Financial results presentation For the six months ended 30 September - - PowerPoint PPT Presentation

For the six months ended 30 September 2013

Financial results presentation

2

This presentation 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 judgments 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 key 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.

Important information

3

Group Overview

Financial Results Internet Pay-TV Outlook Appendix

4

1H FY14: Highlights

Solid revenue growth Increased traction in eCommerce Accelerated development spend Pay-TV growth via DTT in Rest of Africa

1 2 3 4

Thus more muted earnings growth

5

Shift in business mix: majority international + internet

6

5

Group Overview

Financial Results

Internet Pay-TV Outlook Appendix

6

10.73 12.48 3.5 2.9

Sep 12 Sep 13 Revenue (ZARbn) Trading profit (ZARbn) Core HEPS (ZAR) Development spend (ZARbn)

22.4 28.8

28% 15% 16%

1.6 3.0

87%

1H FY14 key financials: Synopsis

7

Sep 12 12 ZARm Sep 13 ZARm Revenue* 34,172 47,606 Less: Associates and joint ventures (11,767) (18,851) Consolidated revenue 22,405 28,755 Trading profit 3,462 2,926 Trading margin 15% 10% Net finance costs (479) (915) Share of equity accounted results 3,990 5,139 Impairments (343) (1,841) Taxation (1,383) (1,447) Net profit 4,658 3,423 Core headline earnings 4,127 4,920 Core headline EPS (ZAR) 10.73 12.48 Higher debt levels to fund acquisitions US$1bn bond issued in July Negative effect of currency translation

Net interest on loans up 83% Income from associates

Includes ZAR1.3bn once-off book profit on Mail.ru’s partial sale of Facebook and Qiwi Increased 2% YoY in constant currency

Core HEPS +16%

Summarised consolidated income statement

R1bn relates to flash sales eCommerce businesses and R750m to Abril

Impairments

* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated

8

Revenue

Robust growth across most platforms eCommerce revenue +98% YoY Some benefit from change in business mix Tencent & Mail.ru’s revenue +69% YoY

Internet

21% YoY increase in subscribers 6% increase in subscription rates Advertising revenue healthy

Pay-TV

1H FY14 revenue by business*

24,887 17,077 5,642 Internet (52%) Pay TV (36%) Print (12%)

Solid results from Media24 Negatively impacted by poor results from Abril due to weak operating environment

Print

Sep 12 Internet Pay-TV Print Sep 13 10,779 2,651 4 34,172

Incremental revenue YoY* (ZARm)

47,606 76% 18% 39% 0%

* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated

9

Development spend

Sep 12 Internet Pay-TV Print Sep 13 2,970 1,286 88 5 1,591

Incremental spend YoY (ZARm)

123% 18% 87% 8%

1H FY14 split by business

2,328 570 72 Internet (79%) Pay-TV (19%) Print (2%)

Significant focus on classifieds Investing in brand advertising Continue to scale etail businesses

Internet

ZAR397m for DTT and online ZAR173m for other technologies

Pay-TV

Seasonality in spending

0% 50% 100% FY11 FY12 FY13 41% 40% 37% 59% 60% 63% 1H 2H

10

* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated

Trading profit

R5.7bn contribution from Tencent and Mail.ru Trimmed by ecommerce loss of ZAR1.8bn Continue focus on scaling operations

Internet

DTT roll-out continuing Accelerated investment in local content Positive contribution from Irdeto

Pay-TV

1H FY14 split by business*

3 879 4 477 214 Internet (45%) Pay TV (52%) Print (3%)

Declining advertising revenues SA profits up marginally Abril losses increased to R35m

Print

Sep 12 Internet Pay-TV Print Sep 13 749 457 (33) 7,397

Incremental profit* (ZARm)

8,570 24% 11% 16% 13%

11

Sep 12 ZARm Sep 13 ZARm Operating cash flow 3,296 3,904 Capex (994) (1,978) Finance leases (266) (382) Tax (1,265) (1,591) Investment income 986 834 Free cash flow 1,757 787

Free cash flow

Pay-TV ZAR1.7bn (mainly DTT) Internet ZAR161m Print ZAR216m

Capex +99%

Impacted by new satellite lease for MCSA

Finance leases

Increase due to higher profits in SA

Tax

Includes ZAR793m dividend from Tencent No dividends from Mail.ru or Abril

Investment income

12

Sep 13 ZARm Debt: (offshore US$2.5bn) (26,706) Cash: (South Africa R6bn) 14,683 Closing net debt (12,026) Interest cover 9x US$347m of debt-funded acquisitions Some currency impact on translation

Increase

Excludes transponder leases of ZAR7.2bn, considered to be an operating cost

Net debt Gearing 20%

Net debt

13

Group Overview Financial Results

Internet

Pay-TV Outlook Appendix

14

eCommerce: strategy

15

eCommerce: financial summary

Competition increasing in many markets Mobile development remains a key priority More localisation of product offering and services

Operational

16% organic revenue growth, mainly marketplace platforms 22% revenue growth from currency and rest acquisitive Development spend more than doubled to R2.3bn

Financial

ZARm Sep 12 Sep 13 % C Chang nge Revenue 3,991 7,907 98% Trading profit (726) (1,779) >-100%

e-Tail (84%) Classifieds (7%) Payments (6%) Other (3%)

Revenue by type

16

eCommerce: development spend

1H FY14 development spend by type

1,424 681 92 131 Classifieds (61%) eTail (29%) Payments (4%) Other (6%)

• 3,000

6,000 9,000 Sep 11 Sep 12 Sep 13 2,478 3,991 7,907 575 1,043 2,328 Revenue Development spend

Revenue and development spend (ZARm)

98% 123%

17

eCommerce: classifieds

Market presence in ~40 countries, leading position in several Stepping up investment to extend gap over competitors India and Brazil key areas of focus

Strategic

Focus on building brands and expanding user base Healthy growth on engagement metrics Some monetisation of vertical sites, mainly advertising Monetisation of general sites not a near-term objective

Operational

• 5

10 15 20 Sep 12 Sep 13 7.8 16.7 115% Europe (57%) India & SE Asia (27%) Latin America (8%) Africa & Middle East (8%)

Page views by region*

• 50.0

100.0 150.0 200.0 250.0 300.0 Sep 12 Sep 13 76 277

Daily page views (m)*

266%

* Select criteria as measured for the month of September, not adjusted for acquisitions and disposals and reflecting associates on a proportionate basis

Daily visits (m)*

18

eCommerce: e-tail

B2C retail growth accelerating, leadership in all key markets Price comparison business growing ahead

• f market

Flash sale fashion businesses repositioned

Strategic

16% revenue growth organic, rest acquisitive Some impact from change in business mix

Financial

Continuing to scale operations and invest in driving traffic Some investment to improve fulfilment and distribution

Operational

Europe (91%) India & SE Asia (4%) Africa & Middle East (3%) Latam (2%)

GMV by region**

**Includes GMV for lead-comparison operations on an imputed basis

• 1,500

3,000 4,500 6,000 7,500 Sep 12 Sep 13 3,241 6,651 105%

Revenue (ZARm)

19

VAS (77%) eCommerce transactions (15%) Advertising and other (8%)

Internet:

RMBm Bm* Jun 12 Jun 13 % C Chang nge Revenue 20,175 27,932 38% Operating profit 7,629 9,628 26% Operating margin 38% 34%

* Data for 1H FY13 reflects 100% of results Jan-Jun 2013 available on www.tencent.com; 1H FY14 ZAR/RMB 1.61 (1.30)

Revenue mix 1H FY14*

• 272m combined monthly active WeChat and Weixin

user accounts (+124% YoY)

• 816m monthly active IM user accounts (+4% YoY)
• 623m monthly active Qzone user accounts (+5% YoY)

Q3 2013 statistics

Strong performance from online and smartphone games Further investment in mobile smartphone apps

• Weixin expanded rapidly, supported by new features
• Step-up in international marketing of WeChat

Progress in online advertising and eCommerce Merger with Sogou on search

Operations

Solid growth in revenues and profits eCommerce initiatives reducing margins Sales and marketing expenses increased

Financials

20

Internet:

Community IVAS (32%) Display advertising (20%) MMO Games (25%) Context advertising (13%) Other (10%)

RURm* Jun 12 Jun 13 % C Chang nge Revenue 9,693 12,442 28% EBITDA 5,318 6,706 26% EBITDA margin 55% 54%

* Data reflects 100% of Mail.ru Group’s 1H FY13 aggregate segment performance as reported. For IFRS results with full disclosure refer to www.corp.mail.ru; 1H FY14 ZAR/RUR 0.304 (0.259)

Revenue mix 1H FY14* Contextual advertising strong IVAS healthy due to increase of paying user engagement Executing well on games strategy − Warface top revenue generator − Jungle Heat launched successfully

Operations

Sold remaining Facebook shares Sold 2.4m shares in Qiwi (Oct), raised US$73m Launched My.com for the US market

Other Q3 2013 performance

Mail.ru portal - monthly audience 33.7m users

21

Group Overview Financial Results Internet

Pay-TV

Outlook Appendix

22

PayTV: strategy

Better products Investment in DTT More investment in local content

23

Subscribers (‘000)

– 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 2,639 3,214 3,698 4,168 4,699 1,030 1,234 1,499 1,837 2,560 South Africa Sub-Saharan Africa

Pay-TV homes (‘000)

Pay-TV: subscriber growth

21%

24

Pay-TV: overview

1,3m net additions YoY

• Compact accounted for 35% of growth
• Premium stable
• 541,180 DTT subscribers at 30 Sep

PVR base increased 19% YoY to 1m

Subscribers

More local content, weaker ZAR and additional satellite costs triggered margin pressure 10 new channels, including 2 local content channels Launched the Explora with improved hard drive Expanded video on demand capability GoTV (DTT) continue in-country rollout

Operations

Increased regulatory pressures Competition increasing sharply

Regulation & Competition

Sep 12 Sep 13 % C Chang nge Net subscribers (‘000) 6,005 7,260 21% ZARm ZARm Revenue 14,426 17,077 18% Trading profit 4,020 4,477 11% Trading margin 28% 26%

• 400

800 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 480 268 415 394 734 521

Net additions (‘000)

25 Mar 10 Mar 11 Mar 12 Mar 13 Sep 12 Sep 13

18,810 22,253 25,259 30,257 14,426 17,077 5,279 5,855 6,319 7,559 4,020 4,477

Revenue Trading profit

28% 26% 25% 25% 28% 26%

Margin

Pay-TV: operational dynamics

Pay-TV financials (ZARm) Programming cost (ZARm) Capital expenditure (ZARm)

– 2 000 4 000 6 000 8 000 Mar 10 Mar 11 Mar 12 Mar 13 Sep 12 Sep 13 4,304 5,497 6,037 6,935 3,364 3,943 – 800 1 600 2 400 Mar 10 Mar 11 Mar 12 Mar 13 Sep 12 Sep 13 855 1,204 1,288 2,016 638 1,687

17% 164%

Digital subscriber mix

Sep 12 Sep 13

25% 31% 38% 38% 37% 31%

Premium

Compact Lower-end

26

Pay-TV: revenues

1H FY14 subscription revenue split

Premium (57%) Compact (26%) Other (10%) Family & Select (4%) Access (2%) DTT (1%)

1H FY14 revenue split

Subscription (80%) Advertising (8%) Hardware sales (5%) Online/Broadband (4%) Other (3%)

* Blended ARPU currently ZAR314

27

Pay-TV: DTT investment to ramp up 2H

• 400

800 1 200 Mar 10 Mar 11 Mar 12 Mar 13 Sep 12 Sep 13

663 607 731 897 482 570

Development spend (ZARm)

18% Sep 13 Dec 12 Dec 14

Analogue switch-off (ASOs) starting to gain pace

Jun 15

Tanzania

Mar 13

28

Group Overview Financial Results Internet Pay-TV

Outlook

Appendix

29

eCommerce

• Step-up spending on classifieds, focus on Brazil and India
• Strengthen market positions
• Focus on mobile

FY14 Financials

• Top-line growth momentum to be maintained
• Development spend around ZAR7bn
• Thus lower profit growth and FCF

Pay-TV

• Prepare for analog switch-off in some countries
• Extend online services and launch new products
• Position for intensifying competition

Outlook: Accelerating investment spend

30

Group Overview Financial Results Internet Pay-TV Outlook

Appendix

31

Advertising (32%) Printing (29%) Circulation (16%) Books (9%) Other (9%) Distribution (5%)

Print:

ZARm* Sep12 Sep 13 % C Chang nge Revenue 3,721 3,951 6% Trading profit 222 242 9% Trading margin 6% 6%

*Data for 1H FY14 reflect Media24’s stand-alone results available on www.media24.com

Revenue mix 1H FY14 Capex trend* Economic environment remains challenging Print losing adspend market share to television and online

Environment

Advertising revenue -3% and circulation -4% YoY Printing revenue +8% YoY , solid performance by book publishers Expansion into eCommerce (i.e. Spree) Capex higher due to acquisition of some printing assets

Operations

• 200

400 600 800 Mar 10 Mar 11 Mar 12 Mar 13 Sep 12 Sep 13 684 348 360 369 166 216 30%

32

Print:

BRLm Jun 12 Jun 13 % C Chang nge Revenue 1,411 1,284

• 9%

Trading loss (3) (26) > -100%

*Data reflects 100% of results Jan – Jun 2013; 1H FY14 ZAR/BRL 4.45 (4.11)

Impacted by weak economy Advertising revenues under pressure Print being complemented by digital initiatives

Environment

Advertising revenue -10% YoY , maintained market share Subscription revenues remain strong Single copy circulation declining in line with market Cost-cutting initiatives implemented, more required Some rationalisation of magazine titles

Operations

ZAR153m loss included in core headline earnings Impaired investment

Financials

33

Sep 12 Exchange rate impact Organic growth Acquisitive growth Sep 13

5,117 5,738 2,579 34,172 47,606

Incremental revenue YoY* (ZARm)

Revenue

* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated

17% growth from existing operations

• Tencent (+38%), Mail.ru (+28%) in local currency
• eCommerce +16% YoY
• Pay-TV revenues +12% YoY

Organic growth

15% revenue uplift from weaker ZAR Devalued -24% vs. Rmb and -20% vs. US$

Exchange rate

Mainly driven by new etail platforms such as eMag and Netretail

Acquisitive growth

39%

34

Development spend

• 1 000

2 000 3 000 Sep 12 Classifieds e-Tail Payments Sep 13 961 289 36 1,043

Incremental eCommerce development spend YoY (ZARm)

2,328

Sep 12 ZARm Sep 13 ZARm % C Chang nge Internet 1,043 2,328 123% Pay-TV 482 570 18% Print 66 72 8% Total 1,591 2,970 87%

• 10,000

20,000 30,000 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13

13,455 15,833 18,482 22,405 28,755 ,482 1,240 1,126 1,591 2,970

Revenue Development spend

Revenue and Development spend (ZARm)*

28% 87% 0% 4% 8% 12% Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 4.6% 6.1% 7.1% 7.1% 8.6% 10.3%

Development spend as % of revenue

35

Company results PPA adjustments IFRS results Other adjustments Core HEPS Contribution 4,501 (164) 5,139 (638) 5,303

Contribution by associates and joint ventures

Compa pany y PPA A IFRS Other Core HEPS ZARm results ts adjust stments nts results ts adjust stments nts* contr tribu bution n Tencent 3,960

• 3,960

420 4,380 Mail.ru 1,607 (59) 1,548 (1,143) 405 Abril (128) (70) (198) 45 (153) Other (136) (35) (171) 40 (131) TOTAL 5,303 (164) 5,139 (638) 4,501

* Headline and core earnings adjustments similar to Naspers methodology

Associates and joint ventures contribution to Core HEPS (ZARm)

36

Sep 12 ZARm Sep 13 ZARm Interest (paid) (703) (1,055) Loans and overdrafts (480) (749) Transponder leases (72) (173) Other (151) (133) Interest received 224 257 Loans and call accounts 203 242 Other 21 14 Other finance costs, net

• (117)

FX translation adjustments (76) (165) BEE preference dividends 76 48 Total finance costs (479) (915)

Net finance costs

US$700m 7-year bond issued Jul10:

• 6.375% coupon

US$1bn 7-year bond issued Jul 13:

• 6% coupon

5-year US$2.25bn RCF extended to Oct 2018:

• US$800m drawn at Sep 2013
• US$800m fixed at 4.3% all-in until March 2016
• Floating interest of 1.75% + 3 month LIBOR

Debt

Increased 83% YoY from ZAR277m to ZAR504m

Net interest paid on loans

SSA: new 15-yr lease effective Dec09

• Total cost ~US$40m p.a.

SA: new agreement effective Sep12

• Cost increased to US$42m p.a.

Transponders

37

Sep 12 ZARm Rm Sep 13 ZARm Rm Profit before tax 6,041 4,870 Add back: Development spend 1,525 2,898 Equity results (including impairments) (4,063) (4,386) Other gains and losses 378 958 Acquisition gains 16 222 FX gains and losses 76 165 BEE preference dividends (76) (48) Adjusted profit before tax 3,895 4,679 Tax charge (1,242) (1,447) Effective rate 32% 31%

Taxation analysis

38

Sep 12 ZARm Sep 13 ZARm Headline earnings 3,194 3,641 Equity-settled share scheme charges 339 429 Deferred tax adjustments (26) (49) Amortisation of intangible assets 583 690 Business combination gains/(losses) (39) 12 Retention option expense 41 72 Fair value adjustments & currency translations 35 125 Core headline earnings 4,127 4,920

Core headline earnings

39

ZAR weakness positively impacted translation of offshore earnings Averag age Closin sing g rate Currency y (ZAR = 1 1FC) Sep 12 Sep 13 % c change ge Sep 12 Sep 13 % c change ge US dollar 8.23 9.86

• 20

8.32 10.11

• 22

Euro 10.43 13.00

• 25

10.69 13.66

• 28

Chinese Yuan/Renminbi 1.30 1.61

• 24

1.32 1.65

• 25

Brazilian Real 4.11 4.45

• 8

4.10 4.49

• 10

Polish Zloty 2.48 3.06

• 23

2.60 3.23

• 24

Russian Ruble 0.259 0.304

• 17

0.27 0.31

• 15

Revenue growth YoY * Trading profit growth YoY *

25,000 34,000 43,000 52,000 Reported Constant Currency 47,606 42,131 +39% +23% 3,000 6,000 9,000 Reported Constant Currency 8,570 8,544 +16% +16%

Core earnings growth YoY

• 2,000

4,000 6,000 Reported Constant Currency 4,920 4,314 +19% +5%

* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated

Impact of currency movements

40

FX - Hedging to manage risk

Pay-TV: US$368m and EUR6m (programming rights and leases) Print: EUR20m and US$16m (paper and ink)

Annualised net foreign input costs

Pay-TV: long-term commitments, cover up to 100%

• f rolling 12 -24 month net inputs

Print: short-term commitments, cover maximum 12 months rolling input costs Bond/RCF: hedge interest liability to a maximum of 24 months

Hedging strategy

Almost all FEC’s qualify for hedge accounting

FEC’s

US$ FX Cover US$m US$ rate FY14 301 9.28 FY15 247 9.79 EUR FX Cover EURm EUR rate FY14 21 13.27 FY15 5 13.64

41

Capital expenditure

Sep 12 ZARm Sep 13 ZARm Land, buildings & plant 85 264 Transmission equipment 492 1,217 Computer, software & network equipment 376 429 Other (including vehicles, furniture) 41 68 Capital expenditure 994 1,978 Capex/Revenue 4% 7%

42

Ongoing M&A activity

Total acquisition spend (US$m)

• 200

400 600 800 Mar 10 Mar 11 Mar 12 Mar 13 Sep 13 517 754 260 634 347 Other

Other

43

Current assets and liabilities

Current t assets ts Sep 12 ZARm Sep 13 ZARm Inventory 1,588 2,486 Programme and film rights 2,830 3,147 Trade receivables 4,294 5,007 Other receivables 2,842 3,531 Derivative financial assets 284 501 Cash and deposits 10,363 16,262 Assets held for sale 30 32 Total 22,231 30,966 Current t liabilities Sep 12 ZARm Sep 13 ZARm Current portion of long-term debt 1,786 2,192 Provisions 285 228 Trade payable 4,056 5,669 Accrued expenses and other 8,674 11,318 Tax payable 525 699 Derivative financial liabilities 149 875 Bank overdraft and call loans 1,577 1,578 Liabilities held for sale

• Total

17,052 22,599

44

Consolidated income statement – US$

Sep 12 ZARm Sep 13 ZARm Sep 12 US$m Sep 13 US$m Revenue 22,405 28,755 2,721 2,917 Operating profit 2,548 1,621 309 164 Finance costs (479) (915) (58) (93) Share of equity accounted results 3,990 5,139 297 391 Acquisitions and disposals 23 614 3 62 Dilution profits (41) (836) (5) (85) Impairment of equity accounted investments

• (753)
• (76)

Profit before taxation 6,041 4,870 734 494 Taxation (1,383) (1,447) (168) (147) Net profit 4,658 3,423 566 347 Attributable to: Naspers 4,150 3,112 504 316 Minorities 508 311 62 32

1H FY14 ZAR/US$ 9.86 (8.23)

45

Naspers group structure

46 46

Glossary of terms

ARPU: Average Revenue per User B2C: Business To Consumer DPS: Dividend per Share DTH: Direct-to-Home Television DTT: Digital Terrestrial Television EPS: Earnings per Share FCF: Free Cash Flow FEC: Forward Exchange Contract GEM: Global Emerging Markets GMV: Gross Merchandise Value HEPS: Headline Earnings per Share HD: High definition IM: Instant Messaging MMOG: Massively Multiplayer Online Game PCU: Peak Concurrent Users SNS: Social Network Service SSA: Sub-Saharan Africa VAS: Value-Added Services

47

Meloy Horn Office: +27 11 289 3320 Mobile: +27 82 7727 123 E-mail: InvestorRelations@naspers.com Website: www.naspers.com

47

Investor Relations