Wrap Text
NPN - Naspers Limited - The reviewed results of the Naspers group for the six
months ended 30 September 2010
Naspers Limited
(Registration Number: 1925/001431/06)
("Naspers")
JSE Share code: NPN
ISIN: ZAE000015889
LSE ADS code: NPSN
ISIN: US 6315121003
INTERIM REPORT
The reviewed results of the Naspers group for the six months ended 30 September
2010 are as follows:
Commentary
The group performed well over the past six months, increasing consolidated
revenues by 18% and core headline earnings by 33%. Major areas of growth were
the internet and pay-television businesses. Our print media business has shown
some recovery, whilst the technology business improved margins.
Corporate activities for the period include:
- The group consolidated its internet interests in Russia, acquiring a 28,7%
interest in Digital Sky Technologies ("DST") by contributing existing assets and
cash. DST was subsequently renamed Mail.ru group. On 5 November 2010 Mail.ru
group was listed on the London Stock Exchange and presently has a market
capitalisation of some US$7,1bn. Our share is therefore worth approximately
US$2bn.
- The group issued a seven-year US$700m bond, with a coupon rate of 6,375%. The
proceeds were used to partly pay down an offshore revolving credit facility.
FINANCIAL REVIEW
Consolidated revenues expanded by 18% to R15,8bn. Growth came largely from the
internet businesses, where revenues were up 54%. In addition, broadening of the
pay-television subscriber base saw revenues increase by 20%. Consolidated
trading profit lifted 23% to R3,3bn.
Net interest cost increased from R150m last year to R376m, the result of funding
investments with debt. Our earnings from equity-accounted associates grew to
R1,4bn, mostly from strong performances at Tencent and Mail.ru.
A once-off dilution gain of R1,5bn arose from the contribution of the group`s
stake in Mail.ru into DST. Shareholders need to note that this is an accounting
profit which did not contribute to cash flows or core headline earnings.
The net result of the above is core headline earnings of R3,2bn - an increase of
33% on the prior period.
This earnings performance delivered positive free cash flows of R2,1bn. Our
funding structure remains sound with total consolidated net debt, excluding
satellite leases, of R4,9bn. This represents a net debt:equity ratio of 14%.
SEGMENTAL REVIEW
This segmental review includes our consolidated subsidiaries, plus the
proportional consolidation of associated companies.
Pay television
This unit experienced growth of 498 000 subscribers during the six-month period.
This was largely driven by the FIFA 2010 World Cup (a similar growth-boosting
event will not recur soon), coupled to decoder subsidies and extensive
marketing. As a consequence, revenue increased by 20% to R10,2bn. Operating
margins were lower due to cost pressures from growing the subscriber base,
intense competition and increased sports content costs.
In South Africa, the gross base expanded by 363 000 to 3,2 million households.
The lower-priced Compact bouquet delivered the most growth (242 000 homes).
Advertising revenues started to recover.
Recently the roll-out of mobile TV services commenced. This is still an
experimental service that will incur losses for many years. However, this
technical advancement benefits domestic research and development in South Africa
and helps our engineers engage with the future.
In the rest of sub-Saharan Africa our base grew by 135 000 to 1,2 million homes.
The lower-priced Compact/Family bouquets now reach 504 000 homes. Operating
margins were reduced by a higher investment in local content, increased
competition and additional satellite capacity. Increased regulation and new
broadband technologies are adding to the challenge.
Internet
Overall the internet segment reported revenue growth of 54% and trading profits
were up by 73%.
Tencent revenues were R3,3bn and trading profit R1,7bn. The QQ platforms now
manage 636 million active instant messaging (IM) user accounts and 116 million
concurrent users at peak. The social networking service, QZone, also grew well.
In aggregate, the other internet businesses reported revenue growth of 54% and a
trading profit of R100m. The e-commerce operations of Allegro (Eastern Europe)
and Ricardo (Western Europe) continued expanding. Both businesses broadened
their product offerings through organic growth and smaller bolt-on acquisitions.
In Russia, the newly listed Mail.ru group holds assets that include 100% of the
online portal and e-mail platform, Mail.ru, instant messaging service, ICQ and
social network service, Odnoklassinki. It also owns 32,5% of vkontakte -
Russia`s most popular social network. In addition, Mail.ru has small interests
in Facebook (2,4%), Zynga (1,5%) and Groupon (5,1%).
During the period, the group impaired R531m of goodwill and intangible assets,
mainly at Gadu-Gadu, where growth has lagged.
Print media
The operations in South Africa showed modest revenue growth of 4%, with
advertising improving modestly but remaining subdued. Trading profits were up
10% as the business improved cost efficiencies. Capital expenditure was also
reduced.
Abril saw revenue growth of 8% and an 11% increase in trading profit on the back
of a vibrant Brazilian economy.
Technology
Whilst consolidated revenues in Rands were flat, operating performance improved
as Irdeto re-organised its products and organisation achieving efficiencies in
the process. Several new clients were added and services introduced to assist
clients in securing internet distributed digital assets and content.
OUTLOOK
Early indications are that revenue growth could remain healthy over the next six
months. By contrast the profit line could be hit by the increasing cost of sport
on pay TV and an acceleration of development spend in several of our business
sectors. This statement has not been reviewed or reported on by the company`s
auditors.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Our financial results for the six months ended 30 September 2010 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 with 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.
The group adopted the following new standards and amendments for the period
ended 30 September 2010:
IAS 7 "Statement of Cash Flows" has been amended and requires changes in
interests in a subsidiary that do not result in a loss of control to be recorded
in financing activities as opposed to investing activities. This amendment is
effective retrospectively, resulting in the restatement of the statement of cash
flows. Preference dividends received are now recorded in investing activities as
opposed to financing activities. The total amount reallocated to investing
activities was R232m for the six months ended 30 September 2009 and R404m for
the year ended 31 March 2010.
IFRS 3 Revised "Business Combinations" and IAS 27 Revised "Consolidated and
Separate Financial Statements" were adopted. The effect of these standards is
recorded in the line item "Gains on acquisitions and disposals" on the income
statement. The revised requirements resulted in re-measurements of R76m and
acquisition-related costs of R35m recorded in the income statement. These items
are adjusted for in the calculation of headline and core headline earnings.
The MWEB business is now reported in the pay-television rather than the internet
segment. It is working on technologies to deliver video content. Comparative
segmental results have been restated in accordance with IFRS 8 "Operating
Segments".
Core headline earnings exclude once-off and non-operating items. We remain of
the opinion that it is a suitable measure of the group`s sustainable operating
performance. This is not a defined term under IFRS and may not necessarily be
comparable with similarly titled measures reported by other companies.
ACQUISITIONS
In August 2010, the group consolidated its internet interests in Russia
acquiring 28.7% in Digital Sky Technologies ("DST"), a prominent internet
company in Russian-speaking markets. As consideration, the group contributed its
39.3% investment in Mail.ru and US$388m in cash.
In August 2010 the group acquired 68% of OLX for US$144m in cash. This is a free
classifieds business operating mainly in emerging markets, especially in Latin
America. In September 2010, the group acquired 74% of Multiply Inc. for US$44m
in cash. This unit combines social networking with an online marketplace focused
on South-East Asia, and fits well within the group`s internet strategy. The
group also made smaller acquisitions for a combined cost of R353m.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Managing director
Cape Town
30 November 2010
Revenue Year ended
Six months ended 30 September 31 March
2010 2009 2010
Segmental Reviewed Reviewed % Audited
Review R`m R`m Change R`m
Pay television 10 186 8 497 20 17 603
Internet 5 514 3 583 54 8 237
- Tencent 3 342 2 175 54 4 874
- Other 2 172 1 408 54 3 363
Print 5 126 4 836 6 10 204
Technology 599 605 - 1 207
Economic interest 21 425 17 521 22 37 251
Corporate services - - - -
Less: Associates (5 592) (4 066) 38 (9 253)
Consolidated 15 833 13 455 18 27 998
EBITDA Year ended
Six months ended 30 September 31 March
2010 2009 2010
Segmental Reviewed Reviewed % Audited
Review R`m R`m Change R`m
Pay television 3 553 2 989 19 5 851
Internet 1 981 1 177 68 2 697
- Tencent 1 795 1 118 61 2 542
- Other 186 59 +100 155
Print 522 472 11 1 232
Technology 118 11 +100 98
Economic interest 6 174 4 649 33 9 878
Corporate services (115) (110) 5 (230)
Less: Associates (2 087) (1 315) 59 (3 152)
Consolidated 3 972 3 224 23 6 496
Trading profit Year ended
Six months ended 30 September 31 March
2010 2009 2010
Segmental Reviewed Reviewed % Audited
Review R`m R`m Change R`m
Pay television 3 163 2 702 17 5 232
Internet 1 781 1 032 73 2 362
- Tencent 1 681 1 045 61 2 363
- Other 100 (13) +100 (1)
Print 357 317 13 896
Technology 79 (14) +100 47
Economic interest 5 380 4 037 33 8 537
Corporate services (115) (114) - (232)
Less: Associates (1 925) (1 198) 61 (2 858)
Consolidated 3 340 2 725 23 5 447
Note: Trading profit excludes amortisation of intangible assets (other than
software) and other gains/losses, but includes the finance cost on transponder
leases.
Six months ended Year ended
30 September 31 March
2010 2009 2010
Consolidated Income Reviewed Reviewed Audited
Statement R`m R`m R`m
Revenue 15 833 13 455 27 998
Cost of providing services and (8 156) (6 893) (14 438)
sale of goods
Selling, general and (4 804) (4 343) (9 155)
administration expenses
Other gains/(losses) - net (529) (293) (364)
Operating profit 2 344 1 926 4 041
Interest received 211 195 348
Interest paid (587) (345) (883)
Other finance income/(costs) - (42) 179 114
net
Share of equity-accounted 1 406 872 2 058
results
Impairment of equity-accounted (120) - (62)
investments
Dilution gains on equity- 1 532 - -
accounted investments
Gains on acquisitions and 55 107 144
disposals
Profit before taxation 4 799 2 934 5 760
Taxation (973) (1 051) (1 808)
Profit for the period 3 826 1 883 3 952
Attributable to:
Equity holders of the group 3 450 1 579 3 257
Non-controlling interest 376 304 695
3 826 1 883 3 952
Core headline earnings for the 3 215 2 414 5 319
period (R`m)
Core headline earnings per N 860 648 1 426
ordinary share (cents)
Fully diluted core headline 830 634 1 386
earnings per N ordinary share
(cents)
Headline earnings for the 2 369 1 466 3 297
period (R`m)
Headline earnings per N 633 394 884
ordinary share (cents)
Fully diluted headline earnings 612 385 859
per N ordinary share (cents)
Earnings per N ordinary share 921 424 873
(cents)
Fully diluted earnings per N 889 415 848
ordinary share (cents)
Net number of shares issued
(`000)
- At period-end 374 694 373 451 374 308
- Weighted average for the 374 308 372 451 372 951
period
- Fully diluted weighted 387 662 380 852 383 820
average
Six months ended Year ended
30 September 31 March
2010 2009 2010
Reconciliation of Trading Reviewed Reviewed Audited
Profit to Operating Profit R`m R`m R`m
Trading profit 3 340 2 725 5 447
Finance cost on transponder 74 38 93
leases
Amortisation of intangible (541) (544) (1 135)
assets
Other gains/(losses) - net (529) (293) (364)
Operating profit 2 344 1 926 4 041
Note: For a reconciliation of operating profit to profit before taxation, refer
to the "Consolidated income statement".
Six months ended Year ended
30 September 31 March
Condensed Consolidated 2010 2009 2010
Statement of Comprehensive Reviewed Reviewed Audited
Income R`m R`m R`m
Profit for the period 3 826 1 883 3 952
Total other comprehensive income, (760) (1 817) (2 047)
net of tax, for the period
Translation of foreign operations (932) (1 318) (1 918)
Cash flow hedges 35 (654) (560)
Share of associates` other 138 - 250
comprehensive income and reserves
Tax on other comprehensive income (1) 155 181
Total comprehensive income for 3 066 66 1 905
the period
Attributable to:
Equity holders of the group 2 720 (142) 1 308
Non-controlling interest 346 208 597
3 066 66 1 905
Six months ended Year ended
30 September 31 March
Condensed Consolidated 2010 2009 2010
Statement of Changes Reviewed Reviewed Audited
in Equity R`m R`m R`m
Balance at beginning of the 35 634 35 217 35 217
period
Changes in share capital and
premium
Movement in treasury shares (49) (435) (1 041)
Share capital and premium issued 61 - 433
Changes in reserves
Total comprehensive income for 2 720 (142) 1 308
the period
Movement in share-based 259 247 498
compensation reserve
Movement in existing control 5 (260) (334)
business combination reserve
Direct retained earnings movement (23) (11) (22)
Dividends paid to Naspers (885) (773) (773)
shareholders
Changes in non-controlling
interest
Total comprehensive income for 346 208 597
the period
Dividends paid to non-controlling (600) (249) (311)
shareholders
Movement in non-controlling 154 (43) 62
interest in reserves
Balance at end of period 37 622 33 759 35 634
Comprising:
Share capital and premium 14 479 14 639 14 466
Retained earnings 19 366 15 157 16 823
Share-based compensation reserve 1 922 1 174 1 573
Existing control business 151 71 98
combination reserve
Hedging reserve (373) (480) (408)
Valuation reserve 1 844 1 844 1 844
Foreign currency translation (1 641) (188) (736)
reserve
Non-controlling interest 1 874 1 542 1 974
Total 37 622 33 759 35 634
Six months ended Year ended
30 September 31 March
Consolidated 2010 2009 2010
Statement of Reviewed Reviewed Audited
Financial Position R`m R`m R`m
ASSETS
Non-current assets 48 989 41 198 44 342
Property, plant and equipment 7 011 4 616 6 490
Goodwill 17 222 17 436 16 620
Other intangible assets 4 134 4 743 4 976
Investment in associates 16 581 10 292 11 942
Other investments and loans 3 269 3 465 3 500
Deferred taxation 772 646 814
Current assets 15 145 12 705 13 126
Inventory 829 755 693
Programme and film rights 2 226 1 690 1 298
Trade receivables 2 826 2 343 2 438
Other receivables and loans 1 891 1 616 1 900
Cash and cash equivalents 7 361 6 280 6 785
Assets classified as held-for- 12 21 12
sale
Total assets 64 134 53 903 57 468
EQUITY AND LIABILITIES
Share capital and reserves 35 748 32 217 33 660
Non-controlling shareholders` 1 874 1 542 1 974
interest
Total equity 37 622 33 759 35 634
Non-current liabilities 14 493 10 364 10 892
Capitalised finance leases 1 995 542 1 736
Liabilities - interest bearing 10 292 7 504 6 983
Liabilities - non-interest 152 50 51
bearing
Post-retirement medical 182 169 178
liability
Derivatives 789 975 684
Deferred taxation 1 083 1 124 1 260
Current liabilities 12 019 9 780 10 942
Current portion of long-term 1 724 1 578 1 675
debt
Trade payables 2 278 1 836 1 721
Accrued expenses and other 5 865 5 144 5 740
current liabilities
Derivatives 864 459 847
Bank overdrafts and call loans 1 288 763 959
Total equity and liabilities 64 134 53 903 57 468
Net asset value per N ordinary 9 541 8 627 8 993
share (cents)
Six months ended Year ended
30 September 31 March
Condensed Consolidated 2010 2009 2010
Statement of Reviewed Reviewed Audited
Cash Flows R`m R`m R`m
Cash flow from operating 2 503 2 254 5 622
activities
Cash flow utilised in investing (4 172) (2 780) (4 752)
activities
Cash flow generated 2 232 760 (169)
from/(utilised in) financing
activities
Net movement in cash and cash 563 234 701
equivalents
Foreign exchange translation (316) (520) (678)
adjustments
Cash and cash equivalents at 5 826 5 803 5 803
beginning of the period
Cash and cash equivalents at 6 073 5 517 5 826
end of the period
Six months ended Year ended
30 September 31 March
Calculation of 2010 2009 2010
Headline and Core Reviewed Reviewed Audited
Headline Earnings R`m R`m R`m
Net profit attributable to 3 450 1 579 3 257
shareholders
Adjusted for:
- insurance proceeds (6) (175) (369)
- impairment of property, plant 2 150 225
and equipment and other assets
- impairment of goodwill and 531 3 384
intangible assets
- profit on sale of property, (57) (15) (229)
plant and equipment and
intangible assets
- profit on sale of investments (76) (72) (120)
- step-up acquisition gain (14) - -
- dilution gains on equity- (1 532) - -
accounted investments
- remeasurements included in (25) - 30
equity-accounted earnings
- impairment of equity- 120 - 62
accounted investments
2 393 1 470 3 240
Total tax effects of (25) (4) 7
adjustments
Total non-controlling interest 1 - 50
of adjustments
Headline earnings 2 369 1 466 3 297
Adjusted for:
- treasury-settled share scheme 217 134 418
charges
- prior year withholding taxes - - 121
- (recognition)/reversal of (7) 132 253
deferred tax assets
- amortisation of intangible 525 436 922
assets
- Welkom Yizani refinancing - 330 330
- fair value adjustments and 77 (84) (22)
currency translation
differences
- acquisition-related costs 34 - -
Core headline earnings 3 215 2 414 5 319
Six months ended Year ended
30 September 31 March
2010 2009 2010
Supplementary Reviewed Reviewed Audited
Information R`m R`m R`m
Depreciation of property, plant 497 425 878
and equipment
Amortisation 602 580 1 213
- intangible assets 541 544 1 135
- software 61 36 78
Finance cost on transponder 74 38 93
leases
Other gains/(losses) - net (529) (293) (364)
- profit/(loss) on sale of 7 14 (47)
property, plant andequipment
and intangible assets
- impairment of goodwill and (531) (3) (384)
intangible assets
- impairment of tangible assets (2) (150) (225)
- Welkom Yizani refinancing - (330) (330)
- insurance proceeds 6 175 369
- profit on transponder lease 46 - 253
settlement
- fair value adjustment on (55) 1 -
shareholders` liability
Other finance income/(cost) - (42) 179 114
net
- net foreign exchange (155) 36 (154)
differences and net fair value
adjustments on derivatives
- preference dividends received 113 143 268
Gains on acquisitions and 55 107 144
disposals
- profit on sale of investments 4 107 144
- profit on partial disposal of 72 - -
investments
- acquisition-related costs (35) - -
- step-up acquisition gain 14 - -
Goodwill
- cost 17 050 15 407 15 407
- accumulated impairment (430) (49) (49)
Opening balance 16 620 15 358 15 358
- foreign currency translation (510) (802) (1 163)
effects
- acquisitions 1 428 2 907 2 807
- impairment (316) (27) (382)
Closing balance 17 222 17 436 16 620
- cost 17 966 17 512 17 050
- accumulated impairment (744) (76) (430)
Investments and loans 19 850 13 757 15 442
- listed investments 5 710 3 494 4 646
- unlisted investments 14 140 10 263 10 796
Market value of listed 96 498 77 427 92 843
investments
Director`s valuation of 14 140 10 263 10 796
unlisted investments
Commitments 16 989 15 842 18 626
- capital expenditure 468 643 527
- programme and film rights 8 041 6 030 8 698
- network and other service 516 573 656
commitments
- transponder leases 7 045 7 732 7 689
- operating lease commitments 679 576 697
- set-top box commitments 240 288 359
Share of equity-accounted 1 406 872 2 058
results
- dilution gains - - (64)
- sale of assets (25) - 23
- sale of investments - 35 77
Contribution to headline 1 381 907 2 094
earnings
- amortisation of intangible 169 83 180
assets
- treasury-settled share scheme 91 - 148
charges
- (recognition)/reversal of (10) - 101
deferred taxation
Contribution to core headline 1 631 990 2 523
earnings
Tencent 1 486 936 2 148
Mail.ru 95 54 70
Abril 28 8 318
Other 22 (8) (13)
Business combinations
On 4 August the group acquired a 68% fully diluted interest in OLX Inc., a free
online classifieds business. The fair value of the total purchase consideration
was R1,0bn (US$143,6m) in cash.
The preliminary purchase price allocation: property, plant and equipment
("PP&E") R3m; intangible assets R2m; cash R234m; other current assets R57m;
trade and other payables R35m; and the balance to goodwill. The main factor
contributing to the goodwill recognised is the company`s large presence in the
classifieds business in the emerging markets. The recognised goodwill is not
expected to be deductible for income tax purposes.
Total acquisition-related costs of R1,6m were recorded in "Gains on acquisitions
and disposals" in the income statement. A non-controlling interest of R51m was
recognised at the acquisition date. This was measured using the proportionate
share of the identifiable net assets. The revenue and results from OLX since the
acquisition date were not significant to the group`s consolidated results.
On 13 September, the group acquired 74% of Multiply Inc. which combines social
networking with an online marketplace. The fair value of the total purchase
consideration was R314m (US$44m) in cash.
The preliminary purchase price allocation: PP&E R7m; cash R9m; trade and other
receivables R7m; trade and other payables R7m and the balance to goodwill. The
main factor contributing to the goodwill recognised is the company`s significant
user base in emerging markets. The recognised goodwill is not expected to be
deductible for income tax purposes.
Total acquisition-related costs were recorded in "Gains on acquisitions and
disposals" in the income statement. A non-controlling interest of R4m was
recognised at the acquisition date, and was measured using the proportionate
share of the identifiable net assets. The group did not recognise revenue or net
profits from Multiply as the acquisition date was close to the interim reporting
date and the amount insignificant to the group`s results.
Had the revenues and net results of all business combinations that occurred in
the period been included from 1 April 2010 it would not have had a significant
effect on the group`s consolidated revenue and net results.
Directors
T Vosloo (chairman), J P Bekker (managing director), F-A du Plessis,
G J Gerwel, R C C Jafta, L N Jonker, D Meyer,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 8001 Link Market Services South Africa
(Proprietary) Limited
(PO Box 2271, Cape Town 8000) 11 Diagonal Street, Johannesburg 2001
(PO Box 4844, Johannesburg 2000)
ADR programme
The Bank of New York Mellon maintains a GlobalBuyDIRECTTM plan for Naspers
Limited. For additional information, please visit the Bank of New York`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 - GlobalBuyDIRECTTM, Church Street Station, PO 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.
For more details about Naspers and the investor call about the results, visit
the Naspers website at www.naspers.com
Date: 30/11/2010 09:00:01 Supplied by www.sharenet.co.za
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