Naspers’s video entertainment and Internet businesses showed strong growth in revenue in the year to March 2015, but earnings were once again underpinned by Chinese Internet group Tencent.
This as the group continues to prioritise investment in its TV and e-commerce businesses over short-term profits. It invested R10,7 billion across the business, increasing its stake in equity-accounted investments Souq, Konga and Indian e-commerce player Flipkart, and accelerating its investment in the roll-out of digital terrestrial TV, among other investments. All told, development spend was 33% more than last year.
The company announced a 30% rise in core headline earnings to R11,2bn for the year ended March 2015, off a 17% rise in revenue to R73bn.
The Internet businesses delivered a mixed performance, ultimately offering up R13bn of trading profit, up from R6,6bn last year. Within this, Tencent delivered profits of R17bn, up by 96%, although this figure is slightly distorted by the sale of certain investments.
Tencent’s decision to concentrate on the provision of mobile services is paying off handsomely with mobile Internet users now accounting for 85% of total Internet users in China.
Mail.ru delivered profits of R1,1bn, down 2% on the previous year, which is admirable considering the turbulent political and economic environment in Russia.
Tencent’s stellar growth continues to prop up Naspers’ diverse e-commerce businesses, which span at least 40 countries, and which returned a R6bn loss, 14% more than the previous year. However, this is largely self-inflicted as the group is determined to deliver a “superior” customer experience that is ahead of its competitors. As such, R8bn of the R10bn investment in development was diverted into this sector.
On a positive note, revenue within this grouping was up by 36% to R27,8bn.
Naspers continued with its drive to become a substantial player in the online classifieds sector and concluded agreements with Norwegian-based Schibsted Media Group, Telenor Holdings and Singapore Press Holdings Limited, covering classifieds assets in Latin America, Southeast Asia and Eastern Europe.
In March its main brand, OLX, served 240m active users worldwide and garnered 34m visits per day on average, a growth of 33% year on year. While mobile is not as dominant globally as it is in China, about 54% of traffic comes from mobile and, in some markets, it is more than 80%.
The video entertainment segment (previously the pay-TV division) produced another consistent performance, generating revenues of R42,4bn — up by 17% year on year.
Development spend increased by 31% to R2,4bn as MultiChoice builds out its digital terrestrial television (DTT) services, resulting in trading profit contracting by 6% to R8bn.
This division now provides entertainment to about 10,2m homes across Africa. This comprises 2,2m DTT subscribers and almost 8m direct-to-home satellite service subscribers.
Naspers notes that competition from international online players with global reach, such as Netflix, Amazon and Google, is increasing. In this regard, MultiChoice is investing in its online offering, expanding its delivery platforms and improving products and services. The DStv Explora personal video recorder is a differentiator and became Internet-connected in November 2014.
The print media segment saw the listing of printing business, Novus, in March. The group received proceeds of R1,1bn from the listing. The segment managed marginal revenue growth.
However, trading profit declined to R314m (2014: R606m) as the print industry continues to decline. Media24 is also investing in Internet and e-commerce opportunities.
Impairment losses of R684m were recognised, mainly relating to broadcasting equipment and intangible assets.
Net interest incurred on borrowings amounted to R1,6bn, up from R1,3bn in the previous year, thanks to a weaker rand and additional drawdowns to fund acquisitions and development spend.
Gearing now stands at 30%, excluding transponder leases and non-interest-bearing liabilities.
Naspers declared a dividend of 470c per listed N ordinary share, and 94c per unlisted A ordinary share.
The share ended the day down by 4,1% at R1 839,96.
- This article was first published on Moneyweb and is republished here with permission