/ 27 June 2006

Naspers targets broadband to ensure growth

South African media group Naspers on Tuesday reported a 63% increase in its core headline earnings per ordinary N share to 696 cents for the year ended March 2006 from 427 cents for the 12 months to March 2005.

Naspers declared an annual dividend per N share of 120 cents, up 71% from 70 cents previously and 24 cents from 14 cents per unlisted A ordinary share.

Revenue for the 12-month period was R15,706-billion up from R13,518-billion in the previous comparative period due to a net growth in pay-television subscribers of 163 000 and an increase in advertising revenues of 22%.

Operating profit was R3,004-billion from R2,469-billion, with aggregate operating margins at 19%.

“After four years of rapid earnings and cash flow growth, some strategic investments are required in the year ahead to deliver growth in ensuing years,” Naspers said.

“We are targeting, in particular, broadband services in China and North America, and digital video broadcast-handheld (DVB-H) in Africa. We plan this in the knowledge that such investments will reduce short-term earnings and cash flow growth. In addition, we will invest in the further development of existing businesses and expand into new markets and opportunities,” the group added.

“Over the past few years, economic management of especially the South African and Chinese economies has been particularly impressive. Future growth will be reliant on continued economic expansion in our markets, which is uncertain,” Naspers said.

Naspers is focused on developing media businesses in Brazil, Russia, India, China, South and sub-Saharan Africa.

Subsequent to year-end, Naspers acquired a 30% equity stake in a leading Brazilian media company, Abril, for a cash consideration of $422-million.

“We also established development offices in Russia and India and are pursuing opportunities in these and other markets,” Naspers said.

“The group plans to step up investment in broadband and mobile technologies and services. Both represent opportunities for delivering media content in new formats,” the company said.

Naspers generated an accounting profit of about R1-billion from the sale of its interest in UBC.

At Naspers’ South African pay television operation there was a net 103 000 to 1,25-million subscribers.

The lower priced bouquet aimed at the emerging market (DStv Compact) grew to 42 000 subscribers.

MultiChoice launched the personal video recorder (PVR) in October 2005, selling about 28 000 units.

“In the coming year, we intend to make a substantial investment in the development of a DVB-H platform in South Africa,” Naspers said.

The sub-Saharan Africa subscriber base grew by 50 000 to 385 000, primarily from expansion in the Angolan market.

Naspers’ pay television market in the Mediterranean grew by 10 000 to 374 000 subscribers.

“Migration from analogue to digital continues, with 69% of subscribers now using digital services,” Naspers said.

Naspers’ internet segment reflected revenue growth of 29%. Operating losses before amortisation and other gains and losses increased to R98-million, mostly attributed to the development of the internet portal business in Thailand and Sportscn in China. The internet operation in South Africa remained profitable.

Naspers’ print media division benefited from strong organic growth and robust economic conditions, resulting in revenue growing by 18% to R3,9-billion.

“Newspaper titles such as Daily Sun, Son and Soccer Laduuuuuma continued to show good circulation growth. Additional printing presses are being installed to cope with capacity demands,” Naspers said.

“The magazine segment also experienced a good year with a number of new titles being launched in South Africa. A new printing plant, Paarl Web Gauteng, was commissioned and is performing to expectation. An empowerment partner, Kurisani, has invested in this business,” the group said.

The group’s book publishing business, Via Afrika, had a reasonable year with the schoolbook publishers recording an excellent performance.

In contrast, the private education business turned in a mixed performance.

On the empowerment front, Naspers said its South African operations had already started work to ensure compliance with black economic empowerment (BEE) codes of good practice, which are to be finalised shortly. – I-Net Bridge