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Naspers Limited - Interim Report And Withdrawal Of Cautionary
Naspers Limited
(Registration number 1925/001431/06)
ISIN: ZAE000015889 JSE share code: NPN
("Naspers")
INTERIM REPORT AND WITHDRAWAL OF CAUTIONARY
The results of the Naspers group for the six months ended 30 September 2003
are stated as follows:
Segmental Review
Revenue Ebitda
Six months ended Six months ended
30 Sept 30 Sept
2003 2002 % 2003 2002 %
R"m R"m change R"m R"m change
Subscriber platforms 3 754 3 805 (1) 654 268 144
- pay television 3 155 3 149 - 618 333 86
- internet 464 421 10 47 (68) +100
- technology 135 235 (43) (11) 3 -
Print media 1 298 1 124 15 219 186 18
Book publishing and private
education 538 516 4 18 9 100
- publishing 269 233 15 (13) (19) 32
- education 269 283 (5) 31 28 11
Corporate services 3 - - (13) (8) (63)
5 593 5 445 3 878 455 93
Operating profit before
amortisation and impairment Operating profit
Six months ended Six months ended
30 Sept 30 Sept
2003 2002 % 2003 2002 %
R"m R"m change R"m R"m change
Subscriber platforms 445 (43) +100 295 (351) +100
- pay television 458 141 +100 397 (24) *+100
- internet 5 (178) +100 (63) (304) 79
- technology (18) (6) (200) (39) (23) (70)
Print media 163 135 21 156 132 18
Book publishing and private
education 2 (6) +100 (12) (19) 37
- publishing (19) (25) 24 (19) (26) 27
- education 21 19 11 7 7 -
Corporate services (14) (8) (75) (14) (8) (75)
596 78 +100 425 (246) +100
*Includes a once-off charge of R148 million for the impairment of
programming rights.
Abridged Income Statement
Six months Six months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 Mar 2003
Reviewed Reviewed Audited
R"m R"m R"m
Revenue 5 593 5 445 11 187
Earnings before interest, tax,
depreciation and amortisation (Ebitda) 878 455 1 191
Depreciation (282) (377) (664)
Operating profit before amortisation
and impairment 596 78 527
Amortisation (171) (176) (342)
Impairment of programming rights - (148) (155)
Operating profit/(loss) 425 (246) 30
Finance costs (208) (168) (223)
Share of equity-accounted results 28 83 169
Exceptional items 35 (397) 61
Profit/(loss) before taxation 280 (728) 37
Taxation (174) (92) (159)
Minority interest (88) 370 (162)
Net profit/(loss) from continuing
operations 18 (450) (284)
Loss from discontinuing operations - (154) (141)
Profit arising on discontinuance of
operations - 746 751
Net income attributable to shareholders 18 142 326
Headline earnings/(loss) for the
period (R"m) 148 (143) (33)
Headline earnings/(loss) per N ordinary
share (cents) 57 (96) (19)
Earnings per N ordinary share (cents) 7 96 185
Fully diluted earnings per N ordinary
share (cents) 7 96 185
Net number of shares issued ("000)
- at period-end 258 778 148 084 258 151
- weighted average for the period 258 465 148 084 176 556
- fully diluted weighted average 260 116 153 689 182 161
Abridged Balance Sheet
30 Sept 30 Sept 31 Mar
2003 2002 2003
Reviewed Reviewed Audited
R"m R"m R"m
ASSETS
Non-current assets 6 174 5 583 6 904
Property, plant and equipment 3 269 3 911 3 592
Goodwill and other intangibles 1 974 785 2 225
Investments and loans 650 442 734
Programme and film rights 115 380 227
Deferred taxation 166 65 126
Current assets 4 850 6 060 5 276
Total assets 11 024 11 643 12 180
EQUITY AND LIABILITIES
Share capital and reserves 2 942 763 3 511
Minority interest 172 706 301
Non-current liabilities 3 022 4 895 3 097
Capitalised finance leases 1 990 2 754 2 277
Liabilities - interest-bearing 681 1 576 412
- non-interest-bearing 112 369 191
Post-retirement medical liability 160 126 146
Deferred taxation 79 70 71
Current liabilities 4 888 5 279 5 271
Total equity and liabilities 11 024 11 643 12 180
Net asset value per N ordinary
share (cents) 1 137 515 1 360
Abridged Statement of Changes in Equity
Six months Six months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 Mar 2003
Reviewed Reviewed Audited
R"m R"m R"m
Balance at beginning of period 3 511 1 386 1 386
Effect of adopting AC133 (335) - -
As restated 3 176 1 386 1 386
Movement in treasury shares 2 - (731)
Share capital and premium issued - - 3 395
Foreign currency translations (166) (728) (828)
Movement in cash flow hedging reserve (10) - -
Net income attributable to shareholders 18 142 326
Dividends (78) (37) (37)
Balance at end of period 2 942 763 3 511
Abridged Cash Flow Statement
Six months Six months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 Mar 2003
Reviewed Reviewed Audited
R"m R"m R"m
Cash generated from operations 387 130 1 103
Dividends paid (82) (37) (37)
Cash flow from operating activities 305 93 1 066
Cash flow from investment activities (453) (496) 234
Cash flow from financing activities (244) (348) (636)
Net movement in cash and cash
equivalents (392) (751) 664
Analysis of Exceptional Items
Six months Six months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 Mar 2003
Reviewed Reviewed Audited
R"m R"m R"m
Profit/(loss) on sale and
revaluation of investments and debt 37 (393) 127
Loss on dilution of interest in
subsidiaries (2) - (1)
Asset impairments and write-offs - (4) (65)
Net exceptional items 35 (397) 61
Calculation of Headline Earnings
Six months Six months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 Mar 2003
Reviewed Reviewed Audited
R"m R"m R"m
Net income attributable to shareholders 18 142 326
Adjusted for:
- impairment of programming rights
after minorities - 57 70
- profit arising on discontinuance of
operations - (746) (751)
- exceptional items after tax and
minorities (33) 232 29
- amortisation of goodwill after
minorities 163 172 293
Headline earnings/(loss) 148 (143) (33)
Loss from discontinuing operations - 47 35
Headline earnings from continuing
operations 148 (96) 2
Adjusted for:
- foreign exchange translation
differences (25) (22) (86)
- creation of deferred tax assets 3 (6) (58)
- amortisation of intangible assets 33 20 31
- AC133 fair value adjustments 100 - -
Core headline earnings/(loss) 259 (104) (111)
Supplementary Information
Six months Six months Year
ended ended ended
30 Sept 2003 30 Sept 2002 31 Mar 2003
Reviewed Reviewed Audited
R"m R"m R"m
Finance costs 208 168 223
- net interest paid 69 117 199
- interest on finance leases 77 125 238
- net foreign exchange differences (35) (74) (214)
- net fair value adjustments on
derivatives 97 - -
Investments and loans 650 442 734
- listed investments 381 289 619
- unlisted investments 269 153 115
Market value of listed investments 1 613 1 396 1 254
Directors" valuation of unlisted
investments 269 153 115
Commitments 714 1 320 1 079
- capital expenditure 226 115 110
- programme and film rights 346 952 782
- network and other commitments 104 253 186
- decoder commitments 38 - 1
Operating lease commitments 366 685 627
Naspers"s mission is to build shareholder value by operating subscriber
management platforms that provide content, services and means of communication
to paying users; to license related technologies and to be useful to the
communities we serve.
COMMENTARY
Highlights
Highlights over the past six months include:
* The rand continued to strengthen during the period, resulting in a mixed
impact on the group. On the positive side, there were considerable foreign
currency input costs, which will now translate into lower rand costs. On the
negative side, revenues generated outside of South Africa will now translate
into fewer rands.
* The pay-television operations in Greece, battered by ill-considered
competition, advanced some distance in their drive to profitability.
* Tencent, the real-time communications company which operates the QQ platform
in China, made progress, growing registered subscriptions to some 22 million.
For the first time the internet segment reported a total net operating profit
before amortisation.
* In the over-traded local print media segment, Daily Sun and Son continued to
grow rapidly.
FINANCIAL OVERVIEW
In total, the group"s revenues for the period grew marginally to R5,6
billion. This flat revenue growth was partly a consequence of the stronger rand.
In addition, the benefits of the appreciating rand were passed on to pay-
television subscribers in South Africa, where none or only nominal subscription
fee increases were introduced during the past year.
Continued focus and effort to drive costs down resulted in operating profit,
before amortisation and impairment charges, improving sharply to R596 million.
Net finance costs of R208 million were higher than for the equivalent period
last year, mainly because of fair value adjustments required by AC133 of R97
million, R35 million relating to currency gains and R77 million to notional
interest on financial leases, mostly for satellite transponders. Thus the net
interest paid on borrowings was R69 million, compared with R117 million last
year. This reduction is partially due to lower levels of debt and lower interest
rates.
The share of equity-accounted results relates largely to the performance of M-
Net and SuperSport. Both companies have been affected by the stronger rand,
which has sharply reduced the rand value of their dollar-based revenues. The
implementation of the new accounting standard AC133 also had a negative impact
on their results.
The total tax charge increased to R174 million, largely as a result of the
increased profitability of the group.
The net effect of the above was headline earnings from continuing operations of
R148 million, compared with a loss in the equivalent period last year of R96
million. As previously reported to shareholders, these headline earnings include
certain items prescribed by South African Generally Accepted Accounting Practice
("SA GAAP"), which reduce their credibility as a measure of true operating
performance. Our best estimate of such items include:
Currency translation gains R25 million
Creation of deferred tax assets (R3) million
Amortisation of intangible assets (R33) million
Impact of AC133 (R100) million
(R111) million
The net effect of these prescribed accounting conventions was that reported
headline earnings were negatively impacted by R111 million. Adjusting for these
items would result in "core headline" earnings of R259 million, compared with a
comparable reported loss of R104 million in the previous year.
On 30 September 2003 the group had net consolidated cash resources of R1,6
billion and interest-bearing liabilities of R0,9 billion, excluding capitalised
satellite and other leases.
SUBSCRIBER PLATFORMS
Pay television
In total, the pay-television subscriber base reflected marginal growth. The
group now manages in excess of two million pay-television subscribers, 68% of
whom subscribe to digital services. Stable subscriber numbers, coupled with the
stronger rand and only small subscription fee increases, saw pay-television
revenues remain flat in rand terms. In contrast, operating profit before
amortisation charges grew to R458 million.
The South African pay-television base sits at just above one million
subscribers, whilst on the rest of the African continent the base grew to 269
000. Our pay-television and internet operations in South Africa have overlapping
costs and functions and will move closer together in future.
In Greece, progress has been made and operating losses were significantly
down compared with last year. The subscriber base has grown after the
traditional summer churn and now stands at 274 000. Progress has also been made
in securing local football rights at more realistic prices, which helped bolster
the programme offer.
In Thailand, UBC"s subscribers stand at 425 000 homes. This business, which is
equity accounted, reported an operating profit before amortisation of R75
million. Although piracy remains a problem, the Thai economy has recovered well.
Internet
The internet segment grew revenues to R464 million. In excess of 40% of this
revenue is generated outside South Africa, therefore the strong rand has a
negative impact here. The segment reached profitability in total for the first
time, recording a small operating profit before amortisation. In South Africa, M
Web maintained its subscriber base around 240 000. A concern is the stagnation
of the dial-up market locally and the lack of local broadband services. The lack
of innovation and regulatory limitations on South African fixed-line telephony
is concerning. M-Web, however, continued to grow in other segments.
In Thailand, the group has 250 000 users, most of whom access the service on
a prepaid basis. It is also the leading provider of on-line content and
entertainment.
The group"s principal activity in China is an interest in Tencent, a
developer and operator of real-time communication and entertainment technologies
and services. Tencent has built a position at the forefront of China"s internet
and wireless value-added service sector. As the operator of the largest Chinese-
language instant-messaging and digital entertainment platform, QQ, it enjoys
significant consumer recognition amongst China"s 60 million internet users and
240 million mobile phone users. With some 22 million registered subscriptions
across all its services, QQ generated revenue of US$36 million and an operating
profit of US$21 million during the period. In August 2003, Tencent bought back
some of its own shares, resulting in the Naspers group owning 50% of Tencent and
the founding members owning the remaining 50%. Tencent was equity accounted from
August 2003.
Technology
Irdeto Access, the group"s primary technology business, continued its
transition to a software business by further reducing its hardware sales. This,
combined with the weak global market for conditional access products, had a
negative effect on revenue. As a consequence, revenues and margins were down
compared with the same period last year. Containing costs remains a prime focus
until the market recovers. The encryption of premium content remains core to the
technology focus of the group and, to this end, the group continues to invest in
research and development, which will secure the integrity of its core subscriber
businesses and potentially unlock new growth opportunities.
PRINT MEDIA
The newspaper and magazine businesses in South Africa had a satisfactory
period, growing revenues by 15% and operating profits before amortisation by
21%. Here the stronger rand was beneficial. Certain titles, such as Daily Sun
and Son, as well as some magazines, continued to show growth. However, many
sectors in this market are overtraded and are heading for a shake-out. The
printing operations had a good run and were able to pass on lower paper and ink
costs to their customers.
BOOK PUBLISHING AND PRIVATE EDUCATION
The book publishing business had a stable interim period, with revenues
growing by 15% to R269 million. Highlights, such as the success of the Harry
Potter books, were balanced by more muted results elsewhere. Educor experienced
static student enrolments. As a consequence, revenues were flat, whilst
operating profits before amortisation were slightly up. These two businesses
will be more closely integrated in future.
BLACK ECONOMIC EMPOWERMENT
The Welkom economic empowerment scheme was extended for three years. We
believe that this will be beneficial to both the 17 000 previously disadvantaged
individuals participating in the scheme and the group.
The board took cognisance of recent communications by Government relating to
economic empowerment and is studying their impact. The group supports the
principle of economic empowerment and envisages launching suitable initiatives
in future.
WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the trading update and cautionary announcement
dated 3 September 2003. In view of the publication of the interim results, the
cautionary is now withdrawn.
BOARD OF DIRECTORS
To fill vacancies that arose with the recent retirement of directors, whilst
also meeting a need for certain expertise, Fred Phaswana, Francine-Anne du
Plessis and Rachel Jafta were appointed to the board in October 2003.
ACCOUNTING POLICIES
These abridged consolidated interim financial statements comply with South
African Statements of Generally Accepted Accounting Practice and 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 2003, except for
the adoption of AC133 - Financial Instruments:
Recognition and Measurement, as from 1 April 2003. These interim financial
statements have been reviewed by the company"s auditors, PricewaterhouseCoopers
Inc, whose report is available for inspection at the registered offices of
Naspers.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Managing director
25 November 2003
(For a more detailed exposition, visit the Naspers website at www.naspers.com)
Directors:
T Vosloo (chairman), JP Bekker (managing director), JJM van Zyl,
E Botha, LN Jonker, NP van Heerden, SJZ Pacak, BJ van der Ross,
GJ Gerwel, HSS Willemse, F du Plessis, FTM Phaswana, RCC Jafta.
Company secretary:
GM Coetzee
Registered office:
40 Heerengracht, Cape Town 8001
(PO Box 2271, Cape Town 8000)
Transfer secretaries:
Ultra Registrars (Proprietary) Limited,
Fifth Floor, 11 Diagonal Street, Johannesburg 2001
(PO Box 4844, Johannesburg 2000)
Date: 25/11/2003 09:00:36 AM Supplied by www.sharenet.co.za
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