A focus on developing classifieds websites and building digital terrestrial television networks in Africa will lead to a big increase in development spending by Naspers in the second half of its current financial year, the media and Internet group said on Tuesday.
This will have a “dampening effect” on earnings and cash flow in the second half and for the 2014 financial year as a whole, it said in notes alongside its interim results for the six months that ended 30 September 2013.
Already in the first half of the 2014 financial year, development spend has risen by 87% to R3bn, leading to a 15% decline in consolidated operating profits compared to the same period last year.
“We are building e-commerce platforms, in particular online classifieds, [and]rolling out digital terrestrial television across many cities in Africa. The pace of investment in these opportunities will accelerate sharply in the second half of the current financial year,” Naspers said.
“We expect development spend to exceed R7bn for the full financial year to March 2014, compared to R4,3bn last year.”
In the six months to September, Naspers grew its top line by 28% to R28,8bn, driven by strong growth in its Internet businesses, including its associate, China’s Tencent, and helped by weakness in the value of the rand. Core headline earnings per share grew by 16%. “We caution, though, that over the next six months an acceleration of investment into growth areas will lower earnings.”
Group core headline earnings for the period rose to R4,9bn from R4,1bn previously. Headline earnings came in at R3,6bn from R3,2bn before.
Revenues across all Internet platforms grew by 76% to R24,9bn. Increased development spend resulted in slower trading profit growth of 24% to R3,9bn.
Naspers now earns the majority of its revenues, including associates, offshore instead of in South Africa, and from the Internet businesses instead of from pay-television business MultiChoice.
Still, the pay-TV segment grew revenues by 18% to R17,1bn on the back of net new subscribers of 560 000. Trading profits increased by 11% to R4,5bn, failing to match revenue growth because of higher development spending.
Naspers said its CEO, Koos Bekker, and its nonexecutive chairman, Ton Vosloo, had both agreed to requests by the group’s board to say on in their present positions. — (c) 2013 NewsCentral Media