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Naspers - Summary of the audited results of the Naspers group for the

Release Date: 27/06/2006 08:15
Code(s): NPN
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Naspers - Summary of the audited results of the Naspers group for the year ended 31 March 2006 Naspers Limited (Registration number: 1925/001431/06) ISIN: ZAE000015889 JSE share code: NPN ("Naspers") Provisional Report Summary of the audited results of the Naspers group for the year ended 31 March 2006 Commentary GROUP OVERVIEW AND PROSPECTS The Naspers group continues to benefit from past investments coming to fruition and a positive macro-environment in many of its key markets. These primary factors have resulted in top-line revenues growing 16% to R15,7 billion and core headline earnings growing by 67% to R1,9 billion. After four years of rapid earnings and cash flow growth, some strategic investments are required in the year ahead to deliver growth in ensuing years. We are targeting, in particular, broadband services in China and North America, and digital video broadcast-handheld (DVB-H) in Africa. We plan this in the knowledge that such investments will reduce short-term earnings and cash flow growth. In addition, we will invest in the further development of existing businesses and expand into new markets and opportunities. In recent years, the group has experienced strong macro-economic growth in our key markets. Over the past few years, economic management of especially the South African and Chinese economies has been particularly impressive. Future growth will be reliant on continued economic expansion in our markets, which is uncertain. Geographically the group is focused on the BRICSA countries (Brazil, Russia, India, China, South and sub-Saharan Africa), which we believe present above average growth opportunities. To date we have been successful in establishing a firm presence in Africa and China. Subsequent to year-end, we acquired a 30% equity stake in a leading Brazilian media company, Abril, for a cash consideration of US$422 million. This allows participation in the expanding Brazilian media market. We also established development offices in Russia and India and are pursuing opportunities in these and other markets. As mentioned before, the group plans to step up investment in broadband and mobile technologies and services. Both represent opportunities for delivering media content in new formats. FINANCIAL REVIEW Group revenues grew by 16% to R15,7 billion. This came largely from net growth in pay-television subscribers of 163 000 and an increase in advertising revenues of 22%. Operating profit improved by 22% to R3 billion, with aggregate operating margins at 19%. The net finance cost of R11 million includes net interest income of R181 million earned on cash held in the group, an imputed interest cost on finance leases - mostly for satellite capacity - of R177 million, unrealised foreign exchange losses of R22 million on foreign denominated finance leases and fair value adjustments on foreign exchange contracts and other derivatives, which reflect a net gain of R7 million. The group"s share of earnings from its equity-accounted associates, including the investment in Tencent, increased to R151 million. The taxation charge of R935 million is substantially higher than last year, partly a function of the increased profitability of the group and partly the creation of deferred tax assets last year of R470 million, which then reduced the net tax charge. An accounting profit of some R1 billion was recorded on the sale of our interest in UBC and is reflected as a profit arising on the discontinuance of operations. Last year we reported headline earnings of R2,02 billion and indicated to shareholders that this figure was artificially boosted by the creation of deferred tax assets of R470 million and fair value adjustments relating to foreign exchange contracts of R360 million. As expected, neither of these items recurred to this extent in the current year. As a consequence, headline earnings for this year reflects a modest growth of 6% to R2,14 billion. Core headline earnings, which we believe reflects true, sustainable earnings performance, grew by 67% to R1,97 billion. An analysis of core headline earnings is shown in the adjacent section "Calculation of Headline and Core Headline Earnings". The group balance sheet remains sound. The group generated free cash flow of R1,9 billion (2005: R1,4 billion) in the current year. DIVIDEND The board has recommended that the annual dividend be increased by 71% to 120 cents (previously 70 cents), per N ordinary share and 24 cents (previously 14 cents), per unlisted A ordinary share. If approved by shareholders, the dividends are payable to shareholders recorded in the books on 8 September 2006 and will be paid on 11 September 2006. The last date to trade cum dividend will be on 1 September 2006. ELECTRONIC MEDIA Pay television In aggregate, the pay-television segment grew revenues by 15% and operating profit before amortisation and other gains and losses by 29%. This growth was largely driven by an increase in the aggregate subscriber base of 163 000 to just above two million. These segmental results exclude UBC which was sold during the year and is treated, for IFRS reporting purposes, as a discontinued operation. South Africa: The South African operation reflected some growth, increasing by a net 103 000 to 1,25 million subscribers. The lower priced bouquet aimed at the emerging market (DStv Compact) grew to 42 000 subscribers. MultiChoice launched the personal video recorder (PVR) in October 2005, selling some 28 000 units. In the coming year, we intend to make a substantial investment in the development of a DVB-H platform in South Africa. Sub-Saharan Africa: The sub-Saharan Africa subscriber base grew by 50 000 to 385 000, primarily from expansion in the Angolan market. Our businesses in sub- Saharan Africa continue to be plagued by regulatory pressures and processes. Mediterranean: This base grew by 10 000 to 374 000 subscribers. Migration from analogue to digital continues, with 69% of subscribers now using digital services. During the year, ten new channels were added to the Nova platform. Seasonal churn remains an issue. Internet The internet segmental results for the current year exclude Tencent as this investment is now equity accounted. The prior year figures include Tencent"s operations for three months to June 2004. The internet segment reflected revenue growth of 29% (52% adjusting for Tencent"s accounting treatment). Operating losses before amortisation and other gains and losses increased to R98 million, mostly attributed to the development of the internet portal business in Thailand and Sportscn in China. The internet operation in South Africa remains profitable. Tencent is the leading instant-messaging (IM) platform in China, and increasingly one of the leaders in this category worldwide. The business has shown strong growth with peak simultaneous online user accounts for IM services reaching 19,6 million, and active IM user accounts increasing to 220 million (some users have more than one account). The internet segment, including our equity-accounted share of Tencent"s earnings, is profitable. Conditional access Irdeto, the content security solution business, reported record shipments of almost six million devices leading to a growth in revenues of 38%. Irdeto recently acquired a competitor, Philips CryptoTec and continued its expansion into the rapidly developing mobile TV segment. Its pioneering agreement with TU Media in Korea is the first such mobile TV service launched in the world. Irdeto will capitalise on its lead by further developing its technology for safe-guarding content in the broadband, internet and mobile environment. Entriq The consumption of broadband media on the internet is becoming the dominant form of internet use. This is evidenced by the almost doubling of Entriq"s revenue to R66 million. Extensive investment continued in content protection, subscriber management technologies and application service provider services for such broadband markets. Major clients that Entriq has secured include NBC, Viacom, MTV, ProSieben and the Intel ViiV-platform. Entriq has also developed a broadband product, MediaZone, where niche content is aggregated and offered to the market for subscription. Substantial investment is expected in the short term to consolidate on the progress that Entriq has achieved in its technologies. PRINT MEDIA Newspapers, magazines and printing This segment benefited from strong organic growth and robust economic conditions, resulting in revenue growing by 18% to R3,9 billion. Newspaper titles such as Daily Sun, Son and Soccer Laduuuuuma continued to show good circulation growth. Additional printing presses are being installed to cope with capacity demands. The magazine segment also experienced a good year with a number of new titles being launched in South Africa. A new printing plant, Paarl Web Gauteng, was commissioned and is performing to expectation. An empowerment partner, Kurisani, has invested in this business. Book publishing and private education The book publishing business, Via Afrika, had a reasonable year with the school book publishers recording an excellent performance. In contrast, the private education business turned in a mixed performance. The core distance education business, International Colleges Group, had a satisfactory year, whilst a number of growth initiatives were launched with varying levels of success. This was also the last year of the teach-out of Lyceum colleges, closed some years ago. The face-to- face business, Damelin, continued with its repositioning and focus on the further education and training sector. BLACK ECONOMIC EMPOWERMENT (BEE) Our understanding is that the Codes of Good Practice should be finalised shortly. The South African operations have already started work to ensure compliance with these Codes. In respect of equity ownership, we intend to attract the required level of ownership through an offering to a broad base of BEE participants, including individuals, groupings and our own BEE staff. Further announcements in this regard will be made shortly. ACCOUNTING POLICIES The financial results are prepared in accordance with International Financial Reporting Standards (IFRS), the requirements of the South African Companies Act, Act 61 of 1973, and the Listings Requirements of JSE Limited (Listings Requirements). In terms of the Listings Requirements the group is required to prepare its consolidated financial statements in accordance with IFRS for the year ended 31 March 2006. The date of transition to IFRS was 1 April 2004. The group"s opening balance sheet at 1 April 2004 has been restated in accordance with IFRS1, "First-time Adoption of IFRS". The effect of the transition from South African Statements of Generally Accepted Accounting Practice to IFRS on the group"s equity at 1 April 2004 and 31 March 2005 and its net profit for the year ended 31 March 2005 has been disclosed with the group"s 30 September 2005 interim results in a separate document entitled "Transition to IFRS". This information is available on the group"s website at www.naspers.com. A copy of the unqualified audit opinion of the auditors, PricewaterhouseCoopers Inc., is available for inspection at the registered office of the company. On behalf of the board Ton Vosloo Koos Bekker Chairman Managing director Cape Town 27 June 2006 Segmental Review Revenue Year ended 31 March 2006 2005 R"m R"m %
Electronic media 10 219 8 732 17 - pay television 8 903 7 747 15 - internet 898 696 29 - conditional access 352 255 38 - Entriq 66 34 94 Print media 5 500 4 782 15 - newspapers, magazines 3 983 3 374 18 and printing - book publishing and 1 517 1 408 8 private education Corporate services (13) 4 - 15 706 13 518 16
Operating profit before amortisation and other gains/(losses) Year ended 31 March
2006 2005 R"m R"m % Electronic media 2 503 1 945 29 - pay television 2 761 2 133 29 - internet (98) (52) 88 - conditional access 5 (47) (111) - Entriq (165) (89) 85 Print media 652 636 3 - newspapers, magazines 616 550 12 and printing - book publishing and 36 86 (58) private education Corporate services (55) (43) 28 3 100 2 538 22 Segmental Review Ebitda
Year ended 31 March 2006 2005 R"m R"m % Electronic media 2 937 2 356 25 - pay television 3 105 2 465 26 - internet (34) 11 - - conditional access 19 (35) - - Entriq (153) (85) 80 Print media 811 779 4 - newspapers, magazines 745 665 12 and printing - book publishing and 66 114 (42) private education Corporate services (52) (42) 24 3 696 3 093 20 Operating profit
Year ended 31 March 2006 2005 R"m R"m % Electronic media 2 467 1 916 29 - pay television 2 785 2 120 31 - internet (153) (68) 125 - conditional access - (47) - - Entriq (165) (89) 85 Print media 595 604 (1) - newspapers, magazines 612 528 16 and printing - book publishing and (17) 76 (122) private education Corporate services (58) (51) 14 3 004 2 469 22 Abridged Consolidated Income Statement Year Year ended ended 31 March 31 March 2006 2005
R"m R"m Revenue 15 706 13 518 Cost of providing services and sale of (8 754) (7 726) goods Selling, general and administration (3 948) (3 311) expenses Other gains/(losses) - net - (12) Operating profit 3 004 2 469 Finance costs - net (11) (216) Share of equity-accounted results 151 88 Profit/(loss) on sale of investments 74 (1) Dilution profits - 368 Profit before taxation 3 218 2 708 Taxation (935) (257) Profit after taxation 2 283 2 451 Profit from discontinued operations 32 50 Profit arising on discontinuance of 1 032 - operations Profit for the year 3 347 2 501 Attributable to: Naspers shareholders 3 190 2 384 Minority shareholders 157 117 3 347 2 501 Core headline earnings for the period 1 975 1 185 (R"m) Core headline earnings per N ordinary 696 427 share (cents) Headline earnings for the period (R"m) 2 146 2 024 Headline earnings per N ordinary share 756 730 (cents) Fully diluted headline earnings per N 715 690 ordinary share (cents) Earnings per N ordinary share (cents) 1 124 860 Fully diluted earnings per N ordinary 1 063 814 share (cents) Net number of shares issued ("000) - At period-end 290 555 282 590 - Weighted average for the period 283 719 277 294 - Fully diluted weighted average 300 243 293 126 Abridged Consolidated Balance Sheet 31 March 31 March 2006 2005 R"m R"m ASSETS Non-current assets 7 272 6 839 Property, plant and equipment 3 689 3 445 Goodwill and other intangible assets 1 159 1 226 Investments and loans 1 383 1 231 Programme and film rights 171 48 Derivative financial instruments 33 32 Deferred taxation 837 857 Current assets 10 067 7 204 TOTAL ASSETS 17 339 14 043 EQUITY AND LIABILITIES Share capital and reserves 7 118 4 866 Minority interest 172 227 Non-current liabilities 3 372 2 968 Capitalised finance leases 1 444 1 740 Liabilities- interest-bearing 722 423 - non-interest-bearing 551 176 Post-retirement medical liability 153 161 Deferred taxation 502 468 Current liabilities 6 677 5 982 Net asset value per N ordinary share 2 450 1 722 (cents) Abridged Consolidated Statement of Changes in Equity Year Year ended ended
31 March 31 March 2006 2005 R"m R"m Balance at beginning of year 5 093 2 012 Movement in treasury shares 65 38 Share capital and premium issued 106 761 Foreign currency translation 18 (4) Movement in fair value reserve (24) 41 Movement in cash flow hedging reserve (1) 24 Movement in share-based compensation 135 34 reserve Transactions with minority (1 113) (106) shareholders Net profit for the period 3 347 2 501 Dividends (336) (208) Balance at end of year 7 290 5 093 Abridged Consolidated Cash Flow Statement Year Year ended ended 31 March 31 March
2006 2005 R"m R"m Cash flow from operating activities 3 166 2 368 Cash flow from investment activities (335) (877) Cash flow from financing activities 25 (514) Net increase in cash and cash 2 856 977 equivalents Calculation of Headline and Core Headline Earnings Year Year ended ended 31 March 31 March 2006 2005
R"m R"m Net profit attributable to 3 190 2 384 shareholders Adjusted for: - impairment of goodwill and other 69 14 assets - (profit)/loss on sale of property, (17) (7) plant and equipment - (profit)/loss on sale of (64) 1 investments - discontinuance of operations (1 032) - - dilution profits - (368) Headline earnings 2 146 2 024 Adjusted for: - creation of deferred tax assets (42) (470) - amortisation of intangible assets 48 40 - IAS39 fair value adjustments (145) (360) - profit from discontinued (32) (49) operations Core headline earnings 1 975 1 185 Supplementary Information Year Year ended ended 31 March 31 March
2006 2005 R"m R"m Depreciation of property, plant and 596 556 equipment Amortisation of intangible assets 96 57 Share-based payment expenses (IFRS2) 135 129 Other gains/(losses) - net - (12) - profit on sale of property, plant 17 7 and equipment - impairments of goodwill and (69) (14) intangible assets - impairments of tangible assets - (6) - dividends received 2 1 - fair value adjustment on 50 - shareholders" liability Finance costs 11 216 - net interest income (181) (62) - interest on finance leases 177 172 - net foreign exchange differences 22 (2) - net fair value adjustments on (7) 108 derivative instruments Investments and loans 1 383 1 239 - listed investments 1 249 1 126 - unlisted investments 134 113 Market value of listed investments 6 506 3 208 Directors" valuation of unlisted 134 113 investments Commitments 2 860 3 924 - capital expenditure 445 447 - programme and film rights 1 426 1 483 - network and other services 364 385 commitments - operating lease commitments 359 1 511 - set-top box commitments 266 98 Directors T Vosloo (chairman), J P Bekker (managing director), J J M van Zyl, L N Jonker, N P van Heerden, S J Z Pacak, B J van der Ross, G J Gerwel, H S S Willemse, F du Plessis, F T M Phaswana, R C C Jafta Company secretary G M Coetzee Registered office Transfer secretaries 40 Heerengracht, Cape Town, Ultra Registrars 8001 (Proprietary) Limited (PO Box 2271, Cape Town, Fifth Floor, 11 Diagonal 8000) Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) ADR programme The Bank of New York maintains a Global BuyDIRECT(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 - Global BuyDIRECT(TM) Church Street Station, P O Box 112588, New York, NY 10286-1258, USA. For a more detailed exposition, visit the Naspers website at www.naspers.com Date: 27/06/2006 08:15:15 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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