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NPN - Naspers - The Reviewed Results Of The Naspers Group For The Six Months

Release Date: 26/11/2008 09:00
Code(s): NPN
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NPN - Naspers - The Reviewed Results Of The Naspers Group For The Six Months Ended 30 September 2008 Naspers Limited (Registration Number: 1925/001431/06) ISIN: ZAE000015889 & Share Code: NPN ISIN: US 6315121003 & LSE ADS code: NPSN ("Naspers" or "the group") Interim Report The reviewed results of the Naspers group for the six months ended 30 September 2008 are as follows: Commentary GROUP OVERVIEW The group recorded robust revenue growth of 32% for the period. New developments coupled with the cost of growing the pay-television subscriber base and finance costs resulted in core headline earnings remaining relatively constant. A key area of growth was in the internet segment, where recent investments such as Allegro/Ricardo and Gadu-Gadu performed well. Our associates, mail.ru and Tencent, also reported good growth. The pay-television businesses, traditionally not sensitive to the economic cycle, continued to grow with the equated subscriber base increasing by 171 000 households. Our technology business increased revenues by 51% as a result of organic growth and acquisitions. Advertising revenues comprise 16% of our total revenue base, so the recent downward pressure on advertising revenues, which grew by 5% on a comparative basis, has a limited impact on the group. Looking ahead, it is expected that the recent market turmoil will slow consumer spending. However, we expect the major emerging markets in which we operate to continue growing, albeit at a slower pace. Our businesses will adapt their strategies to this trend. Strategic investments made over the past few years in internet and pay- television operations have positioned us well for the years ahead. Current market conditions may present us with further investment opportunities. The group has a strong balance sheet. FINANCIAL REVIEW Revenue growth of 32% in the aggregate was recorded over the period. The key driver came from existing operations, which increased by 19%, whilst new acquisitions added 13%. Growth in the internet segment was boosted by the inclusion of Allegro and Ricardo (forming part of Tradus). Pay-television revenues increased by 28% as a result of the expansion of its subscriber base by a net 171 000 households. Print media in South Africa remained subdued, with revenues growing by only 4%. Our operating profit before amortisation and other gains/losses increased by 7% to R2,4 billion (2007: R2,2 billion). The reduction in certain margins arose from growing our pay-television subscriber base and developing new services. Total development costs were R638 million (2007: R551 million). Net interest costs for the period were R133 million, compared with income of R268 million in the prior period. This arises from funding new acquisitions in the last quarter of the prior year with debt. Other finance income includes preference dividends of R191 million (2007: R160 million) and foreign exchange mark-to-market losses of R102 million compared with mark-to-market gains of R104 million in the prior period. Our share of the equity-accounted results of our associates, mainly Tencent, mail.ru and Abril, increased to R405 million (2007: R126 million). The impairment of equity-accounted investments refers mostly to our withdrawal from a German mobile TV project. A R2,6 billion profit arising on the discontinuance of operations relates to the sale of pay-television businesses in Greece and Cyprus. Proceeds of approximately R4,3 billion were used to reduce the group`s long-term debt. The net effect of the above is that core headline earnings for the period grew to R1,76 billion. A "Calculation of Headline and Core Headline Earnings" is detailed below. ELECTRONIC MEDIA Pay television Overall, the pay-television segment expanded revenues by 28%, owing to excellent subscriber growth of 171 000 during the period. Operating margins diminished due to costs of growing the subscriber base and strengthening our products. In South Africa the subscriber base grew by 79 000 net equated subscribers to 1 649 000. The mid-priced Compact bouquet delivered firm growth to 369 000. A slowdown in consumer spending impacted advertising revenues, which showed a marginal decline. In sub-Saharan Africa a focus on local content and our coverage of the Olympics delivered exceptional growth of 92 000 net equated subscribers, taking the cumulative base to 630 000. The Compact bouquet stands at 247 000. More competition across the continent is reflected in higher prices for content and subsequently lower margins. Mobile TV licences were obtained in Ghana, Kenya, Namibia and Nigeria. Construction of DVB-H networks in these markets continues. Internet The internet segment recorded revenue of R1,8 billion, which increased sharply owing to the inclusion of Allegro/Ricardo and Gadu-Gadu. An operating profit before amortisation and other gains/losses of R113 million was recorded. The e-commerce operations of Allegro (Eastern Europe) and Ricardo (Western Europe) generated revenues of R887 million. Both of the largest markets, Poland and Switzerland, delivered sound growth. Ricardo launched new services in Austria and Greece, whilst Allegro concluded investments in the Czech Republic and Hungary. Gadu-Gadu in Poland now has 14 million unique users. A casual gaming portal was recently added and further expansion is planned. In China Tencent performed ahead of expectations with growth on all platforms. The Olympics increased traffic to almost one billion page views per day and peak concurrent users exceeded 45 million. The total number of active users now exceeds 350 million. The addition of several new games contributed to steady growth. Tencent`s contribution to core headline earnings increased to R504 million (2007: R226 million). In India ibibo continues to develop its internet business, focussing on social media, search and advertising. An agreement was concluded with Tencent whereby the two companies will jointly develop the Indian business. In Russia mail.ru grew its base to 45 million active e-mail users. This business contributed R38 million (2007: R20 million) to our core headline earnings. Technology Irdeto continued to build its conditional access business, delivering over 8,3 million units in the period. Overall revenue increased by 51%, thanks to organic growth and the inclusion of acquisitions. The Entriq business was integrated into the Irdeto group, now bringing all our technology businesses under one umbrella. The inclusion of new acquisitions and development costs in the Entriq and BSS businesses have seen operating profit before amortisation and other gains/losses decrease by 29%. PRINT MEDIA The print media operations in South Africa generated marginal revenue growth of 4%. In light of depressed macro-economic conditions, costs are being cut and headcount reduced. Prudent capital expenditure disciplines are also in place. Circulation and readership of newspaper and magazine publications mostly held up particularly in the emerging markets. Advertising feels the pinch of the recession more directly. Our printing business, Paarl Media, achieved revenue growth of 7%, although margins were affected by lower print volumes and exchange rates. The book publishing business is operating satisfactorily, but reflects a decline in revenue because of the sale of some businesses in the prior year. In Brazil Abril continues to steam ahead. Revenues in local currency grew by 27% and Abril`s contribution to our core headline earnings increased to R71 million. BASIS OF PRESENTATION AND ACCOUNTING POLICIES Condensed interim financial statements for the six months ended 30 September 2008 have been prepared in accordance with IAS 34 ("Interim Financial Reporting"), and in compliance with the Listings Requirements of the JSE Limited. The accounting policies used to prepare the interim results are consistent with those applied in the previous period and IFRS. These condensed interim financial statements have been reviewed by the company`s auditor, PricewaterhouseCoopers Inc., whose unqualified report is available for inspection at the registered office of the company. Preference dividend income was previously included in interest received, but has been reclassified to other finance income to better reflect its nature. SUBSEQUENT EVENTS The group announced on 2 June 2008 that it had initiated an auction process to dispose of its internet service provider (ISP) business, MWEB. On 10 November 2008 the group announced that an agreement had been concluded for the sale of MWEB`s sub-Saharan Africa business excluding South Africa ("MWEB Africa"). The purchase price places a value of approximately R610 million on the MWEB Africa group. As regards MWEB`s operations in South Africa, the group decided to terminate the auction process for this unit. A better price will probably be obtainable once the contraction in credit markets clears. FINANCIAL DIRECTOR Steve Pacak, the financial director of Naspers, has been with the group for over 20 years. The board has granted him a three-month sabbatical from 1 January 2009 until he resumes his duties on 1 April 2009. Steve will accordingly resign all his group directorships for the duration of his sabbatical. Steve Ward, currently CFO of MIH, will act as chief financial officer of Naspers in Steve Pacak`s absence. On behalf of the board Ton Vosloo Koos Bekker Chairman Managing director Cape Town 26 November 2008 Segmental Review Revenue Six months ended 30 September
2008 2007 % R`m R`m Change Pay television 6 981 5 447 28 Internet 1 831 654 +100 Technology 725 481 51 Print 3 108 2 998 4 Corporate services 7 7 - 12 652 9 587 32
Ebitda Six months ended 30 September 2008 2007 %
R`m R`m Change Pay television 2 309 2 200 5 Internet 195 (20) +100 Technology (24) (17) (41) Print 418 375 11 Corporate services (103) (24) - 2 795 2 514 11
Operating profit before amortisation and other gains/(losses) Six months ended 30 September 2008 2007 %
R`m R`m Change Pay television 2 099 2 044 3 Internet 113 (49) +100 Technology (49) (38) (29) Print 303 276 10 Corporate services (104) (25) - 2 362 2 208 7 Operating profit
Six months ended 30 September 2008 2007 % R`m R`m Change Pay television 1 887 2 034 (7) Internet (43) (79) 46 Technology (127) (69) (84) Print 283 234 21 Corporate services (102) (26) - 1 898 2 094 (9) Consolidated Income Statement Six months Six months Year ended ended ended
30 September 30 September 31 March 2008 2007 2008 Reviewed Reviewed Audited R`m R`m R`m
Revenue 12 652 9 587 20 518 Cost of providing services (6 703) (4 787) (10 778) and sale of goods Selling, general and (4 034) (2 683) (5 877) administration expenses Other (losses)/gains - net (17) (23) 15 Operating profit 1 898 2 094 3 878 Interest received 321 402 826 Interest paid (454) (134) (324) Other finance income - net 38 286 503 Share of equity-accounted 405 126 654 results Profit on sale of 34 - 16 investments Impairment of equity- (216) (68) (279) accounted investments Profit before taxation 2 026 2 706 5 274 Taxation (837) (883) (1 378) Profit after taxation 1 189 1 823 3 896 Profit from discontinued 127 39 243 operations Profit/(loss) arising on 2 568 (81) (82) discontinuance of operations Profit for the period 3 884 1 781 4 057 Attributable to: Naspers shareholders 3 560 1 454 3 418 Minority shareholders 324 327 639 3 884 1 781 4 057 Core headline earnings for 1 763 1 706 3 996 the period (R`m) Core headline earnings per 476 495 1 130 N ordinary share (cents) Fully diluted core 470 482 1 104 headline earnings per N ordinary share (cents) Headline earnings for the 1 272 1 588 3 806 period (R`m) Headline earnings per N 343 461 1 076 ordinary share (cents) Fully diluted headline 339 448 1 051 earnings per N ordinary share (cents) Earnings per N ordinary 961 422 967 share (cents) Fully diluted earnings per 948 411 944 N ordinary share (cents) Net number of shares issued (`000) - At period-end 371 449 348 527 370 558 - Weighted average for the 370 558 344 632 353 622 period - Fully diluted weighted 375 517 354 111 362 106 average Condensed Consolidated Balance Sheet 30 September 30 September 31 March
2008 2007 2008 Reviewed Reviewed Audited R`m R`m R`m ASSETS Non-current assets 40 194 16 041 41 822 Property, plant and 4 529 4 077 4 541 equipment Goodwill and other 22 311 1 596 24 183 intangible assets Investments and loans 12 773 9 894 12 507 Deferred taxation 482 474 466 Other non-current assets 99 - 125 Current assets 12 601 16 620 12 940 Assets classified as held 537 411 2 030 for sale TOTAL ASSETS 53 332 33 072 56 792 EQUITY AND LIABILITIES Share capital and reserves 34 884 21 809 31 909 Minority shareholders` 1 298 516 1 238 interest Total equity 36 182 22 325 33 147 Non-current liabilities 7 904 2 543 13 053 Capitalised finance leases 924 1 107 1 112 Liabilities - interest- 5 640 658 10 629 bearing - non-interest-bearing 434 423 189 Post-retirement medical 149 183 142 liability Deferred taxation 757 172 981 Current liabilities 9 057 7 933 8 935 Liabilities classified as 189 271 1 657 held for sale TOTAL EQUITY AND LIABILITIES 53 332 33 072 56 792 Net asset value per N 9 391 6 257 8 611 ordinary share (cents) Condensed Consolidated Statement of Changes in Equity Six months Six months Year ended ended ended 30 September 30 September 31 March 2008 2007 2008
Reviewed Reviewed Audited R`m R`m R`m Balance at beginning of 33 147 21 570 21 570 period Movement in treasury shares (9) (148) (2 180) Share capital and premium 46 213 4 752 issued Foreign currency (828) (354) 3 529 translations Movement in fair value - - 1 849 reserve Movement in cash flow (95) (51) 218 hedging reserve Movement in share-based (12) 78 155 compensation reserve Transactions with minority 940 (16) 24 shareholders Net profit for the period 3 884 1 781 4 057 Dividends (891) (748) (827) Balance at end of period 36 182 22 325 33 147 Condensed Consolidated Cash Flow Statement Six months Six months Year ended ended ended 30 September 30 September 31 March
2008 2007 2008 Reviewed Reviewed Audited R`m R`m R`m Cash flow from operating 1 449 1 949 4 411 activities Cash flow generated 3 313 (1 010) (18 331) from/(utilised) in investment activities Cash flow (utilised (6 259) (922) 8 856 in)/from financing activities Net movement in cash and (1 497) 17 (5 064) cash equivalents Foreign exchange (64) (256) 908 translation adjustments Cash and cash equivalents 7 325 11 481 11 481 at beginning of period Cash and cash equivalents 5 764 11 242 7 325 at end of period Included in: - Cash and cash 5 728 11 199 6 690 equivalents - Assets classified as 36 43 635 held for sale 5 764 11 242 7 325 Calculation of Headline and Core Headline Earnings Six months Six months Year ended ended ended
30 September 30 September 31 March 2008 2007 2008 Reviewed Reviewed Audited R`m R`m R`m
Net profit attributable to 3 560 1 454 3 418 shareholders Adjusted for: - impairment of goodwill 19 10 48 and other assets - profit on sale of assets (20) (14) (15) - discontinuance of (2 568) 79 82 operations - gain on loan settlement - - (87) - loss on sale of 46 - 512 investments - impairment of equity- 216 68 348 accounted investments 1 253 1 597 4 306 Total tax effects of 9 3 (486) adjustments Total minority interest of 10 (12) (14) adjustments Headline earnings 1 272 1 588 3 806 Adjusted for: - (profit)/loss from (121) (3) 48 discontinued operations - treasury-settled share 124 33 47 scheme charges - creation of deferred tax - - (244) assets - amortisation of 363 159 410 intangible assets - fair value adjustments 125 (71) (71) and currency translation differences Core headline earnings 1 763 1 706 3 996 Supplementary Information Six months Six months Year ended ended ended 30 September 30 September 31 March
2008 2007 2008 Reviewed Reviewed Audited R`m R`m R`m Depreciation of property, 433 306 662 plant and equipment Amortisation of 448 91 375 intangible assets Share-based payment 168 111 184 expenses (IFRS 2) Other (losses)/gains - (17) (23) 15 net - profit on sale of 3 4 8 property, plant and equipment - impairments of goodwill - - (20) and intangible assets - impairments of tangible (19) (7) (28) assets - dividends received 1 1 1 - gain on loan settlement - - 87 - fair value adjustment (2) (21) (33) on shareholders` liabilities Net finance 95 (554) (1 005) costs/(income) - interest received (321) (402) (826) - interest paid 404 82 224 - interest on finance 50 52 100 leases - net foreign exchange 102 (104) (91) differences - net fair value 51 (22) (76) adjustments on derivative instruments - preference dividends (191) (160) (336) received Investments and loans 12 773 9 894 12 507 - listed investments 2 701 1 533 2 282 - unlisted investments 10 072 8 361 10 225 Market value of listed 37 527 28 147 29 306 investments Directors` valuation of 10 072 8 361 10 225 unlisted investments Commitments 10 098 5 777 8 682 - capital expenditure 357 603 642 - programme and film 6 791 2 713 4 804 rights - network and other 2 187 1 746 2 138 services commitments - operating lease 664 568 802 commitments - set-top box commitments 99 147 296 Analysis of equity- accounted results Tencent 504 226 615 Abril 71 40 150 mail.ru 38 20 49 Other (29) (5) (42) Contribution to core 584 281 772 headline earnings Intangible amortisation (88) (115) (214) Deferred tax assets - - 244 created Discontinued operations - (33) (62) Contribution to headline 496 133 740 earnings Impairment of assets (10) (6) (18) Sale of investments (81) (1) (68) Share of equity-accounted 405 126 654 results 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, T M F Phaswana, L P Retief, B J van der Ross, N P van Heerden, J J M van Zyl, H S S Willemse Company secretary G Kisbey-Green Registered office Transfer secretaries 40 Heerengracht, Cape Town Link Market Services South Africa 8001 (Proprietary) Limited (P O Box 2271, Cape Town 11 Diagonal Street, Johannesburg, 8000) 2001 (P O Box 4844, Johannesburg 2000)
ADR programme The Bank of New York Mellon maintains a GlobalBuyDIRECT TM plan for Naspers Limited. For additional information, please visit the Bank of New York Mellon`s web site 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 Mellon, Shareholder Relations Department - GlobalBuyDIRECT TM, Church Street Station, P O Box 11258, New York, NY 10286-1258, USA. Important information The report contains forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. Words such as "believe", "anticipate", "intend", "seek", "will", "plan", "could", "may", "endeavour" and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such 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 include key factors that could adversely affect our businesses and financial performance. 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. For a more detailed exposition, visit the Naspers website at www.naspers.com 26 November 2008 Sponsor: Investec Bank Limited Date: 26/11/2008 09:00:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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