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Naspers Limited - Interim Report
NASPERS LIMITED
(Registration number 1925/001431/06)
ISIN: ZAE000015889 JSE share code: NPN
(Naspers)
INTERIM REPORT
The reviewed results of the Naspers group for the six months ended
30 September 2005 are as follows:
COMMENTARY
GROUP OVERVIEW
Favourable macro-economic conditions in our major markets helped Naspers
achieve satisfactory results over the past six months. Revenue grew by 14%
whilst headline earnings of R1,036 billion and core headline earnings of R976
million were recorded.
Profits in the second half of the financial year will, however, be subdued by
development costs.
The group now reports under International Financial Reporting Standards
(IFRS). Accordingly, the interim results for the six months ended 30 September
2005 detailed below, are presented on that basis. For ease of comparison, the
financial information relating to the six months ended 30 September 2004 and
the year ended 31 March 2005, have been restated in terms of IFRS.
Shareholders are also referred to an announcement describing the group"s
transition to IFRS that was released via SENS on 29 November 2005 and is
available on www.naspers.com.
Broadly speaking, macro-economic conditions in the major markets in which the
group operates remained favourable over the past six months and the results
reported here reflect this. On previous occasions we have reminded
shareholders that we serve consumers whose spending power is influenced by
economic cycles. If such tendencies turn negative, as they will do from time to
time, we will be affected. Some elements of the South African advertising
market appear to be cooling. However, the general state of the local economy
looks sound, largely owing to the astute management of the economy by
government. The economy of China continues to expand rapidly.
The group remains focused on developing growth opportunities, both organically
from existing businesses and through investing in new opportunities. Further
investments in China and India are under consideration. Whilst it is difficult
to place a firm time frame to such projects, we anticipate some progress in the
second half of this financial year. Such investments will have an impact on
both cash flows and earnings.
FINANCIAL OVERVIEW
Revenue for the period increased by 14% to R7,7 billion. The major contributor
remains subscriptions. As an indication of currently favourable economic
conditions, advertising revenues grew by 20% over the period.
Selling, general and administration expenses now include a charge of R80
million (September 2004: R63 million) for share-based compensation, calculated
in accordance with IFRS 2 "Share-based payments".
Finance costs continue to decline, in line with reduced levels of debt in the
group. Finance costs include net interest income of R52 million and imputed
interest incurred on finance leases of R82 million. The fair value adjustments
required by IAS 39 on the group"s foreign exchange contracts and other
derivative instruments declined to R5 million, compared with R60 million in
the prior period.
Equity accounted earnings increased to R78 million and comprise mainly our share
of Tencent"s earnings in China. As from 1 September 2005, the group equity
accounted its interest in Beijing Media Corporation. The comparative period
reflected a dilution profit of R380 million, arising mainly from the listing of
Tencent in Hong Kong, an event that did not recur in the current year.
The net effect of the above is headline earnings for the period of R1 036
million, equating to 366 cents per share. Core headline earnings, which we
continue to believe is a more appropriate measure of true sustainable
operating performance, was slightly lower at R976 million or 345 cents
per share. An analysis of how we determine core headline earnings is shown below
in the section "Calculation of core headline earnings". In the second half of
the year we anticipate an acceleration of development costs, which will impact
on the rate of growth of core headline earnings.
As previously pointed out to shareholders, headline earnings in the financial
year ended 31 March 2005 were artificially boosted by the application of
certain accounting principles. In particular, the creation of deferred tax
assets (R470 million) and accounting for foreign exchange contracts
(R360 million). It is improbable that such an artificial boost to earnings
will recur in the current financial year and, as a consequence, it is likely
that headline earnings for the full year will, as anticipated, probably be
lower than that reported last year.
ELECTRONIC MEDIA
Pay television
The total pay-television subscriber base grew by a net 81 000 over the period.
The group currently has 2,38 million subscribers under management, of whom 80%
are on digital platforms.
In South Africa the equated subscriber base grew marginally by 45 000 over the
period to just below 1,2 million. The compact bouquet reflects 22 500
subscribers. In sub-Saharan Africa, the base grew by 20 000 to 356 000
households. Main sectors of growth were the emerging Black market segment in
South Africa and the Portuguese tier in sub-Saharan Africa. Regulations
escalated across the continent and will probably become more intensive in many
territories.
In Greece the subscriber base of 364 000 remained more or less stable over the
period, a satisfactory outcome given the traditional churn over the summer
months. The business continues its good turnaround and reported an operating
profit before amortisation of R165 million (2004: R75 million).
In Thailand we accepted an offer from our partner, True Corporation Plc, to
acquire our interest in the pay-TV business UBC, as well as our interest in
the internet service provider KSC. The cash consideration is US$160 million
and is part of a tender offer to all UBC"s shareholders. The offer is still
subject to UBC shareholder approval.
Internet
In South Africa M-Web now has 314 000 dial-up and 30 000 broadband customers.
The South African business remains profitable, but slow-growing due to a lack
of broadband connections. South Africa is falling dramatically behind its
peers elsewhere in the world in this regard, and this handicap will gradually
impact other sectors of our economy that rely on communications.
Progress was made in the rest of Africa, in particular with a VSAT service in
Nigeria. M-Web Thailand enhanced its leading position with its Sanook! portal.
Improvements to the service are being added.
In China, Tencent, in which we hold an interest, expanded its range of services
to complement its instant messaging platform. New offerings, including QQ
Zone and QQ Pets, were launched to the QQ community, which includes the
majority of the approximately 100 million internet users in China.
Technology
This segment reported an operating loss before amortisation of R47 million, as
both Irdeto and Entriq are investing heavily in developing new technologies.
Irdeto is expanding its technology for the protection of content delivered to
mobile hand-held devices. Following high volumes of smart cards and other
equivalent devices, it generated an operating profit in the period. Entriq is
increasing development expenditure on building its broadband content portals
and will continue to increase expenditure for the next few years, before any
profits will materialise.
PRINT MEDIA
Newspapers, magazines and printing
Revenue from this segment increased to R1 940 million, and operating profit
before amortisation grew by 17% to R282 million.
Newspapers benefited from continued robust advertising in South Africa, whilst
advertising in the magazine sector was more static.
Circulation was generally satisfactory, with a few exceptions. The Daily Sun
continued its growth, achieving an audited circulation in the six months to
June of 437 000. A satisfying aspect of this is that the low cover price and
relevant content is stimulating readership in homes where many were not
previous readers of newspapers. Soccer Laduuuuuma and the Sunday Sun also
recorded new circulation peaks.
Beijing Media Corporation in China, in which we hold an interest, had a muted
six months to June 2005, largely due to lower property advertising revenues.
In our view, prospects over the longer term remain positive.
Book publishing and private education
Revenue from this segment increased by 5% to R615 million and an operating loss
before amortisation of R28 million was recorded.
Shareholders are probably aware that the book business is a cyclical one and
results for the half year are not a reliable indication of those for the full
year, particularly as the dates of school-book sales are variable. Most
businesses are trading positively, although the general book retail market
shows strain. The e-trader Kalahari.net continues to grow.
The private education business had mixed results, with distance education
excelling and the face-to-face business struggling to cope with the high
infrastructure cost and additional expenditure to meet rigorous new
accreditation requirements. Educor is managing more and more to comply with the
various Higher Education and Further Education and Training regulations.
Considerable work is, however, still required to bring Damelin to adequate
levels of profitability.
BLACK ECONOMIC EMPOWERMENT
The group supports the government"s broad-based Black economic empowerment
initiatives. We intend to implement an empowerment transaction once adequate
clarity on the Codes of Good Practice has been obtained.
DIVIDEND
The group has a policy of declaring an annual dividend. Accordingly no interim
dividend is proposed.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Condensed interim financial statements for the six months ended 30 September
2005 have been prepared in accordance with IAS 34 "Interim Financial
Reporting", and in compliance with the Listings Requirements of JSE Limited.
They represent the group"s first IFRS condensed interim financial statements
for part of the period for which annual financial statements will be prepared in
terms of IFRS.
These condensed interim financial statements have been reviewed by the
company"s auditors, PricewaterhouseCoopers Inc., whose report is available for
inspection at the registered offices of the company.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Managing director
Cape Town
29 November 2005
SEGMENTAL REVIEW
Revenue
Six months ended 30 September
2005 2004 %
R"m R"m Change
Electronic media 5 105 4 522 13
- pay television 4 441 3 970 12
- internet 444 422 5
- technology 220 130 69
Print media 2 555 2 184 17
- newspapers, magazines and printing 1 940 1 599 21
- book publishing and private education 615 585 5
Corporate services 1 1 -
7 661 6 707 14
SEGMENTAL REVIEW
Ebitda
Six months ended 30 September
2005 2004 %
R"m R"m Change
Electronic media 1 500 1 171 28
- pay television 1 550 1 182 31
- internet (15) 48 -
- technology (35) (59) 41
Print media 328 311 5
- newspapers, magazines and printing 343 299 14
- book publishing and private education (15) 12 -
Corporate services (32) (19) (68)
1 796 1 463 23
Operating profit before amortisation and other gains and losses
Six months ended 30 September
2005 2004 %
R"m R"m Change
Electronic media 1 285 969 33
- pay television 1 380 1 016 36
- internet (48) 20 -
- technology (47) (67) 30
Print media 254 239 6
- newspapers, magazines and printing 282 242 17
- book publishing and private education (28) (3) -
Corporate services (34) (19) (79)
1 505 1 189 27
Operating profit
Six months ended 30 September
2005 2004 %
R"m R"m Change
Electronic media 1 260 954 32
- pay television 1 383 1 003 38
- internet (73) 18 -
- technology (50) (67) 25
Print media 250 228 10
- newspapers, magazines and printing 287 233 23
- book publishing and private education (37) (5) -
Corporate services (34) (19) (79)
1 476 1 163 27
CONDENSED INCOME STATEMENT
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
Reviewed Reviewed Audited
R"m R"m R"m
Revenue 7 661 6 707 13 959
Cost of providing services and
sale of goods (4 316) (3 907) (8 043)
Selling, general and
administration expenses (1 888) (1 640) (3 367)
Other gains and losses, net 19 3 (12)
Operating profit 1 476 1 163 2 537
Net finance costs (10) (135) (234)
Share of equity-accounted results 78 32 88
Profit/(loss) on sale of
investments, net 11 (20) (1)
Dilution profits, net 6 380 368
Profit before taxation 1 561 1 420 2 758
Taxation (433) (353) (257)
Net profit for the period 1 128 1 067 2 501
Attributable to:
Naspers Limited shareholders 1 066 1 008 2 384
Minority shareholders 62 59 117
1 128 1 067 2 501
Core headline earnings for the
period (R"m) 976 450 1 235
Core headline earnings per N
ordinary share (cents) 345 163 445
Headline earnings for the period
(R"m) 1 036 645 2 024
Headline earnings per N ordinary
share (cents) 366 233 730
Fully diluted headline earnings
per N ordinary share (cents) 342 221 690
Earnings per N ordinary share
(cents) 376 364 860
Fully diluted earnings per N
ordinary share (cents) 352 345 813
Net number of shares issued
("000)
- At period-end 284 848 278 816 282 590
- Weighted average for the period 283 154 276 658 277 294
- Fully diluted weighted average 303 265 292 451 293 126
CONDENSED BALANCE SHEET
30 September 30 September 31 March
2005 2004 2005
Reviewed Reviewed Audited
R"m R"m R"m
ASSETS
Non-current assets 7 140 5 373 6 837
Property, plant and equipment 3 697 3 327 3 445
Goodwill and other intangibles 1 204 833 1 225
Investments and loans 1 307 861 1 231
Programme and film rights 50 73 48
Derivative financial instruments 29 34 32
Deferred taxation 853 245 856
Current assets 7 748 7 002 7 204
Total assets 14 888 12 375 14 041
EQUITY AND LIABILITIES
Share capital and premium 5481 5 321 5 391
Other reserves (2494) (2 371) (2 418)
Retained earnings 2749 516 1 893
Naspers shareholders" interest 5736 3 466 4 866
Minority shareholders" interest 158 231 227
Total shareholders" equity 5 894 3 697 5 093
Non-current liabilities 3 137 3 061 2 951
Capitalised finance leases 1 689 1 795 1 740
Liabilities - interest bearing 589 781 423
- non-interest-bearing 186 211 159
Post-retirement medical liability 150 169 161
Deferred taxation 523 105 468
Current liabilities 5 857 5 617 5 997
Total equity and liabilities 14 888 12 375 14 041
2 014 1 243 1 722
Net asset value per N ordinary share (cents)
CONDENSED STATEMENT OF CHANGES IN EQUITY
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
Reviewed Reviewed Audited
R"m R"m R"m
Balance at beginning of period 5 093 2 012 2 012
Movement in treasury shares 60 (32) 38
Share capital and premium issued - 761 761
Foreign currency translations 1 14 (4)
Movement in fair value reserve (24) 20 41
Movement in cash flow hedging reserve 6 18 24
Movement in share-based
compensation reserve 103 16 34
Transactions with minority
shareholders (213) (2) (106)
Net profit for the period 1 128 1 067 2 501
Dividends (260) (177) (208)
Balance at end of period 5 894 3 697 5 093
CONDENSED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
Reviewed Reviewed Audited
R"m R"m R"m
Cash flow from operating activities 1 295 609 2 368
Cash flow from investment activities (624) (52) (877)
Cash flow from financing activities (183) (110) (514)
Net movement in cash and cash
equivalents 488 447 977
CALCULATION OF CORE HEADLINE EARNINGS
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
Reviewed Reviewed Audited
R"m R"m R"m
Net profit attributable to
Naspers shareholders 1 066 1 008 2 384
Adjusted for :
- other gains and losses, net (13) (3) 7
- profit/(loss) on sale of
investments, net (11) 20 1
- dilution profits, net (6) (380) (368)
Headline earnings 1 036 645 2 024
Adjusted for :
- currency translation
differences (19) 13 1
- creation of deferred tax assets (10) - (470)
- amortisation of intangible
assets 34 21 40
- IAS 39 fair value adjustments (65) (229) (360)
Core headline earnings 976 450 1 235
RECONCILIATION OF NET PROFIT
Six months Year
ended ended
30 September 31 March
2004 2005
Reviewed Audited
R"m R"m
As previously reported under SA GAAP
- Attributable to Naspers shareholders 1 064 2 600
- Attributable to minority shareholders 60 120
1 124 2 720
Adjusted for :
- share-based payments (63) (128)
- amortisation of goodwill and intangible assets - -
- transactions with minority shareholders 32 (59)
- recognition of intangible assets (10) (20)
- property, plant and equipment (7) (11)
- leases (2) (4)
- decommission liabilities - -
- discounting of financial liabilities 3 (1)
- currency translation differences (10) 4
As reported under IFRS 1 067 2 501
RECONCILIATION OF EQUITY
31 March 30 September 1 April
2005 2004 2004
Audited Reviewed Audited
R"m R"m R"m
As previously reported under SA GAAP
- Naspers shareholders" interest 6 630 4 999 3 231
- Minority shareholders" interest 223 223 237
6 853 5 222 3 468
Adjusted for :
- share-based payments (155) (110) (62)
- amortisation of goodwill and
intangible assets 219 219 219
- transactions with minority
shareholders (1 956) (1 786) (1 782)
- recognition of intangible assets 40 51 61
- property, plant and equipment 116 121 128
- leases (21) (20) (18)
- decommission liabilities (2) (3) (2)
- discounting of financial liabilities (1) 3 -
As reported under IFRS 5 093 3 697 2 012
Supplementary Information
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
Reviewed Reviewed Audited
R"m R"m R"m
Depreciation of property, plant
and equipment 291 274 556
Amortisation of intangible assets 48 29 57
Share-based payment expenses
(IFRS 2) 80 63 129
Other gains and losses, net 19 3 (12)
- profit on sale of property,
plant and equipment 18 3 7
- impairments of goodwill and
intangible assets - - (14)
- impairments of tangible assets - - (6)
- dividends received 1 - 1
Finance costs 10 135 234
- net interest income (52) (30) (62)
- interest on finance leases 82 86 190
- net foreign exchange
differences (25) 19 (2)
- net fair value adjustments on
derivatives (IAS 39) 5 60 108
Investments and loans 1 313 995 1 239
- listed investments 1 192 921 1 126
- unlisted investments 121 74 113
Market value of listed investments 4 862 2 122 3 208
Directors" valuation of unlisted
investments 121 74 113
Commitments 3 699 2 148 3 924
- capital expenditure 343 184 447
- programme and film rights 1 574 1 135 1 483
- network and other services
commitments 304 241 385
- operating lease commitments 1 335 573 1 511
- set-top box commitments 143 15 98
Directors
T Vosloo (chairman), J P Bekker (managing director), F A du Plessis,
G J Gerwel, R C C Jafta, L N Jonker, S J Z Pacak, F T M Phaswana,
B J van der Ross, N P van Heerden, J J M van Zyl, H S S Willemse.
Company secretary
G M Coetzee
Registered office Transfer secretaries
40 Heerengracht, Cape Town 8001 Ultra Registrars (Proprietary) Limited
(PO Box 2271, Cape Town 8000) Fifth Floor, 11 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 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, Shareholder Relations
Department - GlobalBuyDIRECT(TM), Church Street Station, PO Box 11258, New
York, NY 10286-1258, USA.
Date: 29/11/2005 09:00:23 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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