Naspers core headline earnings grow by 30%

Cape Town - Naspers [JSE:NPN] said on Monday that its core headline earnings, a measure the board considers a reliable indicator of sustainable operating performance, grew 30% to R11.2bn, up from R8.6bn in 2014.

It said this was mainly due to increased earnings contributions from Tencent - which it has a 34% stake in - and some of the profitable ecommerce businesses.

Releasing the summary of its audited consolidated results for the year ended March 31 2015 on Sens, the JSE-listed company said some R10.7bn was invested in development spend in growing the business. “This is a 33% increase on the prior year,” it explained.

Revenue grew by 26% to R132.446bn from R104.981bn in 2014.

On an economic-interest basis, Naspers said its revenue grew 26% during the year, driven by solid growth in the internet, e-commerce and video- entertainment segments.

Progress made across TV, internet platforms

Naspers said it made progress across its video-entertainment (previously pay-TV) and internet platforms. “We strengthened our position in several markets through incremental investments in people, technology, content and marketing - allowing growth ahead of our competitors,” the company said in Sens commentary.

“The classifieds and e-tail businesses saw strong growth,” Naspers explained. “We continue to invest in these formats as they are gaining market share globally.

“The smartphone is becoming the primary internet device in many of our markets, and we are dedicating considerable resources to advancing our mobile products.

“The video-entertainment business made solid progress with the total base closing at some 10.2 million households across Africa,” it said. “This comprises 2.2 million digital terrestrial television (DTT) subscribers and almost 8 million direct-to-home (DTH) satellite service subscribers.”

Development spend increase

Naspers said the increase in development spend was mainly attributable to the e-commerce and video-entertainment segments, including increased shareholdings in equity-accounted ecommerce investments Souq, Konga and Flipkart, plus continued investment in DTT in the video- entertainment segment.

“Given ongoing delays in analogue switch offs, we decided to invest incrementally in the second half of the year to continue to drive DTT growth, which resulted in 1.4 million African homes being added to the base, to close the year at 2.2 million subscribers,” Naspers said.

Listed internet investments Tencent and Mail.ru were the main contributors to the group's share of equity-accounted results increasing to R16.4bn, compared to R10.8bn in the previous perdiod.

“Tencent produced strong results as it continues on its growth path. Our share of equity-accounted earnings includes once-off gains on the remeasurement of Mail.ru's interest in VK.com, the sale of Mail.ru's shares in Qiwi amounting to R3.9bn, as well as R1.7bn representing our share of gains realised by Tencent on the sale of certain investments and on the dilution of Tencent's interest in Kakao Corporation following a merger.

“A net once-off gain of R1.5bn was recognised mainly relating to dilution of our shareholding in Flipkart. Impairment losses of R478m were booked on underperforming equity-accounted investments in the ecommerce segment.

“Core headline earnings grew 30% to R11.2bn (2014: R8.6bn), mainly due to increased earnings contributions from Tencent and some of the profitable ecommerce businesses. Impairment losses of R684m were recognised mainly relating to broadcasting equipment and intangible assets.

Net interest incurred on borrowings amounted to R1.6bn compared to R1.3bn in 2014, on the back of the rand depreciating against the US dollar and drawdowns on existing credit facilities to fund acquisitions and development spend.

“Consolidated net gearing stood at 30% at March 31, excluding transponder leases and non-interest- bearing liabilities. Increased development spend, plus capital expenditure to build our DTT footprint and TV production facilities in East and West Africa, resulted in free cash outflow of R515m (2014: outflow of R349m). Tax payments were up 16% year on year, as a result of profits in the video-entertainment segment and some profitable e-commerce businesses.”

Naspers' share price closed down 4.71% at R1 839.96 on the JSE on Monday. That was before the results were released.

Naspers share price (from December 28, 2014 to June 26, 2015):

Naspers share price (from June 27, 2010 to June 26, 2015):

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