I will be keeping mine -
NASPERS LIMITED
CONDENSED CONSOLIDATED INTERIM REPORT
for the six months ended 30 September 2015
Naspers continues to make progress in building consumer destinations and platforms in
fast-growing markets. These interim results, in the aggregate, are in line with the board's
expectations. Currency has had a material impact and, where possible, meaningful currency effects
have been isolated in this commentary.
Driven by growth in the ecommerce segment, revenue measured on an economic interest
basis grew 24% to R74,3bn, while in US dollar terms, revenue grew 5% to US$5,9bn. On an
organic basis, excluding the effects of foreign exchange and acquisitions, revenue grew by
20%. Core headline earnings increased 45% to R8,8bn, with Tencent and the South African
video-entertainment business being the main contributors. In US dollar terms, core headline
earnings were up 22% to US$693m.
In ecommerce, the marketplace and established classifieds businesses also delivered year-
on-year earnings growth. These earnings improvements were partly offset by increased
development spend of R5,1bn, measured on an economic interest basis – a 17% year-on-year
increase.
The classifieds business has made solid progress, outpacing competition. Naspers further
strengthened its position in classifieds with the recently announced transaction, subject to
regulatory approval, to take a controlling stake in Avito in Russia. The etail, marketplace and
travel businesses continue to make progress and are widening the gap in operating metrics
relative to competitors.
The digital terrestrial television (DTT) business and the South African video-entertainment
group continue to deliver customer growth and improved financials. The direct-to-home (DTH)
business in sub-Saharan Africa faced headwinds, mainly from a challenging macroeconomic
environment and currency weakness. In August we launched ShowMax, a subscription video-
on-demand (SVOD) service in South Africa.
Media24 has returned to a modest trading profit growth. The impact of sectoral declines in
its traditional print and media revenues is being offset by growth in its online and ecommerce
initiatives.
The following financial commentary and segmental review have been prepared on an
economic interest basis, including consolidated subsidiaries and a proportionate consolidation
of associated companies and joint ventures. Where relevant throughout this report, amounts
and percentages have been adjusted for the effects of foreign currency and acquisitions and
disposals. Such adjusted items (pro forma financial information) are quoted in brackets after
the equivalent metrics reported under International Financial Reporting Standards (IFRS).
A reconciliation of the pro forma financial information to the equivalent IFRS metrics is provided
in note 16 of this condensed consolidated interim report.
COMMENTARY
FINANCIAL REVIEW
Consolidated revenues of R37,8bn grew by 10% (10%), driven
by good growth in our ecommerce segment. In US dollar terms,
consolidated revenues were US$3,0bn – a decrease of 7% (increase
of 10%) compared to the prior year, caused by currency.
Revenue growth remained strong with the internet segment, which
grew 33% (28%), outpacing growth in other segments. Internet
revenues now account for 64% of group revenues, up from 60%
a year ago. Businesses outside South Africa now contribute 75% of
revenues, up from 71% a year ago.
Consolidated development spend declined by 13% (20%) year on
year and by 32% compared to the second half of 2015. Reduced
development spend in the classifieds and DTT businesses was
offset by investments in new areas, notably ShowMax, mobile-only
classifieds (Letgo) and travel in India.
Trading profit grew 34% (19%) to R15,3bn on the back of solid earnings
contributions from Tencent, South African video entertainment and
the Allegro marketplace.
The group's share of the results of equity-accounted investments,
mainly Tencent and Mail.ru, was R8,0bn for the period, and includes
non-recurring gains of R1,5bn relating primarily to once-off gains
recognised by Tencent on changes in its shareholding in certain
associates. Tencent's performance was driven by improved advertising
and mobile platform monetisation. Mail.ru contributed R296m to core
headline earnings.
Ecommerce trading losses increased by 55% (46%) year on year, mainly
due to costs incurred by our etail equity-accounted investments to
scale their businesses. The classifieds segment delivered lower losses,
partly due to benefits from the transaction concluded with Schibsted
in January 2015, but also steady progress towards monetisation and
improved profitability by classifieds businesses already at scale. The
marketplace business grew its trading profits.
The video-entertainment segment saw more or less the same
trading profit. In South Africa steady growth was recorded, while
results in sub-Saharan Africa were impacted by weakening
currencies. A number of initiatives have been implemented to deal
with rising input costs.
An impairment loss of R1,9bn has been recognised during the period
for the group's investment in its Latin American online comparison
shopping (OCS) business, Buscapé. This has been recognised as
part of "Other gains/(losses) – net" in the condensed consolidated
income statement. Adverse economic developments, combined
with pressure on OCS's share of ecommerce, led us to revise future
expectations resulting in an impairment. The OLX, PayU and
Movile investments in Latin America are performing well.
The consolidated net interest expense on borrowings rose 46%
to R1,2bn, primarily as a result of the foreign exchange effects of
a weakened rand, use of credit facilities to fund growth and the
US$1,2bn bond issued in July 2015. Net gearing, measured on a
consolidated basis, remained low at 32%.
Consolidated free cash inflow for the period was R1,3bn (2014:
outflow of R428m) largely due to a substantial drop in capital
expenditure in the video-entertainment segment having built the
significant part of the DTT network in prior years, and increased
dividend income from equity-accounted investments.
We announced a transaction on 23 October 2015 to increase our
stake in Avito from 17,4% to 67,9% for cash of US$1,2bn. At the
time we noted that the transaction would not materially increase
our existing debt profile in the medium term. We are considering a
capital raise of up to US$2,5bn that, including the Avito acquisition,
will enhance financial flexibility over the next few years to invest
in attractive growth opportunities. Any capital raise is expected to
be within existing shareholder authorities.Naspers has an obligation in terms of its memorandum of
incorporation (MOI) to maintain its control structure. The voting
percentage of the control structure companies, Naspers Beleggings
(RF) Beperk and Keeromstraat 30 Beleggings (RF) Beperk, is close
to falling below 50% as a result of the issue of Naspers N ordinary
shares. The board therefore approved a capitalisation award
of 194 607 A ordinary shares to A ordinary shareholders to be
implemented on 26 November 2015. The effect of the capitalisation
issue is to increase the voting percentage of the control structure
companies to 54,68%, and restore the voting percentage of the
A ordinary shareholders to 68,38% – the percentage it was when
the new MOI of Naspers Limited was adopted in August 2012.
Forecasts included in this condensed consolidated interim report
have not been reviewed or reported on by the company's
external auditor.
PricewaterhouseCoopers Inc.
Director: Brendan Deegan
Registered Auditor
Cape Town
27 November 2015