South African media group Naspers on Tuesday reported fully diluted headline earnings per share of 342 cents for the six months ended September 30, from 221 cents a year ago. Core headline earnings per share were 345 cents from 163 cents before.
The company’s policy is to pay an annual dividend, therefore no interim dividend was declared.
Revenue rose to R7,66-billion from a previous R6,71-billion, while net profit rose to R1,128-billion from R1,067-billion.
The group said it enjoyed favourable macro-economic conditions in its major markets; however, profits in the second half of the financial year will be subdued by development costs.
Naspers now reports under International Financial Reporting Standards (IFRS), and financial information relating to the six months ended September 2004 was restated in terms of IFRS.
Naspers added that some elements of the South African advertising market appear to be cooling. However, the general state of the local economy looks sound. The economy of China continues to expand rapidly.
“The group remains focused on developing growth opportunities, both organically from existing businesses and through investing in new opportunities. Further investments in China and India are under consideration.
“Whilst it is difficult to place a firm time frame to such projects, we anticipate some progress in the second half of this financial year. Such investments will have an impact on both cash flows and earnings,” it said.
The company said the major contributor to the 14% increase in revenue remains subscriptions and as an indication of currently favourable economic conditions, advertising revenues grew by 20%.
Finance costs continued to decline in line with reduced levels of debt in the group. Finance costs include net interest income of R52-million and imputed interest incurred on finance leases of R82-million.
The fair value adjustments required by IAS 39 on the group’s foreign-exchange contracts and other derivative instruments declined to R5-million, compared with R60-million in the prior period.
Equity accounted earnings increased to R78-million and comprised mainly the share of Tencent’s earnings in China.
From September 1 2005, the group equity accounted its interest in Beijing Media Corporation. The comparative period reflected a dilution profit of R380-million, arising mainly from the listing of Tencent in Hong Kong, an event that did not recur in the current year.
The net effect is headline earnings for the period of R1,036-billion, equating to 366 cents per share, Naspers said.
Core headline earnings, which the group believes is a more appropriate measure of true sustainable operating performance, was slightly lower at R976-million or 345 cents per share.
Headline earnings in the financial year ended March 31 2005 were artificially boosted by the application of certain accounting principles: in particular, the creation of deferred tax assets (R470-million) and accounting for foreign-exchange contracts (R360-million).
“It is improbable that such an artificial boost to earnings will recur in the current financial year and, as a consequence, it is likely that headline earnings for the full year will, as anticipated, probably be lower than those reported last year,” Naspers added.
Naspers’s total pay-television subscriber base grew by a net 81 000 over the period and it currently has 2,38-million subscribers under management, of whom 80% are on digital platforms. In South Africa, the equated subscriber base grew marginally by 45 000 to just below 1,2-million. The compact bouquet reflects 22 500 subscribers. In sub-Saharan Africa, the base grew by 20 000 to 356 000 households.
Main sectors of growth were the emerging black market segment in South Africa and the Portuguese tier in sub-Saharan Africa, it said.
In Greece, the subscriber base of 364 000 remained more or less stable and the business continues its good turnaround and reported an operating profit before amortisation of R165-million from R75-million before.
In Thailand, Naspers accepted an offer from its partner True Corporation plc to acquire its interest in the pay-TV business UBC, as well as its interest in the internet service provider KSC. The cash consideration is $160-million and is part of a tender offer to all UBC’s shareholders. The offer is still subject to UBC shareholder approval.
In South Africa, MWeb now has 314 000 dial-up and 30 000 broadband customers.
“The South African business remains profitable but slow-growing due to a lack of broadband connections. South Africa is falling dramatically behind its peers elsewhere in the world in this regard, and this handicap will gradually impact other sectors of our economy that rely on communications,” Naspers said.
Progress was made in the rest of Africa, in particular with a VSAT service in Nigeria. MWeb Thailand enhanced its leading position with its Sanook! portal. Improvements to the service are being added, it said.
In China, Tencent, in which Naspers holds an interest, expanded its range of services to complement its instant messaging platform. New offerings, including QQ Zone and QQ Pets, were launched to the QQ community, which includes the majority of the approximately 100-million internet users in China.
Naspers’s technology segment reported an operating loss before amortisation of R47-million, as both Irdeto and Entriq are investing heavily in developing new technologies.
Newspapers, magazines and printing’s revenue increased to R1,94-billion and operating profit before amortisation grew by 17% to R282-million.
Newspapers benefited from continued robust advertising in South Africa, while advertising in the magazine sector was more static.
Circulation was generally satisfactory, with a few exceptions. The Daily Sun continued its growth, achieving an audited circulation in the six months to June of 437 000. Soccer magazine Laduuuuuma and the Sunday Sun also recorded new circulation peaks.
Beijing Media Corporation in China, in which Naspers holds an interest, had a muted six months to June 2005, largely due to lower property advertising revenues.
Book publishing and private education grew revenue by 5% to R615-million and an operating loss before amortisation of R28-million was recorded. The book business is a cyclical one and results for the half-year are not a reliable indication of those for the full year, particularly as the dates of school-book sales are variable.
Most businesses are trading positively, although the general book retail market shows strain. The e-trader Kalahari.net continues to grow, Naspers added. — I-Net Bridge