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NPN - Naspers Limited - Reviewed Results Of The Naspers Group For The Six Months
Ended 30 September 2009
Naspers Limited
(Registration Number: 1925/001431/06)
ISIN: ZAE000015889 JSE Share Code: NPN
LSE Share Code: NPSN
("Naspers" or "the group")
INTERIM REPORT
The reviewed results of the Naspers group for the six months ended 30 September
2009 are as follows:
Commentary
Over the past six months the group experienced satisfactory growth. Core
headline earnings for the period grew by 36% to R6,48 per N ordinary share.
Shareholders are reminded that the board considers core headline earnings an
appropriate indicator of the sustainable operating performance of the group, as
it adjusts for non-recurring and non-operational items.
Consolidated operating profit before amortisation and other gains/losses
increased by 19% to R2,8bn, reflecting a net improvement in operating margins.
Growth was driven by the internet and pay-television segments, whilst the print
businesses remained under pressure.
Recently the group acquired a 91% interest in BuscaPe, an e-commerce platform
operating in Latin America. Several smaller transactions were also concluded.
Looking ahead, we plan to grow the group through a combination of organic
expansion from existing businesses, the application of new technologies and the
pursuit of some acquisitions within our field of interest and expertise.
FINANCIAL REVIEW
Consolidated revenue growth of 6% to R13,5bn was recorded over the period. Costs
were closely managed and, as a consequence, consolidated operating profit before
amortisation and other gains/losses expanded by 19% to R2,8bn (2008: R2,4bn).
"Other losses" include a write-down of R330m flowing from the refinancing of the
Welkom Yizani black economic empowerment scheme in Media24. The Naspers board
decided to assist our 107 000 emerging co-shareholders at a time when print
ventures are struggling globally.
Our earnings from equity-accounted associates grew to R872m, mostly via Tencent
and Mail.ru.
A profit of R107m arose from the sale of M-Web`s sub-Saharan Africa business.
The net result of the above was core headline earnings of R2,4bn - an increase
of 37% on the prior period.
Free cash flow was positive at R1,6bn (2008: R759m). Our financial position
remains sound, with total consolidated net debt, excluding satellite leases, of
R2,6bn. This represents a net debt:equity ratio of 8%.
The group recently extended to March 2013 an offshore revolving credit facility
with a syndicate of banks and increased the size of the facility to US$1,6bn.
The current drawdown on the facility is US$948m.
SEGMENTAL REVIEW
This review includes consolidated subsidiaries and our economic interest in
associated companies, as permitted by recently introduced accounting standards.
Pay television
The pay-television segment proved resilient in tough economic conditions.
Revenue increased by 15% to R8bn, largely by growth of 352 000 gross subscribers
for the six-month period. Operating margins held despite cost pressures from
growing the subscriber base and increased sports content costs. SuperSport is
now the largest funder of sport in Africa.
In South Africa the base grew by 238 000 gross to 2 639 000 households. Decoders
were subsidised and lower-priced tiers promoted in the emerging market. The
Compact bouquet delivered growth of 132 000 gross subscribers. Advertising
revenues, however, decreased in line with consumer spending.
In the rest of sub-Saharan Africa our base grew by 114 000 gross to 1 030 000
homes. The lower-priced Compact/Family bouquets now reach 391 000 homes. Several
competitors are active in the market. Operating results from the sub-Saharan
business were affected by a strong rand and a devaluation of the naira in
Nigeria.
Internet
Overall the internet segment performed well, growing revenues by 29% and
operating profit before amortisation and other gains/losses by 49%.
A major profit driver was Tencent, which upped revenues to R2,2bn and operating
profit before amortisation and other gains/losses to R1,1bn. Platform statistics
include active user accounts up to 485m and peak simultaneous instant messaging
users of 75m. Online gaming revenues were robust.
The other internet activities, in aggregate, reported lower operating profit
before amortisation and other gains/losses of R53m - largely the effect of a
firm rand, volatility in some currencies like the rouble and zloty, as well as
development costs of new products or markets.
The e-commerce operations of Allegro (Eastern Europe) and Ricardo (Western
Europe) continued expanding. Gross merchandising value grew 39% in local
currency. Both businesses developed their product offerings through organic
growth and selective bolt-on acquisitions. A consequence was that operating
profit before amortisation and other gains/losses showed a marginal decline.
In Russia Mail.ru expanded its user base to 75m unique visitors. This business
is diversifying its revenue streams and continues to perform ahead of
expectations.
Print media
Globally print operations felt the full impact of economic headwinds.
The operations in South Africa showed no topline growth due to weak advertising
revenues, whilst operating profits before amortisation and other gains/losses
were down 27%. In general, the circulation of our magazines and newspapers
proved remarkably resilient. The book publishing business suffered due to
government spending patterns. Our printing business, Paarl Media, had only
marginal revenue growth. There is a focus on cost and efficiencies. Capital
expenditure has declined and working capital is being tightly managed.
In Brazil Abril experienced similar trends, with marginal revenue growth and a
42% lower operating profit in local currency. Abril has also implemented tougher
cost controls, the benefits of which will follow.
Technology
Generally, orders from existing conditional access clients held up. However, new
sales slowed and client projects were slow, with India and Africa exceptions.
The consolidation of technology assets reduced costs. As a consequence, whilst
revenues were down, operating performance improved.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Our financial results for the six months ended 30 September 2009 have been
prepared in accordance with IAS 34 "Interim Financial Reporting", the
requirements of the South African Companies Act, No 61 of 1973, and in
compliance with the Listings Requirements of the JSE Limited. Except as noted
below, the accounting policies used for the interim results are consistent with
those applied in the previous annual financial statements and IFRS. These
results have been reviewed by the company`s auditor, PricewaterhouseCoopers
Inc., whose unqualified report is available for inspection at the registered
office of the company.
During the prior year, we finalised the purchase price allocation for the
acquisition of Tradus plc. The effect on the September 2008 results was as
follows: goodwill decreased by R3,01bn, intangible assets increased by R3,45bn
and deferred tax liabilities increased by R638m. Amortisation of intangible
assets for the six months increased by R235m gross of deferred tax of R41m.
Prior period information was restated accordingly.
The group recorded a provisional amount of R2,57bn profit from the sale of
NetMed in September 2008. The final profit arising from the sale amounted to
R2,97bn and the group restated the income statement for the period ended 30
September 2008 accordingly, with no effect on the statement of financial
position.
The group adopted the following new standards, amendments and circulars for the
period ended 30 September 2009:
The revised IAS 1 "Presentation of Financial Statements" was issued, requiring
certain changes to existing disclosures as well as the introduction of the
"Statement of Comprehensive Income". These changes had no effect on the
financial position or results of the group.
IFRS 8 "Operating Segments" replaced IAS 14 "Segment Reporting". Segment
information is now presented on the same basis as for internal management
reporting purposes. The only significant change is that the results of our
investments in associates are now proportionately consolidated for segmental
reporting, with Tencent as a separate reportable segment. The amendment to IFRS
8, which allows an entity not to disclose segmental assets, if not reviewed by
management, has been early adopted. Comparative information was restated
accordingly.
IAS 23 "Borrowing Cost (Revised)" requires entities to capitalise qualifying
borrowing costs. This amendment had no material effect on the group.
Circular 3/2009 "Headline Earnings" was issued by the South African Institute of
Chartered Accountants. The circular was changed to incorporate the latest
amendments and revisions to IFRS. This circular is effective for the period
under review, but had no material effect on the group.
ACQUISITIONS
During September the group acquired 91% of Brazilian e-commerce group
BuscaP'.com Inc. for approximately R2,6bn (US$342m), financed from existing
facilities. The preliminary purchase price allocation: tangible assets R157m,
intangible assets R41m, liabilities R227m and the balance to goodwill.
In August the group finalised a public tender offer to acquire 83% of Bankier.pl
in Poland for cash of R145m (PLN53m). The preliminary purchase price allocation:
tangible assets R44m, intangible assets R2m, liabilities R16m and the balance to
goodwill.
The group made some smaller acquisitions for a combined cost of R245m. Revenues
and profits from all acquisitions closed during the period were immaterial to
the consolidated results.
SUBSEQUENT EVENTS
During October 2009 the group acquired 51% of Korbitec (Proprietary) Limited for
R158m. Korbitec is a South African company who develops and commercialises
software, with a focus on the e-commerce property sector.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Managing director
Cape Town
26 November 2009
Segmental Review
Revenue
Six months ended 30 September
2009 2008 %
R`m R`m Change
Pay television 8 019 6 985 15
Internet 4 061 3 144 29
- Tencent 2 175 1 199 81
- Other internet 1 886 1 945 (3)
Print 4 836 5 001 (3)
Technology 605 725 (17)
Economic interest 17 521 15 855 11
Corporate services - - -
Less: Associates (4 066) (3 203) 27
Consolidated 13 455 12 652 6
Ebitda
Six months ended 30 September
2009 2008 %
R`m R`m Change
Pay television 2 911 2 309 26
Internet 1 255 865 45
- Tencent 1 118 628 78
- Other internet 137 237 (42)
Print 472 663 (29)
Technology 11 (24) +100
Economic interest 4 649 3 813 22
Corporate services (110) (103) -
Less: Associates (1 315) (915) 44
Consolidated 3 224 2 795 15
Operating profit
before amortisation
and other gains/(losses)
Six months ended 30 September
2009 2008 %
R`m R`m Change
Pay television 2 694 2 099 28
Internet 1 098 735 49
- Tencent 1 045 584 79
- Other internet 53 151 (65)
Print 327 484 (32)
Technology (11) (49) 78
Economic interest 4 108 3 269 26
Corporate services (113) (104) -
Less: Associates (1 196) (803) 49
Consolidated 2 799 2 362 19
Note: The segmental review includes our share of our associates` results.
Consolidated Income Statement
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2009 2008 2009
Reviewed Reviewed Audited
R`m R`m R`m
Revenue 13 455 12 652 26 690
Cost of providing (6 893) (6 703) (13 531)
services and sale of
goods
Selling, general and (4 343) (4 269) (9 289)
administration expenses
Other losses - net (293) (17) (87)
Operating profit 1 926 1 663 3 783
Interest received 195 321 572
Interest paid (345) (454) (878)
Other finance income - 179 38 3
net
Share of equity- 872 405 1 473
accounted results
Profit on sale of 107 34 36
investments
Impairment of equity- - (216) (214)
accounted investments
Profit before taxation 2 934 1 791 4 775
Taxation (1 051) (796) (1 436)
Profit after taxation 1 883 995 3 339
Profit from discontinued - 127 127
operations
Profit arising on - 2 965 2 965
discontinuance of
operations
Profit for the period 1 883 4 087 6 431
Attributable to:
Naspers shareholders 1 579 3 763 5 761
Minority shareholders 304 324 670
1 883 4 087 6 431
Core headline earnings 2 414 1 763 4 373
for the period (R`m)
Core headline earnings 648 476 1 179
per N ordinary share
(cents)
Fully diluted core 634 470 1 169
headline earnings per N
ordinary share (cents)
Headline earnings for 1 466 1 078 3 065
the period (R`m)
Headline earnings per N 394 291 826
ordinary share (cents)
Fully diluted headline 385 287 819
earnings per N ordinary
share (cents)
Earnings per N ordinary 424 1 015 1 553
share (cents)
Fully diluted earnings 415 1 002 1 540
per N ordinary share
(cents)
Net number of shares
issued (`000)
- At period-end 373 451 371 449 372 451
- Weighted average for 372 451 370 558 371 004
the period
- Fully diluted weighted 380 852 375 517 374 108
average
Consolidated Statement of Comprehensive Income
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2009 2008 2009
Reviewed Reviewed Audited
R`m R`m R`m
Profit for the period 1 883 4 087 6 431
Total other comprehensive (1 817) (921) (3 871)
income, net of tax for
the period
Translation of foreign (1 318) (826) (3 544)
operations
Cash flow hedges (654) (97) (347)
Share of associates` - - (6)
other comprehensive
income
Tax on other 155 2 26
comprehensive income
Total comprehensive 66 3 166 2 560
income for the period
Attributable to:
Naspers shareholders (142) 2 859 1 900
Minority shareholders 208 307 660
66 3 166 2 560
Condensed Consolidated Statement of Changes in Equity
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2009 2008 2009
Reviewed Reviewed Audited
R`m R`m R`m
Balance at beginning of 35 217 33 147 33 147
period
Changes in share capital
and premium
Movement in treasury (435) (9) (405)
shares
Share capital and premium - 46 123
issued
Changes in reserves
Total comprehensive (142) 2 859 1 900
income for the period
Movement in share-based 247 (17) 445
compensation reserve
Movement in business (260) 575 548
combination reserve
Share of associates` - - (252)
reserve movements
Direct retained earnings (11) (1) (9)
movement
Dividends paid to Naspers (773) (669) (669)
shareholders
Changes in minority
interest
Total comprehensive 208 307 660
income for the period
Dividends paid to (249) (222) (307)
minorities
Movement in minority (43) (26) 36
interest in reserves
Balance at end of period 33 759 35 990 35 217
Comprising:
Share capital and premium 14 639 15 393 15 074
Share-based compensation 1 174 465 927
reserve
Business combination 71 609 331
reserve
Hedging reserve (480) 107 (116)
Valuation reserve 1 844 1 849 1 843
Foreign currency (188) 3 898 1 171
translation reserve
Retained earnings 15 157 12 371 14 361
Minority interest 1 542 1 298 1 626
Total 33 759 35 990 35 217
Condensed Consolidated Statement of Financial Position
30 September 30 September 31 March
2009 2008 2009
Reviewed Reviewed Audited
R`m R`m R`m
ASSETS
Non-current assets 41 198 40 640 40 873
Property, plant and 4 616 4 529 4 754
equipment
Goodwill and other 22 179 22 757 20 916
intangible assets
Investments and loans 13 757 12 773 14 276
Deferred taxation 646 482 871
Other non-current assets - 99 56
Current assets 12 684 12 601 13 001
Assets classified as held 21 537 686
for sale
TOTAL ASSETS 53 903 53 778 54 560
EQUITY AND LIABILITIES
Share capital and 32 217 34 692 33 591
reserves
Minority shareholders` 1 542 1 298 1 626
interest
Total equity 33 759 35 990 35 217
Non-current liabilities 10 364 8 542 8 991
Capitalised finance 542 924 865
leases
Liabilities - interest- 7 504 5 640 5 934
bearing
- non-interest-bearing 50 101 118
Post-retirement medical 169 149 155
liability
Derivatives 975 333 543
Deferred taxation 1 124 1 395 1 376
Current liabilities 9 780 9 057 10 088
Liabilities classified as - 189 264
held for sale
TOTAL EQUITY AND 53 903 53 778 54 560
LIABILITIES
Net asset value per 8 627 9 340 9 019
N ordinary share (cents)
Reconciliation of Ebitda to Operating Profit
Six months ended
30 September
2009 2008
R`m R`m
Ebitda 3 224 2 795
Depreciation (425) (433)
Operating profit before amortisation and 2 799 2 362
other losses
Amortisation (580) (682)
Other losses (293) (17)
Operating profit 1 926 1 663
Note: For a reconcilation of operating profit to profit before taxation, refer
to the "Consolidated Income Statement."
Condensed Consolidated Statement of Cash Flows
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2009 2008 2009
Reviewed Reviewed Audited
R`m R`m R`m
Cash flow from operating 2 254 1 449 3 913
activities
Cash flow (utilised (3 012) 3 313 1 217
in)/generated from
investment activities
Cash flow from/(utilised 992 (6 259) (6 839)
in) financing activities
Net movement in cash and 234 (1 497) (1 709)
cash equivalents
Foreign exchange (520) (64) 187
translation adjustments
Cash and cash equivalents 5 803 7 325 7 325
at beginning of period
Cash and cash equivalents 5 517 5 764 5 803
at end of period
Included in:
- Cash and cash 5 517 5 728 5 724
equivalents
- Assets classified as - 36 79
held for sale
5 517 5 764 5 803
Calculation of Headline and Core Headline Earnings
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2009 2008 2009
Reviewed Reviewed Audited
R`m R`m R`m
Net profit attributable to 1 579 3 763 5 761
shareholders
Adjusted for:
- insurance proceeds (175) - (113)
- impairment of goodwill 153 19 139
and other assets
- (profit)/loss on sale of (15) (20) 27
assets
- discontinuance of - (2 965) (2 965)
operations
- (profit)/loss on sale of (72) 46 (10)
investments
- impairment of equity- - 216 214
accounted investments
1 470 1 059 3 053
Total tax effects of (4) 9 5
adjustments
Total minority interest of - 10 7
adjustments
Headline earnings 1 466 1 078 3 065
Discontinued operations - (121) (129)
Headline earnings from 1 466 957 2 936
continuing operations
Headline earnings 1 466 1 078 3 065
Adjusted for:
- profit from discontinued - (121) (129)
operations
- treasury-settled share 134 124 258
scheme charges
- reversal/(creation) of 132 - (58)
deferred tax assets
- amortisation of 436 557 958
intangible assets
- refinancing of the 330 - -
Welkom Yizani empowerment
scheme
- fair value adjustments (84) 125 279
and currency translation
differences
Core headline earnings 2 414 1 763 4 373
Supplementary Information
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2009 2008 2009
Reviewed Reviewed Audited
R`m R`m R`m
Depreciation of property, 425 433 910
plant and equipment
Amortisation of intangible 580 682 1 246
assets
Interest on finance leases 38 50 109
Other losses - net (293) (17) (87)
- profit/(loss) on sale of 14 3 (25)
property, plant and
equipment
- impairments of goodwill (3) - (18)
and intangible assets
- insurance proceeds 175 - 113
- impairments of tangible (150) (19) (143)
assets
- refinancing of the (330) - -
Welkom Yizani empowerment
scheme
- fair value adjustment on 1 (1) (14)
shareholders`liabilities
Other finance income - net 179 38 3
- net foreign exchange 36 (153) (374)
differences and fair value
adjustments on derivatives
- preference dividends 143 191 377
received
Investments and loans 13 757 12 773 14 276
- listed investments 3 494 2 701 3 591
- unlisted investments 10 263 10 072 10 685
Market value of listed 77 427 37 527 44 491
investments
Directors` valuation of 10 263 10 072 10 685
unlisted investments
Commitments 15 842 10 098 14 205
- capital expenditure 643 357 359
- programme and film 6 030 6 791 8 063
rights
- network and other 573 315 480
services commitments
- transponder leases 7 732 1 872 4 290
- operating lease 576 664 701
commitments
- decoder commitments 288 99 312
Analysis of equity-
accounted results
Tencent 936 504 1 217
Mail.ru 54 38 87
Abril 8 71 414
Other (8) (29) (41)
Contribution to core 990 584 1 677
headline earnings
Intangible amortisation (83) (88) (179)
Contribution to headline 907 496 1 498
earnings
Impairment of assets - (10) -
Sale of assets - - (17)
Sale of investments (35) (81) (8)
Share of equity-accounted 872 405 1 473
results
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 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.
Directors
T Vosloo (chairman), J P Bekker (managing director)
F-A du Plessis, G J Gerwel, R C C JaftaL N Jonker
D Meyer, S J Z Pacak, T M F Phaswana, L P Retief
B J van der Ross, N P van HeerdenJ J M van Zyl, H S S Willemse
Company secretary
G Kisbey-Green
Registered office Transfer secretaries
40 Heerengracht, Link Market Services South Africa
Cape Town 8001 (Proprietary) Limited
(PO Box 2271, 11 Diagonal Street,
Cape Town 8000) Johannesburg 2001
(P O Box 4844, Johannesburg 2000)
For a more detailed exposition, visit the Naspers website at www.naspers.com
Date: 26/11/2009 09:00:01 Supplied by www.sharenet.co.za
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