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NASPERS LIMITED
(Registration Number: 1925/001431/06)
("Naspers")
PRELIMINARY REPORT
The audited results of the Naspers Group for the year ended 31 March 2001
are stated below:
GROUP OVERVIEW
In line with our strategy to become one of the leading media businesses in
Africa and Asia, the group made steady progress in developing its subscriber
platforms and technology interests. At the same time, the maturer media
interests delivered increased returns. While this growth strategy will have
a negative impact on short-term earnings, over the medium-term prospects for
building shareholder value are promising.
Progress was made in the midst of turbulent market conditions.
Operationally, group revenues for the period grew by 29% to R9 billion. The
traditional media businesses all reported satisfactory growth in earnings
before interest, tax, depreciation and amortisation (Ebitda).
The internet and technology businesses made significant gains, as reflected
by revenue growth of 78% and 93% respectively. Despite market fluctuations
these technologies continued to flourish and transform the media industry.
Prospects for further revenue growth and value creation from these
businesses remain promising.
In view of the slump in the stock market, and the fact that both businesses
required funding for development, Naspers delisted Educor and M-Web with the
approval of the relevant minority shareholders. The Educor delisting was
concluded in May and the M-Web delisting is expected to be finalised in
July.
FINANCIAL REVIEW
Growth in Ebitda was recorded in the television, print media and education
businesses. Extensive developments were undertaken in the internet and
technology businesses, resulting in an aggregate group Ebitda loss of R295
million.
Depreciation increased by 43% to R517 million, the result of increased
satellite transponder capacity and the new investment in printing
infrastructure. Due to the prescribed change in accounting policy (see
below) the group for the first time reported a goodwill and intangibles
amortisation charge of R948 million.
Net exceptional profits of R3,3 billion were recorded, largely from the MIHL
secondary offering of shares and the OpenTV/SpyGlass merger in the USA.
The net headline loss per N ordinary share amounted to 299c, and fully
diluted earnings per N ordinary share a positive 616c.
On 31 March 2001 the group had net consolidated cash resources of R1 994
million and interest-bearing liabilities of R865 million (excluding
satellite leases). The group has adequate cash resources to fund its
existing business plan.
SEGMENTAL REVIEW
Revenues and earnings before interest, tax, depreciation and amortisation
(Ebitda) of the key business segments were as follows:
REVENUE (R'm) EBITDA (R'm)
2001 2000 % 2001 2000 %
Subscriber platforms
- pay television 4 558 3 909 17 347 229 52
- internet 411 231 78 (648) (342) (89)
Print media 1 922 1 653 16 338 288 17
Technology 1 056 546 93 (365) (170) (115)
Book publishing 545 434 25 22 21 5
Private education 519 217 * 22 (5) *
Corporate services - - - (11) (14) 21
9 011 6 990 29 (295) 7 7
= not comparable
SUBSCRIBER PLATFORMS
Pay television
Over the period under review, the aggregate subscriber base increased by 100
000 homes to 2,16 million. Importantly, the transition of subscribers from
the analogue to digital service continued, with the digital subscriber base
for the first time now comprising a 51% majority of the total (March 2000:
41%). As a consequence, revenues grew by 17%. This transition not only
enhanced revenues and operating margins per subscriber, but also the ability
to offer additional electronic services to the home. Ebitda improved by a
sturdy 52% to R347 million.
We anticipate that growth in the pay television subscriber base will slow
down as the industry starts to mature. Nonetheless, it is expected that the
transition to digital will continue, and that the group will expand its
offering of interactive services to subscribers.
Internet
Over the past year, market perceptions of the internet have swung from being
unrealistically euphoric to quite depressive. History reflects that such
oscillations are typical of major innovations. While market sentiment has
fluctuated wildly, the internet industry continues to show steady organic
growth and no substitute technology has emerged. It appears that the
internet will continue to transform the broad economy and, of particular
interest to the group, the media industry in every country.
In our assessment the current market climate, now characterised by more
realistic expectations, is more conducive for our group to implement its
strategic plans and build more sustainable businesses on lower cost
structures.
The internet developments across the group continue to show good progress as
reflected by overall revenue growth of 78% to R411 million. Development
losses amounted to R648 million.
In South Africa M-Web maintained its position as the country's leading on-
line service provider, content portal and corporate e-business enabler. Over
the past year the subscriber base grew to nearly a quarter of a million
households. Turnover grew by 48% to R336 million.
While the rate of subscriber growth in the market has slowed down, e-
commerce revenues are gradually starting to gain momentum. The effect of
free internet service providers (ISP) services in South Africa is likely to
result in a temporary slowdown in new subscriber growth, but the economic
model of a completely free, uncapped ISP service has proved to be flawed
elsewhere in the world. The advent of interactive television is bringing the
internet closer to television. With this in mind, M-Web will align its
business more closely with MultiChoice Africa's pay television platform.
M-Web Thailand is a premier local on-line service provider comprising of
eleven consumer focused websites. The group owns portals, a Thai-language
search engine, and has a majority interest in KSC, one of the country's
largest ISPs with 200 000 users. M-Web Thailand's websites attract about 3,5
million page views per day, which is even more than in South Africa.
M-Web Indonesia was launched in May 2000. The portal now receives 1,5
million page views per day, representing approximately 60% of the market,
and has 500 000 e-mail users. This business is still young but can be
expanded.
The Chinese market has great potential but uncertainties due to the entry
into the World Trade Organisation (WTO) and changes to investment laws and
regulations demand a cautious investment approach. The focus is on growing
our sport and financial portals, while exploring new investment
opportunities.
Subsequent to year-end, the group acquired a 46,5% stake in QQ, the most
pervasive instant-messaging platform in China. Instant-messaging has become
an important communications tool in China, where QQ is currently the leading
instant-messaging service with 18 million active customers, representing 95%
of the market.
PRINT MEDIA
The print media operations in South Africa experienced static circulation
levels in the aggregate and muted conditions as regards advertising
revenues. These factors limited revenue growth to 16%. Countering this was
an improvement in operating margins, largely the result of extensive
investments in the recent past in infrastructure such as printing plants. As
a result, Ebitda grew by 17% to R338 million.
Of all South African media groups, Media24 has the most advanced technology.
Over the past four years, we invested in excess of R1 billion in our
traditional print media businesses, both in the renewal of infrastructure
and the acquisition of new titles. This confirms our belief that, while
mature, the business offers sound prospects over the next decade. In the
short term, continued pressure on circulation and advertising revenues,
coupled with steep increases in paper prices, will slow down profit growth.
TECHNOLOGY
Revenues from the group's technology businesses reflected spectacular growth
of 93% to in excess of R1 billion. OpenTV experienced excellent revenue
growth as its installed base almost doubled to 16 million digital decoders
across 43 network operators in some 50 countries. It is now the most widely
deployed system worldwide. Revenues from the applications business are also
coming on stream.
Globally, interactive television services are still in the early stages of
development. OpenTV is well positioned to sustain growth in this market.
Mindport's aims were expanded to address the growing demand for content
management, encryption and billing solutions in the internet protocol (IP)
broadband markets.
Its customer care and billing business was merged with Noochee, a USA-based
IP infrastructure and application software company. The merger strengthened
the IBS sales channels and product base.
Irdeto Access, the fourth largest worldwide provider of content protection
solutions, extended its base to 60 customers operating in 50 countries with
seven million users.
BOOK PUBLISHING
The book publishing businesses recorded revenue growth of 25% to R545
million and Ebitda improving to R22 million. The book distribution division
was transferred into a business under the brand name On the Dot.
PRIVATE EDUCATION
Due to the merger between National Private Colleges and Educor comparison
with the previous year's figures is meaningless. Revenue for the year
amounted to R519 million and Ebitda R22 million.
The private education industry experienced turbulent conditions over the
past year. In particular, uncertainty over how the industry is to be
regulated and Government's decision to refuse deductions on the state
payroll system to private educators had a negative impact on enrolments.
In the medium term, it is anticipated that private education will play a
steadily larger role in the world economy as the pace at which technologies
change accelerates and because people live longer, they will have to learn
new skills during their working lives.
HUMAN RESOURCES
The group's aims can only be achieved through the creativity, enthusiasm and
commitment of its employees, supported by open lines of communication and
the creation of ongoing opportunities for development.
DIVIDEND
The board has recommended that the annual dividend be maintained at 24 cents
per N ordinary share. The dividend is payable to shareholders registered on
10 August 2001 and will be paid on or after 24 August 2001.
STRATE
Naspers is scheduled to be converted to Share Transactions Totally
Electronic (STRATE), an electronic settlement platform for share
transactions on the JSE in November 2001. The move to STRATE will ensure
Naspers' participation in a sophisticated settlement process in line with
the international best practice. Shareholders will receive further
communication in this regard in due course.
ACCOUNTING POLICIES
The same accounting policies and methods of computation have been followed
in this report as in the annual financial statements for the year ended 31
March 2000, except for the changes in policy mentioned below. Previously,
goodwill and intangible assets were written off in full against attributable
reserves on acquisition. As from 1 April 2000, intangibles and goodwill have
been stated at historical cost and amortised through the income statement on
a straight-line basis over the period of expected benefit. These changes in
prescribed accounting policies will substantially decrease profitability in
the years ahead and will increase investors' focus on Ebitda as a measure to
properly assess the operational performance of the group. The 2000 group
revenue figure was restated to take into account the new group policy to
account for advertising discounts in the print media segment. Revenue is now
stated net of guaranteed advertising discounts. Programme and film rights as
at 31 March 2000 were restated, with no impact on shareholders' equity.
Variable sports rights are now only accounted for upon showing or when the
cost is reliably determinable. The revised AC102 on taxation was adopted,
which resulted in the restatement of taxation and deferred tax in the prior
year.
On behalf of the board:
Ton Vosloo Koos Bekker
Chairman Managing Director
Directors
T Vosloo (chairman), JF Malherbe (vice-chairman), JP Bekker (managing
director), MJ de Vries, JJM van Zyl, E Botha, LM Taunyane, LN Jonker, NP van
Heerden, SJZ Pacak, BJ van der Ross, GJ Gerwel.
Company secretary: GM Coetzee
ABRIDGED INCOME STATEMENT
Year ended Year ended
31 March 31 March
2001 2000
R'm R'm
Revenue 9 011 6 990
(Loss)/Earnings before interest,
tax, depreciation and
amortisation (EBITDA) (295) 7
Depreciation (517) (362)
Amortisation (948) -
Finance costs (174) (154)
Income from investments 1 3
Share of equity-accounted results (62) (6)
Exceptional items 3 318 4 743
Profit before taxation 1 323 4 231
Taxation (101) (59)
Minority interest (286) (665)
Net income attributable to
shareholders 936 3 507
Headline earnings for the year
(R'm) (443) (144)
Earnings per N ordinary share
(cents) 632 2 701
Headline loss per N ordinary share
(cents) (299) (111)
Fully diluted earnings per N
ordinary share (cents) 616 2 597
Dividend per N ordinary share
(cents) 24 24
Number of shares issued ('000)
at year-end 148 262 148 262
weighted average for the year 148 262 129 851
fully diluted 153 868 135 457
ABRIDGED BALANCE SHEET
31 March 31 March
2001 2001
R'm R'm
Assets
Non-current assets 12 773 4 438
Property, plant and equipment 3 351 2 448
Goodwill and other intangibles 6 767 -
Investments and loans 2 199 1 565
Programme and film rights 361 320
Deferred taxation 95 105
Current assets 5 812 4 780
Total assets 18 585 9 218
Equity and liabilities
Share capital and reserves 3 144 1 825
Minority interest 8 259 1 503
Non-current liabilities 3 019 2 332
Transmission equipment leases 1 631 1 029
Loans - interest-bearing 865 678
- non-interest-bearing 337 432
Post-retirement medical liability 122 135
Deferred taxation 64 58
Current liabilities 4 163 3 558
Total equity and liabilities 18 585 9 218
Net asset value per N ordinary
share (cents) 2 121 1 231
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Year ended Year ended
31 March 31 March
2001 2000
R'm R'm
Balance at beginning of period
As previously stated 1 804 721
Effect of adopting revised AC102 21 20
As restated 1 825 741
Share capital and premium issued - 1 452
Foreign currency translation 358 10
Capital contributions by minorities 7 -
Current period write-offs
- goodwill and other intangibles - (3 859)
- deferred taxation - 9
Adjustments to prior year goodwill 55 -
Net income attributable to
shareholders 936 3 507
Dividends (37) (35)
Balance at end of period 3 144 1 825
ABRIDGED CASH FLOW STATEMENT
Year ended Year ended
31 March 31 March
2001 2000
R'm R'm
Cash (utilised in)/available from
operations (765) 76
Dividends paid (35) (28)
Cash flow from operating
activities (800) 48
Cash flow from investment
activities (660) (2 267)
Cash flow from financing activities 1 395 3 819
Net movement in cash and cash
equivalents (65) 1 600
SUPPLEMENTARY INFORMATION
31 March 31 March
2001 2000
R'm R'm
Dividends received 1 3
Finance costs 174 154
- interest received (270) (125)
- interest paid 362 255
- net foreign exchange differences 82 24
Investments and loans 2 199 1 565
- listed investments 310 371
- unlisted investments 440 285
- marketable securities 357 93
- loans to share incentive schemes 1 092 816
Market value of listed investments 1 000 2 215
Directors' valuation of unlisted
investments and loans 1 532 1 101
Commitments 1 452 1 162
- capital expenditure commitments 75 23
- programme and film rights 834 785
- network commitments 187 272
- decoder commitments 356 82
Operating lease commitments 767 1 193
ANALYSIS OF EXCEPTIONAL ITEMS
Year ended Year ended
31 March 31 March
2001 2000
R'm R'm
(Loss)/Profit on sale of
investments (210) 2 976
Profit on dilution of subsidiaries 3 672 1 796
Asset impairments and write-offs (119) (13)
Warranties in respect of debtors
and business disposals (25) (22)
Share of equity accounted
exceptional items - 6
3 318 4 743
CALCULATION OF HEADLINE LOSS
Year ended Year ended
31 March 31 March
2001 2000
R'm R'm
Net income attributable to
shareholders 936 3 507
Adjusted for
- exceptional items after
tax and minorities (1 561) (3 651)
- amortisation of goodwill after
minorities 182 -
Headline loss (443) (144)