. We have a number of transactions in our investment pipelinethat we are currently pursuing, and hope that some will be concluded in thecurrent financial year. Whilst the roll-out of new products and services, such as mobile television, hasbeen slower than anticipated, we do anticipate an acceleration of businessdevelopment expenditure in the second half of the financial year. Whilst thesedevelopment activities have a negative short-term impact on earnings and cashflows, we believe they will deliver long-term value. FINANCIAL REVIEW The electronic media businesses continued to grow strongly, recording revenuegrowth of 21%. This was largely from net pay-television subscriber growth overthe period of 109 000, whilst the internet businesses also contributed strongly.The performances of Tencent in China and Mail.ru in Russia were particularlystrong. The print media business has started to feel the effects of a slowdown inadvertising revenues. This is evident from print advertising revenues, which,after growing at some 19% per annum over the past three years, experiencedslower growth of 12% in the period under review. Overall the print mediabusiness grew revenues by 14%. Operating profit before amortisation and other gains/losses grew 22% to R2,38billion (2006: R1,95 billion). Net finance income for the period was R548 million compared with a net cost ofR458 million last year. As analysed below, this includes interest income on netcash deposits of R316 million, imputed interest on finance leases of R63million, preference dividend income of R160 million and an aggregate amount ofR135 million in respect of foreign currency translation differences. Interestincome on the capital raised in March 2007 amounted to approximately R216million. This interest income is not expected to recur as cash is deployed tofund investment opportunities. Included in the prior period was a foreigncurrency translation loss of R260 million, which arose from partly settling anet investment in a foreign subsidiary. The group tax charge increased by 63% to R927 million, a function of theincreased profitability of the group. The net effect of all the above is headline earnings for the period of R1,59billion and core headline earnings of R1,75 billion. The calculation of headlineand core headline earnings is detailed below. ELECTRONIC MEDIA Pay television The pay-television business continued to grow, recording a net increase of 109000 subscribers in the six-month period to 30 September 2007. This generated a21% increase in revenue to R6,36 billion. The past six months witnessed the arrival of additional competition across ourvarious African markets. This is starting to translate into higher content costsand pressure on margins as the group vigorously defends its market position. Besides organic growth in its existing and new markets, this business unit isfocused on expanding into mobile television services. South Africa: The South African subscriber base grew by 81 000 over the period to 1 473 000.The lower priced Compact bouquet was strengthened with additional channels andthe acquisition of South African Premier Soccer League rights. The Compactbouquet grew to 159 000 subscribers. Easyview, at R20 per month, was enhancedwith additional channels in October 2007. The number of personal video recordersshowed strong growth closing on 186 000 subscribers. In addition to licensing MultiChoice South Africa, the IndependentCommunications Authority of South Africa (Icasa) announced that it will beissuing four new licences. The terms and conditions that will apply to each ofthese licences are currently being formulated by Icasa and we anticipate thatthese additional pay-television operators will launch services in 2008. The trial mobile television broadcast service continues to make progress. We arepursuing the requisite licence ahead of a full commercial launch in the nearfuture. The Competition Tribunal recently approved the acquisition by Naspers ofJohncom's 39% stake in M-Net and SuperSport. Sub-Saharan Africa: During the period, a new sub-Saharan Africa direct-to-home (DTH) competitor anda new Nigerian terrestrial/DTH competitor emerged. Despite this, the MultiChoicesub-Saharan subscriber base grew by 30 000 subscribers in the period to 500 000households. Growth continues to come mostly from Angola and Nigeria. Therecently introduced lower priced family bouquet showed good growth. Several African countries have moved fast in the issuing of mobile televisionlicences, with the result that mobile television broadcast services have beenlaunched in Namibia, Nigeria and Kenya. Licences are being pursued in otherAfrican countries. Mediterranean: In Greece, the subscriber base remains stable at 330 000 households after thesummer churn period. Key local and international soccer rights were renewed andtiering was introduced. Several new IPTV players, whilst still at an embryonicstage, launched services in a strategic alliance with NetMed. A new broadcastbill came into being, paving the way for a digital migration strategy in Greece. Following a review of our strategic investment priorities we initiated a formalprocess to explore a possible sale of the Greek and Cypriot pay-televisionbusiness. Internet The internet segment recorded revenue growth of 22% to R654 million. Largelybecause of the investment cost of developing the Indian operation as well aspursuing other opportunities, a net operating loss before amortisation and othergains/losses of R49 million was incurred. The revenue and operating profits of Tencent and Mail.ru are not included in thesegmental analysis as they are treated as associates. Our share of theirearnings is reflected as: "Share of equity-accounted results" in theincome statement. In China, Tencent continues to serve the largest online community in the countrywith its leading instant-messaging platform, QQ. During the period, total activeuser accounts grew from 254 million to 289 million with peak concurrent useraccounts increasing from 28,5 million to 32,6 million. Other growth areas werethe blogging service, Qzone, which grew from 62 million to 84 million activeuser accounts, and QQ Pets, which grew from 54 million to 89 million. Tencentcontributed R218 million to group core headline earnings. In Russia, Mail.ru continued to grow above expectation. Active users grew from29,7 million to 35,3 million generating 4,3 billion page views per month. E-mailusers grew from 25,6 to 30,7 million users and online photos viewed grew from315 million to 351 million. Mail.ru contributed positively to group coreheadline earnings. The MWeb operations in South Africa remained stable with 330 000 subscribers.The business remains profitable. In India, we have identified two key areas as possible drivers: local search andyouth. During the period, we launched 21 different products into the market.India is fiercely competitive with large international players present in themarket. The development of this business will take time. Conditional access This business continues to perform well, reflecting revenue growth of 17%. Thisgrowth was fuelled from the digital television segment (satellite, cable andterrestrial) worldwide. Irdeto shipped 26% more smart cards compared with thesame period last year and signed agreements with 75 customers during the periodunder review. The revenue related to these customers is expected to be earned inthe second half of the year and beyond. Irdeto continues to invest in research and development to remain competitive andto stay ahead of those in the market seeking to pirate its products. Broadband technologies The global growth of broadband has created opportunities for delivery ofcontent, applications and other broadband services. Against this backdrop wecontinue to invest in cross-platform broadband media solutions for distributingmedia content to broadband connected PCs, mobile devices and TVs. PRINT MEDIA Revenue from the print media segment increased by 14% to just below R3 billion,and operating profit before amortisation and other gains/losses grew by 4% toR276 million. Newspapers, magazines and printing In South Africa, both newspapers and magazines experienced a slowdown inadvertising revenues. Circulation is under pressure in a competitive market andgrowth is mostly restricted to titles aimed at the emerging market, includingDaily Sun, City Press and Soccer Laduuuuuma. Growing magazine titles includeMove, National Geographic Kids and Tuis/Home. We obtained 50% interests in the magazine Real, aimed at female readers in theemerging market, as well as SA Jagter/Hunter. In South Africa we launchedDestiny, a high-end female business magazine in partnership with Khanyi Dhlomoand in Kenya we launched Adam, a male interest magazine. We decided todiscontinue a number of marginal titles. In October, irregularities with declared circulation numbers in two of ourtwelve magazine publishing units were uncovered. Media24 moved decisively toaddress the problem, to discipline the relevant staff and to introduceadditional preventative measures. In view of the important long-term relationswith advertising partners, it was decided to refund advertisers proportionatelyto the circulation overstatement. The total amount has not been finalised, butis not material. The printing business recorded strong growth as a result of increased capacity,despite competitive market conditions. Our internet publishing business, groupedtogether under the umbrella of 24.com, is developing satisfactorily. Abril S.A., the leading magazine publisher in Brazil, had a slow first half ofthe year. Due to a decline in the share price of the Hong Kong-listed BeijingMedia Corporation, we recorded a further impairment charge of R68 million onthis investment. Book publishing and private education Marketing expenses in our school book business decreased during the period dueto the slowdown in the implementation of the new curriculum. This resulted inoperating losses being lower than in the comparative period and confirms theseasonal nature of the school text book publishing business. The general bookpublishers traded satisfactorily, but the book market remains tough. During theperiod, Van Schaik Bookstores was sold to Johncom. In addition, and as previously announced, an agreement was concluded to disposeof the private education assets as a going concern. This transaction is subjectto certain conditions and is expected to be effective in the first quarter of2008. The business has been accounted for as a discontinued operation inaccordance with IFRS 5 "Non-current Assets Held for Sale and DiscontinuedOperations". Educor incurred a net loss of R82 million during the periodended 30 September 2007. The group also recorded an impairment charge of R81million in order to reflect the investment at its fair value at 30 September2007. The group has restated its results accordingly. BASIS OF PRESENTATION AND ACCOUNTING POLICIES Condensed interim financial statements for the six months ended 30 September2007 have been prepared in accordance with IAS 34 "Interim FinancialReporting", and in compliance with the Listings Requirements of the JSELimited. The accounting policies used to prepare the interim results areconsistent with those applied in the previous period and IFRS. These condensedinterim financial statements have been reviewed by the company's auditor,PricewaterhouseCoopers Inc., whose report is available for inspection at theregistered office of the company. SECONDARY LISTING During the period Naspers terminated its secondary listing on the Nasdaq StockMarket and listed a Depository Receipt programme on the London Stock Exchange. On behalf of the board: Ton Vosloo Chairman Cape Town 27 November 2007 Segmental Review Revenue Six months ended 30 September 2007 2006 % R'm R'm Change Electronic media 7 492 6 206 21 - pay television 6 357 5 268 21 - internet 654 538 22 - conditional access 445 379 17 - broadband technologies 36 21 71Print media 2 998 2 622 14 - newspapers, magazines and printing 2 569 2 283 13 - book publishing 429 339 27Corporate services 7 (3) - 10 497 8 825 19 Ebitda Six months ended 30 September 2007 2006 % R'm R'm Change Electronic media 2 389 1 941 23 - pay television 2 426 1 924 26 - internet (20) 48 - - conditional access 62 56 11 - broadband technologies (79) (87) 9Print media 375 350 7 - newspapers, magazines and printing 384 389 1 - book publishing (9) (39) 77Corporate services (24) (34) - 2 740 2 257 21 Operating profit before amortisation and other gains/losses Six months ended 30 September 2007 2006 % R'm R'm ChangeElectronic media 2 128 1 715 24 - pay television 2 215 1 738 27 - internet (49) 24 - - conditional access 51 48 6 - broadband technologies (89) (95) 6Print media 276 265 4 - newspapers, magazines and printing 289 307 6 - book publishing (13) (42) 69Corporate services (25) (35) - 2 379 1 945 22 Operating profit Six months ended 30 September 2007 2006 % R'm R'm ChangeElectronic media 2 057 1 761 17 - pay television 2 205 1 844 20 - internet (79) (5) - - conditional access 20 17 18 - broadband technologies (89) (95) 6Print media 234 252 7 - newspapers, magazines and printing 247 298 17 - book publishing (13) (46) 72Corporate services (26) (38) - 2 265 1 975 15 Consolidated Income Statement Six months Six months ended ended Year ended 30 September 30 September 31 March 2007 2006 2007 Reviewed Reviewed Audited R'm R'm R'mRevenue 10 497 8 825 19 005Cost of providing services and sale of (5 409) (4 546) (10 408)goodsSelling, general and administration (2 800) (2 420) (4 869)expensesOther (losses)/gains - net (23) 116 -Operating profit 2 265 1 975 3 728Net finance income/(costs) 548 (458) (368)Share of equity-accounted results 126 93 339Profit on sale of investments - - 4Impairment of equity-accounted (68) (150) (176)investmentProfit before taxation 2 871 1 460 3 527Taxation (927) (569) (1 249)Profit after taxation 1 944 891 2 278Loss from discontinued operations (82) (16) (87)Loss arising on discontinuance of (81) - -operationsProfit for the period 1 781 875 2 191Attributable to:Naspers shareholders 1 454 824 1 999Minority shareholders 327 51 192 1 781 875 2 191Core headline earnings for the period 1 745 1 322 2 875(R'm)Core headline earnings per N ordinary 506 455 972share (cents)Headline earnings for the period (R'm) 1 588 1 276 2 560Headline earnings per N ordinary share 461 439 866(cents)Fully diluted headline earnings per N 448 415 832ordinary share (cents)Earnings per N ordinary share (cents) 422 284 676Fully diluted earnings per N ordinary 411 268 649share (cents)Net number of shares issued ('000) - At period-end 348 527 291 355 344 632 - Weighted average for 344 632 290 555 295 756 the period - Fully diluted weighted 354 111 307 394 307 847 average Condensed Consolidated Balance Sheet 30 September 30 September 31 March 2007 2006 2007 Reviewed Reviewed Audited R'm R'm R'mASSETSNon-current assets 16 041 11 345 16 015Property, plant and equipment 4 077 3 991 4 089Goodwill and other intangible assets 1 596 1 495 1 551Investments and loans 9 894 5 006 9 663Deferred taxation 474 614 506Other non-current assets - 239 206Current assets 16 620 8 099 16 169Assets classified as held for sale 411 - - TOTAL ASSETS 33 072 19 444 32 184EQUITY AND LIABILITIES Share capital and reserves 21 809 9 032 21 143Minority shareholders' interest 516 192 427Total equity 22 325 9 224 21 570Non-current liabilities 2 543 2 782 3 086Capitalised finance leases 1 107 1 628 1 448Liabilities - interest-bearing 658 241 748 - non-interest-bearing 423 496 580Post-retirement medical liability 183 150 195Deferred taxation 172 267 115Current liabilities 7 933 7 438 7 528Liabilities classified as held for sale 271 - - TOTAL EQUITY AND LIABILITIES 33 072 19 444 32 184Net asset value per N ordinary share 6 257 3 100 6 135(cents) Condensed Consolidated Cash Flow Statement Six months Six months ended ended Year ended 30 September 30 September 31 March 2007 2006 2007 Reviewed Reviewed Audited R'm R'm R'mCash flow from operating activities 1 949 1 598 3 523Cash flow utilised in investment (1 010) (4 083) (5 394)activitiesCash flow (utilised in)/from financing (922) (1 416) 6 407activitiesNet movement in cash and cash 17 (3 901) 4 536equivalentsForeign exchange translation adjustments (256) 491 534Cash and cash equivalents at beginning 11 481 6 411 6 411of periodCash and cash equivalents at end of 11 242 3 001 11 481period Calculation of Headline and Core Headline Earnings Six months Six months ended ended Year ended 30 September 30 September 31 March 2007 2006 2007 Reviewed Reviewed Audited R'm R'm R'mNet profit attributable to shareholders 1 454 824 1 999Adjusted for: -impairment of goodwill and 10 - 114other assets - profit on sale of property, (14) (8) (8)plant and equipment - discontinuance of operations 79 - - - loss on sale of investments - 308 279 - impairment of 68 150 176equity-accounted investments 1 597 1 274 2 560Total tax effects of adjustments 3 2 (4)Total minority interest of adjustments (12) - 4Headline earnings 1 588 1 276 2 560Adjusted for: - loss from discontinued 69 14 63operations - creation of deferred tax - (35) (30)assets - amortisation of intangible 159 51 173assets - fair value adjustments and (71) 16 109currency translation differencesCore headline earnings 1 745 1 322 2 875 Supplementary Information Six months Six months ended ended Year ended 30 September 30 September 31 March 2007 2006 2007 Reviewed Reviewed Audited R'm R'm R'mDepreciation of property, plant and 361 313 652equipmentAmortisation of intangible assets 91 86 171Share-based payment expenses (IFRS 2) 114 80 196Other (losses)/gains - net (23) 116 - - profit on sale of property, 4 7 9plant and equipment - impairments of goodwill and - - (10)intangible assets - impairments of tangible (7) (1) (75)assets - dividends received 1 3 4 - fair value adjustment on (21) 107 72shareholders' liabilitiesNet finance (income)/costs (548) 458 368 - interest received (405) (126) (283) - interest paid 89 69 110 - interest on finance leases 63 78 174 - net foreign exchange (110) 337 372differences - net fair value adjustments (25) 100 65on derivative instruments - preference dividends (160) - (70)receivedInvestments and loans 9 906 5 006 9 665 - listed investments 1 533 1 407 1 543 - unlisted investments 8 373 3 599 8 122Market value of listed investments 28 147 11 384 15 123Directors' valuation of unlisted 8 373 3 599 8 122investmentsCommitments 5 777 3 394 5 478 - capital expenditure 603 382 887 - programme and film rights 2 713 2 070 2 024 - network and other services 1 746 339 1 899commitments - operating lease commitments 568 472 470 - set-top box commitments 147 131 198 Condensed Consolidated Statement of Changes in Equity Six months Six months ended ended Year ended 30 September 30 September 31 March 2007 2006 2007 Reviewed Reviewed Audited R'm R'm R'mBalance at beginning of period 21 570 7 204 7 204Movement in treasury shares (148) 9 (210)Share capital and premium issued 213 (137) 7 433Foreign currency translations (354) 1 562 1 231Movement in cash flow hedging reserve (51) 65 24Movement in share-based compensation 78 60 146reserveTransactions with minority shareholders (16) (30) 4 003Net profit for the period 1 781 875 2 191Dividends (748) (384) (452)Balance at end of period 22 325 9 224 21 570 Directors T Vosloo (chairman), F-A du Plessis, GJ Gerwel, RCC Jafta, LN Jonker, SJZPacak, FTM Phaswana, BJ van der Ross, NP van Heerden, JJM van Zyl, HSSWillemse Company secretary GM Coetzee Registered office40 Heerengracht, Cape Town 8001(PO Box 2271, Cape Town 8000) Transfer secretariesLink Market Services South Africa (Proprietary) Limited11 Diagonal Street, Johannesburg 2001(PO Box 4844, Johannesburg 2000) ADR programme The Bank of New York maintains a GlobalBuyDIRECT TM plan for Naspers Limited.For additional information, please visit the Bank of New York's website atwww.globalbuydirect.com or call Shareholder Relations at 1-888-BNY-ADRS or1-800-345-1612 or write to: The Bank of New York, Shareholder RelationsDepartment - GlobalBuyDIRECT TM, Church Street Station, P O Box 11258,New York, NY 10286-1258, USA Important information This report contains forward-looking statements. While these forward-lookingstatements represent our judgements and future expectations, a number of risks,uncertainties and other important factors could cause actual developments andresults to differ materially from our expectations. These include key factorsthat could adversely affect our businesses and financial performance. We are notunder any obligation to (and expressly disclaim any such obligation to) updateor alter our forward-looking statements whether as a result of new information,future events or otherwise. Investors are cautioned not to place undue relianceon any forward-looking statements contained herein. For a more detailed exposition, visit the Naspers website at www.naspers.com This information is provided by RNS The company news service from the London Stock Exchange