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NASPERS LIMITED - INTERIM REPORT

Release Date: 04/12/2002 12:30
Code(s): NPN
Wrap Text

NASPERS LIMITED - INTERIM REPORT NASPERS LIMITED (Registration Number: 1925/001431/06) ("Naspers") ISIN ZAE000015889 JSE Share Code: NPN INTERIM REPORT The results of the Naspers Group for the six months ended 30 September 2002 are stated as follows: HIGHLIGHTS *Internationally the TMT sector remains turbulent. *Revenue increased by 26%. *An operating profit before amortisation of R78 million was realised compared to a loss of R111 million in the prior period. *Headline loss per N ordinary share from continuing operations reduced by 48% to 65c per share. *Cash of R407 million generated from continuing operations. RECENT DEVELOPMENTS Group reorganisation On 26 September 2002, Naspers proposed a reorganisation, pursuant to which the minority interests in MIH Holdings Limited (MIHH) and MIH Limited (MIHL) will be swopped for shares in Naspers. The board believes this reorganisation will significantly simplify the corporate structure and operations of the Group. Subsequent to this announcement, the respective shareholders approved the reorganisation. As the effective date of the reorganisation is scheduled to be later in December 2002, this interim report does not reflect its accounting impact. Disposal of OpenTV On 27 August 2002, MIHL announced that it had closed an agreement relating to the disposal of its interest in OpenTV for a total consideration of US$185 million, being US$46 million received in cash and the balance settled by the receipt of 15,38 million shares of Liberty Media Corporation. This transaction has been accounted for in this period as a discontinuing operation. Greece pay television On 26 July 2002, MIHL announced that it had entered into an agreement with Fidelity Management SA, in terms of which the latter would acquire a 22% interest in NetMed NV. The completion of this transaction was subject to the fulfillment of certain conditions, including the unconditional approval of the Greek Competition Committee. These conditions were not met in the appropriate time and consequently, the agreement has ceased to have an effect. FINANCIAL OVERVIEW The harsh global media environment, which has been extensively reported on, continued into the first six months of the current period and media stocks remained under pressure, although it seems that this climate may now be improving. Despite these difficult conditions, the Group made satisfactory progress during the period. Revenues grew by 26%, driven largely by currency factors and steady growth in subscriber revenue. Cost control resulted in improved margins. Operating profits before amortisation and impairment charges amounted to R78 million compared to a reported loss last year of R111 million. The Group balance sheet reflects an asset of R148 million relating to prepayments to certain Greek football teams to broadcast their matches in the future. The board believes it is prudent to fully provide for these pre-paid programming rights as the future economic benefits of these rights have become uncertain, following the recent turmoil in Greek football. Finance costs at R168 million were lower than last year, but were favourably impacted to the extent of R74 million due to the strengthening Rand. Exceptional items total R397 million. A charge of R298 million was accounted for to adjust the value of the Liberty Media shares received as consideration for the sale of OpenTV to its market value as at 30 September 2002. Subsequently, the market value of the Liberty Media shares improved to such an extent that this loss has been recouped. An additional amount of R95 million was accounted for being the Group`s share of the impairment by SuperSport of its interest in MIHL to market value. A book profit of R746 million arose on the disposal of OpenTV. The headline loss per N ordinary share from continuing operations amounted to 65 cents, compared to 125 cents last year. Cash generated from continuing operations amounted to R407 million, compared to a cash outflow of R206 million for the equivalent period last year. On 30 September 2002, the Group had net consolidated cash resources of R998 million and interest-bearing liabilities of R1,6 billion, excluding satellite and other transmission equipment leases. SUBSCRIPTION PLATFORMS Pay television The pay television platforms recorded revenue growth of 27%, due primarily to currency fluctuations and an increase in digital subscribers. This resulted in improved operating profits before amortisation of R141 million. Africa On the African continent, the subscriber base was static at 1,28 million households. Subscribers continue to migrate from the analogue to the digital platform, which grew by 67 000 to 860 000 subscribers in the six-month period. Digital subscribers now account for 66% of the total. This continued migration to the higher revenue digital service, together with the effect of cost reductions, resulted in improved margins. Regulatory activity across the continent has increased significantly, with several countries in Africa revising their regulatory frameworks for the broadcasting industry. Regulatory processes will demand more time of senior executives in the future. The Group has physical operations and joint ventures in nine countries on the continent and operates in 40 other countries through agents. About 409 000 analogue and 640 000 digital subscribers live in South Africa, with the rest situated as follows: Number of Subscribers Botswana 19 000 Ghana 6 000 Kenya 15 000 Namibia 30 000 Nigeria 59 000 Tanzania 8 000 Uganda 6 000 Zambia 13 000 Other 83 000 Mediterranean With the customary summer churn, the total number of pay television households in this region declined by 27 000 to 290 000 with the biggest decline in analogue subscribers. The decline was exacerbated by the activities of a competing platform in Greece which has recently gone into liquidation. Our digital television service, NOVA, however maintained its leading position and ended the period with 113 000 subscribers. The demise of the competitor, Alpha Digital, will hopefully assist in curbing the unrealistic escalation in the costs of sports rights, but much work is still required to reduce the exorbitant cost structure of this market. The competitive struggle has led to Ebitda losses of R147 million for the past six-month period and more are expected until breakeven. The Cyprus operation currently has 52 000 subscribers. Thailand UBC in Thailand ended the period with 420 000 subscribers, 65% of which are on the digital platform. The business achieved operating profit before amortisation of R80 million. INTERNET The internet remains the Group`s fastest growth segment, with revenues increasing by 90%. Both Ebitda and operating losses were substantially lowered from the equivalent period last year. M-Web Africa maintained its market position, although the dial-up market is relatively stagnant. It ended the period with 249 000 dial-up subscribers and 2 900 hosted clients. The focus remains sharply on cutting costs, reducing losses and driving the business hard to profitability. M-Web South Africa reached Ebitda breakeven in the current period. In Asia, the Group reduced the cash burn across its internet businesses. Some operations have been curtailed to match revenues to costs. In Thailand, the group has 329 000 subscribers accessing its service, the majority on a pre-paid basis. The instant-messaging service in China, QQ, continues to grow its mobile subscriber base. Payments for unique identification numbers and premium services were introduced. The Tencent portal and SportsCN have also experienced growing audiences. TECHNOLOGY Despite a global technology environment which continues to place pressure on revenues and margins, this segment reported positive Ebitda of R3 million. It is expected that sales will slow down in the second half of the year, negatively impacting profitability. Irdeto Access, a wholly-owned subsidiary of MIHL, is currently the conditional access vendor for some 85 customers in 60 countries worldwide. Some seven million Irdeto Access smartcards have been issued. In the People`s Republic of China, Irdeto Access recently acquired eight new clients, bringing its total there to 17. PRINT MEDIA The print media business performed solidly and grew revenues by 7%, largely from increased advertising revenue from its newspapers. Growth in operating profits before amortisation was limited to 4%, the consequence of start-up costs incurred on Daily Sun and providing for the once-off effects from the liquidation of CNA of R4 million. The newspaper division was able to grow advertising revenues, whilst circulation remained stable. The new newspaper, Daily Sun, was launched in July and has now reached a circulation level exceeding 60 000. In the magazine division, a few titles experienced circulation pressure, but the sector survived the turmoil evident abroad better than might have been expected. Printing operations at Paarl Media also continued to perform well. During the period under review, a last, R60 million newspaper press was installed, bringing to conclusion a five-year renewal programme which saw the print media business invest some R1,5 billion upgrading its printing infrastructure, increasing capacity and expanding the range of titles. BOOK PUBLISHING In general, the book publishing business experienced difficult trading conditions, especially as a result of the liquidation of CNA for which a provision of R5 million was made. It is also quite seasonal. Whilst revenues grew by 7%, operating losses amounted to R26 million. The new CEO, Hein Brand, is implementing measures to improve margins. PRIVATE EDUCATION Educor experienced good revenue growth of 15% from improved student enrolments. Margins were higher and operating profits before amortisation grew by 27%. CORPORATE GOVERNANCE Naspers is committed to the principles of openness, equity, integrity and accountability, as advocated in the King Report on Corporate Governance for South Africa 2002 (King II). The directors recognise the need to conduct the business of the enterprise with integrity and in accordance with Generally Accepted Corporate Practices. Accordingly, the board has reviewed King II, and requisite adjustments are in the process of being implemented. ACCOUNTING POLICIES These abridged, consolidated interim financial statements 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 2002. The interim financial statements for the period ended 30 September 2002 have been reviewed by the company`s auditors, PricewaterhouseCoopers, whose report is available for inspection at Naspers` registered office. On behalf of the board: Ton Vosloo Koos Bekker Chairman Managing director Directors T Vosloo (chairman), JF Malherbe (vice-chairman), JP Bekker (managing director), JJM van Zyl, E Botha, LM Taunyane, LN Jonker, NP van Heerden, SJZ Pacak, BJ van der Ross, GJ Gerwel, HSS Willemse. Company secretary: GM Coetzee SEGMENTAL REVIEW Earnings before
interest, tax, Revenue depreciation and Six months ended 30 amortisation (Ebitda) Sept Six months ended 30
Sept 2002 2001 % 2002 2001 % R`m R`m Change R`m R`m Change Continuing operations Subscriber platforms - pay television 3 2 471 27 333 250 33 149 - internet 421 222 90 (68) (220) 69 Print media 1 1 053 7 186 181 3 124 Technology 235 126 87 3 (26) - Book publishing 233 217 7 (19) (13) (46) Private education 283 246 15 28 25 12 Corporate services - - - (8) (5) (60) 5 4 335 26 455 192 137 445
Operating profit before amortisation and impairment Operating loss Six months ended 30 Six months ended 30
Sept Sept 2002 2001 % 2002 2001 % R`m R`m Chang R`m R`m Chan e ge
Continuing operations Subscriber platforms - pay television 141 91 55 (24)* 82 - - internet (178) (291) 39 (304) (474) 36 Print media 135 130 4 132 129 2 Technology (6) (33) 82 (23) (34) 32 Book publishing (25) (18) (39) (26) (18) (44) Private education 19 15 27 7 7 - Corporate services (8) (5) (60) (8) (5) (60) 78 (111) (246) (313) 21 * Includes a once-off charge of R148 million for the impairment of programming rights. NASPERS LIMITED ABRIDGED INCOME STATEMENT Six months Six months Year ended ended ended 31 Mar`02
30 Sept `02 30 Sept `01 Audited Reviewed Unaudited R`m R`m R`m Revenue 5 445 4 335 9 837 Earnings before interest, tax, depreciation and 455 192 709 amortisation (Ebitda) Depreciation (377) (303) (636) Operating profit before amortisation and impairment 78 (111) 73 Amortisation (176) (202) (374) Impairment of programming (148) - - rights Operating loss (246) (313) (301) Finance costs (168) (203) (412) Income from investments - - 4 Share of equity-accounted 83 39 158 results Exceptional items (397) (56) 5 Loss before taxation (728) (533) (546) Taxation (92) (53) (148) Minority interest 370 291 328 Net loss from continuing (450) (295) (366) operations Loss from discontinuing (154) (244) (605) operations Profit/(loss) arising on 746 (144) (952) discontinuance of operations Net income/(loss) 142 (683) (1 923) attributable to shareholders Headline loss for the period (143) (286) (457) (R`m) Headline loss from (96) (180) (236) continuing operations (R`m) Earnings per N ordinary 96 (476) (1 320) share (cents) Headline loss per N ordinary (96) (199) (313) share (cents) Headline loss per N ordinary share from continuing (65) (125) (162) operations (cents) Fully diluted earnings per N 96 (476) (1 320) ordinary share (cents) Dividend per N ordinary 25 24 24 share (cents) - paid Sept `02 Dividend per A ordinary 5 - - share (cents) - paid Sept `02 Net number of shares issued (`000) 148 084 147 979 148 084 at period-end 148 084 143 429 145 692 weighted average for the 161 895 157 345 159 503 period fully diluted weighted average NASPERS LIMITED ABRIDGED BALANCE SHEET 30 Sept 30 Sept 31 March 2002 2001 2002
Reviewed Unaudited Audited R`m R`m R`m ASSETS Non-current assets 5 583 13 514 10 108 Property, plant and 3 911 4 133 4 502 equipment Goodwill and other 785 7 488 3 630 intangibles* Investments and loans 442 1 398 1 408 Programme and film rights 380 388 509 Deferred taxation 65 107 59 Current assets 6 060 5 491 6 538 TOTAL ASSETS 11 643 19 005 16 646 EQUITY AND LIABILITIES Share capital and reserves 763 2 264 1 386 Minority interest 706 7 478 4 364 Non-current liabilities 4 895 4 431 5 118 Transmission equipment 2 754 2 420 2 861 leases Welkom debenture scheme 293 252 271 Loans - interest- 1 283 1 172 1 459 bearing 369 389 334 - non-interest- bearing Post-retirement medical 126 128 126 liability Deferred taxation 70 70 67 Current liabilities 5 279 4 832 5 778 TOTAL EQUITY AND 11 643 19 005 16 646 LIABILITIES 515 Net asset value per N 1 530 936 ordinary share (cents) * Goodwill decreased with the sale of OpenTV. NASPERS LIMITED ABRIDGED STATEMENT OF CHANGES IN EQUITY Six months Six months Year ended ended Ended 30 Sept 30 Sept 31 March
2002 2001 2002 Reviewed Unaudited Audited R`m R`m R`m Balance at beginning of period 1 386 2 553 2 553 Movement in treasury shares - 1 3 Share capital and premium - 227 227 issued Foreign currency translation (728) 202 556 Adjustments to prior year - - 8 goodwill Net income/(loss) attributable 142 (683) (1 923) to shareholders Dividends (37) (36) (38) Balance at end of period 763 2 264 1 386 NASPERS LIMITED ABRIDGED CASH FLOW STATEMENT Six months Six months ended ended Year 30 Sept 30 Sept ended 2002 2001 31 March
Reviewed Unaudited 2002 R`m R`m Audited R`m Cash generated from/(utilized in) continuing operations 407 (206) 228 Cash utilised in discontinuing (277) (286) (574) operations Dividends paid (37) (36) (38) Cash flow from operating 93 (528) (384) activities Cash flow from investment (496) (926) (1 088) activities Cash flow from financing (348) 422 819 activities Net movement in cash and cash (751) (1 032) (653) equivalents NASPERS LIMITED ANALYSIS OF EXCEPTIONAL ITEMS Six months Six months Year ended ended ended 31 March
30 Sept 30 Sept 2002 2002 2001 Audited Reviewed Unaudited R`m R`m R`m
Loss on sale and impairment (25) of investments (393) (37) (Loss)/profit on dilution - (17) 53 of interest in subsidiaries Asset impairments and write- (4) (2) (23) offs (397) (56) 5 RECONCILIATION OF HEADLINE LOSS Six months Six months Year ended ended ended 31 March 30 Sept 30 Sept 2002 2002 2001 Audited
Reviewed Unaudited R`m R`m R`m Net income/(loss) attributable to 142 (683) (1 923) shareholders Adjusted for: - impairment of programming rights after 57 - - minorities
- (profit)/loss arising on (746) 144 952 discontinuance of operations 232 23 91 - exceptional items after tax 172 230 423 and minorities - amortisation of goodwill after minorities Headline loss (143) (286) (457) Loss from discontinuing 47 106 221 operations Headline loss from continuing (96) (180) (236) operations NASPERS LIMITED SUPPLEMENTARY INFORMATION Six Six months Year ended months ended ended
30 Sept 30 Sept 31 March 2002 2001 2002 Reviewed Unaudited Audited R`m R`m R`m
Dividends received - - 4 Finance costs 168 203 412 - interest received (123) (184) (86) - interest paid 365 321 523 - net foreign exchange (74) 66 (25) differences Investments and loans 442 1 398 1 408 - listed investments 289 295 329 - unlisted investments 153 436 299 - marketable securities - 667 780 Market value of listed 1 396 1 013 1 573 investments Directors` valuation of 299 unlisted investments 153 436 Commitments 1 320 1 300 1 202 - capital expenditure 115 135 89 - programme and film 952 904 881 rights - network commitments 253 184 202 - decoder commitments - 77 30 Operating lease commitments 685 1 238 1 339 IMPORTANT INFORMATION This interim report contains forward-looking 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 factors include, but are not limited to, the key factors that we have indicated that could adversely affect our businesses and financial performance contained in our past and future filings and reports, including those filed with or furnished to the U.S. Securities and Exchange Commission (the "SEC"). 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. Investors will be able to obtain any documents filed with the SEC from the SEC`s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Telephone: (202) 942-8090, Fax: (202) 628-9001. E-mail: publicinfo@sec.gov. Documents filed with or furnished to the SEC by Naspers (other than certain exhibits) are also available free of charge from The Company Secretary, Naspers Limited, 40 Heerengracht, Cape Town, 8001, South Africa, Telephone No: +27 21 406 2121. Date: 04/12/2002 12:30:00 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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