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Investor briefi ng book
Financial results for the year ended 31 March 2015
CONTENTS click on each subject matter below
% Financials Internet Video entertainment Outlook Appendix % MAIL PRINT Financials Commentary
Important information
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.
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FY15: Synopsis of financials Revenue, on an economic interest basis, grew by 26%. Revenue* (ZARbn) Development spend* (ZARbn) Internet was the fastest growing Mar 14 Mar 15 at 37% YoY. 26% 33% Development spend, also on
132.45 10.74 an economic interest basis, 104.98 8.10 increased 33% (7% diven by forex). Increase driven by
Core HEPS (ZAR) DPS (ZAR) ecommerce (mainly etail) and DTT. 28% 11% Core headline earnings +30%
27.82 and core headline earnings per 4.70 21.81 4.25 share +28%, driven by a solid performance by
* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated Tencent, online comparison 4 shopping turning profi table and improved performance from more established horizontal and vertical classifi ed sites.
Dividends grew 11%, lower than core HEPS, but ahead of our cash fl ow generation.
Investor briefi ng book 2015 1 % MAIL PRINT Financials Commentary
Strong market positions drove solid revenue growth Internet, still the fastest growing revenue segment; constitutes Incremental revenue* by segment, YoY (ZARm) 59% of group revenues (only 3% 37% 17%3% 26% in 2000). Ecommerce revenue 20,993 6,148 324 132,446 132,446 grew 36% YoY and Tencent 40% 104,981 YoY.
Mar 14 Internet Video Entertainment Print Mar 15 Video entertainment benefi ted from a 27% increase in Revenue by business segment* Revenue* (ZARm) subscribers YoY and 6%
CAGR increase in subscription rates in 31% 132,446 Internet (59%) 104,981 SA. Some negative impact from
Video Entertainment (32%) 76,776 changing subscriber mix and Print (9%) 56,522 45,108 currency weakness in Africa.
Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Challenging trading conditions * Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated continue for Print Media, 5 Media24 revenue +3% YoY.
Diversified business mix 73% of revenue is now earned
FY15 Revenue* by geography FY15 Revenue* by type offshore, compared to only 27% in 2005.
Geographically, most revenue is generated in Asia due to the substantial contribution from Tencent.
Asia (41%) IVAS & games (30%) Taking into account monthly South Africa (27%) Subscription (26%) Europe (15%) Ecommerce (22%) subscription revenues, as well Advertising (9%) Rest of Africa (11%) as IVAS and gaming revenue Printing, circulation & distribution (5%) Latin America (5%) Technology (2%) which is typically of a recurring Other (1%) Other (6%) nature, annuity income represents more than 50% of Geographically diversified portfolio Large annuity income base our revenue base. Cyclical * Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated advertising revenue is only 9% 6 of total revenue.
The diversity of revenue streams reduce the risk of exposure to any one territory or business model.
Investor briefi ng book 2015 2 % MAIL PRINT Financials Commentary
Components of revenue growth Organic growth accounted for the majority of revenue growth:
Incremental revenue YoY* (ZARm) • Tencent +39% YoY
26% • Mail.ru +16% YoY • Ecommerce +35% YoY (2,683) • Video entertainment 25,754 4,394 +14% YoY 132,446 Exchange rate also had an 104,981 impact, mostly due to a weaker ZAR.
Acquisitive growth was Mar 14 Exchange rate impact Organic growth Acquisitive growth Mar 15 negative due to the impact of
* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated Tencent’s ecommerce disposal to JD.com.
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Development spend* breakdown In total, we further increased our investment to: Revenue* and Development spend (ZARm) 26% Mar 14 Mar 15 • Focus on enhancing % Change 33% ZARm ZARm consumer propositions and Ecommerce 6,083 8,059 32%
132,446 growing ahead of Video Entertainment 1,812 2,389 32% 104,981 competitors Print 205 290 42% 76,777 4,308 8,100 10,739 1,535 56,520 2,823 45,102 • Expand markets Total 8,100 10,739 33% Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 • Make seed investments Revenue Development spend
FY15 split by business segment As % of revenue* In ecommerce, spending was 9% affected by: 290 8.1% 7.7% 2,389 Ecommerce (75%) 6% • Higher marketing spend to 5.6% Video Entertainment (22%) 5.0% build market maturity and 3% Print (3%) 3.4% relative scale in classifi eds 8,059 0% • Increased holdings in etail Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 investments (Flipkart, Souq * Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated and Konga) 8 • Larger markets of investment include India, Brazil and Nigeria
Investor briefi ng book 2015 3 % MAIL PRINT Financials Commentary
Further investment in etail and DTT Development spend (economic-interest basis) Incremental development* spend by segment, YoY (ZARm) increased 33% YoY, 7% due to fx 33% 32%42% 33% movements and 26% due to 86 1,976 577 operations.
10,739 8,100 This was mainly attributable to: • Ecommerce (+33% YoY),
Mar 14 Ecommerce Video Entertainment Print Mar 15 where spending to develop etail was up 40% YoY or Effect of forex on development spend*, YoY (ZARm) R387m 7% 26% 33% • Video entertainment’s 2,094
545 continued investment in DTT 10,739 8,100 up 65% to R2.2bn • Media24’s continued Mar 14 Forex Organic investments Mar 15 investment in new revenue *Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated streams, specifi cally in 1 internet and ecommerce
Ecommerce: development spend* Ecommerce development spend increased at a slower Revenue* and development spend (ZARm) rate than YoY revenue growth 36% 27,772 of 36%. 33% 20,355 8,059 12,386 6,083 Equity accounted etail 1,857 3,259 4,218 705 6,643 investments (Souq, Konga and Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Flipkart) accounted for 53% of Revenue Development spend the step-up, impacted by our FY15 development spend by type Incremental development spend YoY (ZARm) increased shareholding during 267 26 1,224 850 285 174 the year. Classifieds (50%) 578 Etail (32%) 4,023 Payments (7%) 8,059 6,083 Other (11%) 2,608
Mar 14 Forex Classifieds Etail Payments Other Mar 15
* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated
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Investor briefi ng book 2015 4 % MAIL PRINT Financials Commentary
Group consolidated development spend
Incremental development spend by segment, YoY (ZARm)
16% 31%42% 20% 561 86 915
9,217 7,656
Mar 14 Ecommerce Video Entertainment Print Mar 15
Effect of forex on development spend, YoY (ZARm)
6% 14% 20% 1,078 484
9,217 7,656
Mar 14 Forex Organic investments Mar 15
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Ecommerce: consolidated development spend
Revenue and development spend (ZARm)
22,775 18,702
12,154 5,639 6,554 3,259 1,857 4,041705 4,438
Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Revenue Development spend
FY15 development spend by type Incremental development spend YoY (ZARm)
267 (28) 65 387 696 224 Classifieds (60%) 578 Etail (21%) 6,554 Payments (9%) 5,639 1,369 3,911 Other (10%)
Mar 14 Forex Classifieds Etail Payments Other Mar 15
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Investor briefi ng book 2015 5 % MAIL PRINT Financials Commentary
Investment in growth opportunities affected trading profit growth Trading profi t continued to be affected by our investment Incremental trading profit by segment* (ZARm) focus. 96% 6%-48% >100% 35%
6,402 (511) (292) (187) In Internet, the R19bn contribution by Tencent and 21,025 15,613 Mail.ru was reduced by the ZAR6.1bn loss in ecommerce. Mar 14 Internet Video Entertainment Print Corp Mar 15 Allegro and OCS all reported growth in profi ts. FY15 split by business segment* Trading profit* (ZARm) 21,025 Video entertainment margin
Internet (61%) 15,613 contracted due to higher STB 14,326 Video Entertainment (38%) 11,762 10,546 subsidies to drive DTT subscriber Print (1%) growth in the absence of ASOs and more investment in local Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 content (ZAR2bn in SA), offset by * Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated positive contribution from Irdeto. 12 Investments in growth areas in Print weigh on margins. Also affected by lower revenues from traditional sources due to structural industry changes and tough trading conditions.
Trading margin squeeze due to Summarised consolidated income statement a 20% increase in consolidated development spend. Excluding Mar 14 Mar 15 ZARm ZARm this, margin was 15%. Revenue* 104,981 132,446 Less: Associates and joint ventures (42,253) (59,354) Net fi nance costs increased 33% Consolidated revenue 62,728 73,092 YoY (8% fx; 25% higher debt).
Trading profit 3,906 3,150 Income from associates Trading margin 6% 4% includes ZAR4.4bn profi t from Net finance costs (2,127) (2,824) re-measurement of Mail.ru’s Share of equity accounted results 10,835 16,384 interest in VK and the sale of Impairments (2,774) (1,162) shares in Qiwi (ZAR3.9bn) and Taxation (2,895) (3,757) Tencent’s sale of investments Net profit 6,529 14,024 (ZAR1.7bn). Core headline earnings 8,616 11,228 Core headline EPS (ZAR) 21.81 27.82 As Abril and the fashion * Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated businesses were impaired
13 in the previous period, FY15 impairments declined from R2.8bn to R1.2bn (various small impairments).
Taxation increased due to higher profi ts in video entertainment, Allegro marketplace and OCS.
Investor briefi ng book 2015 6 % MAIL PRINT Financials Commentary
Net finance costs Debt US$700m 7-year bond issued July 2010 (6.375% coupon) Mar 14 Mar 15 ZARm ZARm US$1bn 7-year bond issued July 2013 (6% coupon) Interest paid (2,466) (2,752) Loans and overdrafts (1,717) (2,020) RCF draw-down went from Transponder leases (356) (376) US$800m to US$1.365bn Other (393) (356) Net interest paid on loans Interest received 606 501 Loans and call accounts 456 415 increased 8% YoY from Other 150 86 ZAR1.3bn to ZAR1.6bn on the back of the ZAR depreciation Other finance costs, net (267) (573) Net FX differences and FV adjustments on derivatives (344) (615) and drawdowns on existing BEE preference dividends received 77 42 credit facilities to fund
Total finance costs (2,127) (2,824) acquisitions Transponders
14 SSA: 15-yr lease effective Dec 2009 (cost ~US$40m p.a.) SA: 15-yr agreement effective Sep 2012 (cost ~US$42m p.a.) New Transponder: 15-yr agreement from Jan 2017 (cost ~US$55m p.a.)
Equity accounted results The contribution from equity accounted investments mainly Associate and JV contributions (ZARm) Tencent and Mail.ru, increased
51% 51%, ahead of the 5yr CAGR
16,384 of 49%.
CAGR +49% Dividends received from associates increased 27% YoY from R819m (US$83m) to R1bn 10,835 8,778 (US$95m). Neither Mail.ru nor Abril paid dividends in the reporting period. 3,869 3,290
Mar 11 Mar 12 Mar 13 Mar 14 Mar 15
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Investor briefi ng book 2015 7 % MAIL PRINT Financials Commentary
Contribution by associates and joint ventures Our share of equity-accounted earnings includes: • Once-off gains on the Company PPA IFRS Other Core HEPS re-measurement of Mail.ru’s ZARm results adjustments results adjustments* contribution interest in VK.com and the Tencent 13,073 - 13,073 1,515 14,588
Mail.ru 5,024 (65) 4,959 (3,976) 983 sale of Mail.ru’s shares in Qiwi Other (1,588) (60) (1,648) 166 (1,482) amounting to R3,9bn TOTAL 16,509 (125) 16,384 (2,295) 14,089 • R1,7bn representing our share * Headline and core earnings adjustments similar to Naspers methodology of gains realised by Tencent on the sale of certain Associates and joint ventures contribution to Core HEPS (ZARm) investments and on the dilution of Tencent’s interest (125) 16,509 16,384 (2,295) in Kakao Corporation 14,089 Further items related to equity Company results PPA adjustments IFRS results Other adjustments Core HEPS Contribution accounted investments: • A net once-off gain of R1,5bn 16 was recognised mainly relating to dilution of our shareholding in Flipkart • Impairment losses of R478m were booked on underperforming ecommerce investments
Core headline earnings Core headline earnings is considered by the board to be an indication of sustainable
30% earnings performance.
CAGR +17% 11,228 FY15 saw an acceleration in the YoY growth rate relative to the 8,533 8,616 5yr CAGR, mainly due to
6,951 a strong performance from 6,036 Tencent and the contribution from some profi table ecommerce businesses.
Mar 11 Mar 12 Mar 13 Mar 14 Mar 15
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Investor briefi ng book 2015 8 % MAIL PRINT Financials Commentary
Core headline earnings up 30% YoY Profi ts from listed assets benefi ted from 43% YoY Incremental core headline earnings drivers, YoY (ZARm) increase in Tencent’s net
476 66 (1,560) operating profi ts and a 50% (206) 1,212 1,490 (1,233) increase in its contribution to (2,639) (2,639) core earnings. 4,936 5,008 Ecommerce businesses
11,228 contributed an incremental ZAR1.2bn to earnings, before
8,616 taking development spend into account.
SA video entertainment business Mar 14 Profits from Ecommerce* Other Video Print Tax & Interest Development Mar 15 listed assets entertainment* spend* continued to drive operating
* Development spend reflected on an economic interest basis, i.e. assuming equity accounted investments are proportionately consolidated; segmental results are net of development spend leverage through subscriber growth. The benefi t was 18 however offset by the SSA operations, where we added international and local content, launched services such as the Explora, PVR and BoxOffi ce and had to deal with the negative impact of weaker currencies.
Core headline earnings
Mar 14 Mar 15 ZARm ZARm
Headline earnings 5,981 7,234
Equity-settled share-based payment expenses 1,120 1,525
Deferred tax adjustments 58 228
Amortisation of other intangible assets 1,385 1,667
Business combination losses / (profits) (9) 140
Retention option expense 128 133
Fair value adjustments & currency translation differences (47) 301
Core headline earnings 8,616 11,228
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Investor briefi ng book 2015 9 % MAIL PRINT Financials Commentary
Impact of currency movements The depreciation of the ZAR against other major currencies Some translation gains due to weaker ZAR resulted in some translation Revenue growth YoY * Trading profit growth YoY * Core earnings growth YoY gains during the year. 150,000 +26% 25,000 12,000 +36% +33% +22% +35% +30% 20,000 21,022 20,275 11,233 132,446 15,000 10,943 This had the following effect on 75,000 128,052 6,000 10,000 our FY15 numbers: revenue 5,000
- - - +4%, trading profi t +5% and Reported Constant Currency Reported Constant Currency Reported Constant Currency core earnings +3%. * Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated
Average Closing rate
Currency (ZAR = 1FC) Mar 14 Mar 15 % change Mar 14 Mar 15 % change US dollar 10.19 11.13 -9 10.53 12.14 -13 Euro 13.69 13.91 -2 14.51 13.04 10 Chinese Yuan/Renminbi 1.66 1.80 -8 1.69 1.96 -16 Brazilian Real 4.50 4.47 1 4.67 3.82 18 Polish Zloty 3.25 3.33 -2 3.40 3.20 6 Russian Ruble 0.31 0.25 19 0.30 0.21 30
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FX exposure: hedging to manage risk Annualised net foreign input costs Video entertainment: US$334m (programming rights and leases). US$ FX Cover US$m US$ rate
12 months out 477 11.59 Corporate: US$142m (Bond/RCF 24 months out 172 12.48 interest hedge)
Print: US$1m and EUR52m.
EUR FX Cover EURm US$ rate
12 months out 52 13.75 Hedging strategy Video entertainment: long-term commitments, cover up to 100% of rolling 12 – 24 month net inputs.
Print: short-term commitments, 21 cover maximum 12 months rolling input costs.
Almost all FECs qualify for hedge accounting.
Investor briefi ng book 2015 10 % MAIL PRINT Financials Commentary
FC outflow due to increased investment in growth Operating cash fl ow down due to higher development spend and increased DTT inventory in Mar 14 Mar 15 ZARm ZARm anticipation of ASOs. Almost all etail operations now generate
Operating cash flow 7,383 6,476 negative working capital
Capex (4,442) (3,280) Finance leases impacted by
Finance leases (805) (932) new satellite lease for MCSA.
Tax (3,319) (3,845) Investment income includes ZAR1bn dividend from Tencent. Investment income (1) 841 1,064
Free cash flow (FCF) (349) (515)
(1) Dividends received from investments and equity accounted investments
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Capital expenditure R2,46bn of total capex spend related to video entertainment (50% of which was spent on DTT
Mar 14 Mar 15 FY15 split by business and transmission; while the new ZARm ZARm offi ce in Randburg accounted Land, buildings & manufacturing equipment 767 802 418 612 for a large portion of the rest). Transmission equipment 2,477 1,075 Ecommerce accounted for Computer, software & network equipment 1,023 911 R612m.
Other (including vehicles, furniture) 372 640 2,398
Capital expenditure 4,639 3,428 Ecommerce (18%) Video Entertainment (70%) Capex/Revenue 7% 5% Print (12%)
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Investor briefi ng book 2015 11 % MAIL PRINT Financials Commentary
M&A activity During the year, we spent US$421m on M&A. Total acquisition spend (US$m) 800 This largely represents increased investments in associates JVs and bolt-on acquisitions. 600 We participated in two funding rounds in Flipkart, resulting in 421 400 additional investments of 754 Other R555m and R2,67bn 634 respectively. We now have a 465 200 15,83% interest in Flipkart on a
260 fully-diluted basis. In addition, we invested R297m - Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 in Konga in FY15 and a further
24 US$41m after year-end, to bring our fully diluted holding to 50,9%.
Consistent dividend growth Our policy is to grow our dividend every year as we DPS (ZAc/share) grow earnings.
11% We do not have a specifi c 470 target pay-out ratio or dividend 425
385 cover.
335
270 235 207 180 156 120
70
Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15
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Investor briefi ng book 2015 12 % MAIL PRINT Financials Commentary
Balance sheet remains solid We are focused on maintaining a highly cash generative portfolio with conservative Mar 15 ZARm leverage. Our balance sheet is
Debt (1): (offshore US$3.2bn) (38,781) healthy; provides us with
Cash: (South Africa ZAR6.3bn) 14,569 fl exibility to continue to invest and grow. Closing net debt (24,212) Consolidated net gearing ratio
Interest cover 10x increased slightly to 30% from 29% at 1HFY15. Net debt/ Adjusted (2) EBITDA 1.3x
Value of marketable listed securities*/Debt 21x Net debt excludes transponder leases of ZAR8bn, considered to (1) Excludes satellite lease liabilities and non-interest bearing debt; (2) Adjusted EBITDA =consolidated EBITDA + share of equity accounted earnings + IFRS2 charges + impairments + transponder lease be an operating cost. payments (i.e. non-cash items) *As at 26 June 2015 Interest cover and net debt to
26 adjusted EBITDA well within our covenants.
Using the value of our listed internet assets, ignoring all other businesses, debt is covered ~21x.
Group net consolidated debt Group gearing increased over time as ecommerce Group net consolidated debt (ZARm) acquisitions have largely been 25,000 35% funded from drawings on our 24,212
30% revolving credit facility (RCF) and the issuing of bonds.
23% Ecommerce is primarily funded 15,407 out of cash fl ow generated from the video entertainment 13% businesses and drawings on the 10% 10% 6,777 RCF. 4,595 3,948
- 5% Mar 11 Mar 12 Mar 13 Mar 14 Mar 15
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Investor briefi ng book 2015 13 % MAIL PRINT Financials Commentary
Debt maturity profile and debt position Benign debt maturity schedule with the next principal Debt maturity profile by calendar year (US$m) repayment not until 2017.
Cash levels remain high at RCF US$2,250m ZAR14.5bn. 43% of cash is held in ZAR, with the balance in Bond US$1,000m Bond US$700m various currencies (mainly USD, MAL RCF US$115m 2016 2017 2018 2019 2020 EUR and PLN).
FY15 net cash reserves split (ZARm) FY15 debt obligations split (ZARm) Large majority of outstanding debt also dominated in hard 225 currency. South Africa (43%) South Africa 6,269
8,300 Offshore - US$ & EUR (57%) Offshore (US$ & EUR)
38,556
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Current assets and liabilities
Mar 14 Mar 15 Mar 14 Mar 15 Current assets Current liabilities ZARm ZARm ZARm ZARm
Inventory 2,882 3,183 Current portion of long-term debt 2,628 4,295
Provisions 260 312 Programme and film rights 1,979 1,868
Trade payable 5,318 5,436 Trade receivables 4,849 4,338 Accrued expenses and other 12,912 14,584 Other receivables 4,807 5,804 Tax payable 809 533 Derivative financial assets 209 449 Derivative financial liabilities 840 569
Cash and deposits 13,664 14,881 Bank overdraft and call loans 1,081 312
Assets held for sale - 2,392 Liabilities held for sale - 135
Total 28,390 32,914 Total 23,848 26,176
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Investor briefi ng book 2015 14 % MAIL PRINT Financials
Consolidated income statement – US$
Mar 14 Mar 15 Mar 14 Mar 15 ZARm ZARm US$m US$m
Revenue 62,728 73,092 6,157 6,569
Operating profit 2,018 1,595 198 143
Finance costs (2,127) (2,824) (209) (254)
Share of equity accounted results 10,835 16,384 1,064 1,473
Acquisitions and disposals 751 1,605 74 144
Dilution gains / (losses) (852) 1,499 (84) 135
Impairment of equity accounted investments (1,201) (478) (118) (43)
Profit before taxation 9,424 17,781 925 1,598
Taxation (2,895) (3,757) (284) (338)
Net profit 6,529 14,024 641 1,260
Attributable to:
Naspers 5,751 14,023 565 1,260
Non-controlling interests 778 1 76 -
FY15 ZAR/US$11.13 (10.19)
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Investor briefi ng book 2015 15 MAIL PRINT Internet Commentary
Ecommerce: expansive global footprint
Classifieds ETAIL Payments Etail: focusing on attractive markets Etail 10 companies, 17 markets #1 in almost all businesses – most by significant margin Online services 76% increase in items sold
Marketplaces: Allegro #1 in Poland
Payments: becoming leader in new- world growth markets 1 brand, 16 markets 100,000+ merchants, 220+ payment options 69% increase in daily payment transactions
Classifieds: OLX the leader across growth markets +40 countries; 240 million active users 24% increase in new listings
Online services: Expanding footprint and growing organically Goibibo: Fastest growing online travel agent in India Redbus: 8x bigger than #2 in bus ticketing in India iFood: 85% market share in food delivery in Brazil * Only includes country of domicile for associates, not their entire footprint 1
Ecommerce: segment overview* Development spend and trading losses growing slower
Mar 14 Mar 15 than revenue – businesses % change Ecommerce: FY15 Revenue split ZARm ZARm Revenue 20,355 27,772 36% getting stronger operationally, Development spend 6,083 8,059 33% driving effi ciencies as they Etail (59%) Trading loss (5,329) (6,093) -14% Other (41%) scale.
Ecommerce: revenue and trading losses (ZARm) Etail remains largest and fastest 28 000 27,772 growing ecommerce segment. 21 000 20,355 Ecommerce: FY15 YoY organic revenue growth by type 14 000 12,386 49%
7 000 6,643 4,218 33% 3,085 – 26% (107) (207) (1,238) (2,337) (5,329) 16% 15% (7 000) (6,093) Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 5% Revenue Trading losses Etail Classifieds Online Payments OCS Marketplaces services
* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated
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Investor briefi ng book 2015 16 MAIL PRINT Internet Commentary
Etail: increased scale driving revenue momentum Etail generated over R5bn incremental revenue for the second year in a row. FY15 Etail: Revenue growth (ZARm)* Etail: FY15 GMV by region* growth was mainly organic. As a 54% retail business, margins are lower 16,501 than other ecommerce formats.
Continue to focus on pillars of 10,705 consumer experience in retail – price, selection and convenience. Good growth in 5,283 India & SE Asia (55%) Europe (35%) repeat visits, suggesting healthy Africa & Middle East (10%) Mar 13 Mar 14 Mar 15 customer satisfaction.
* Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated >50% of GMV in etail coming from India and southeast Asia, driven by acceleration in 34 smartphone penetration.
Online Services: gaining good traction in travel
Ibibo Group: Most online travel transactions in India
Unit transactions/month (m)
2.1
2x
• 2.1m transactions/ month 1.0 • ~2x size of any other online travel agent • 8x size of nearest competitor in bus ticketing ibibo Competition • Largest player in hotels (390% YoY growth) • 44% of hotel transactions on mobile 62% YoY growth 35% • >53% of ibibo’s revenue from non-air categories Source: Website data, March 2015
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Investor briefi ng book 2015 17 MAIL PRINT Internet Commentary
Classifieds: OLX clear leader in emerging markets
Global footprint +40 Countries
+20 Offices
+1,000 Employees Mobile leadership Scale #1 app +4.3 +240m +17b 15 COUNTRIES (1) APP RATING MONTHLY MONTHLY ACTIVE USERS PAGE VIEWS 1) Google play store; shopping category
Note: numbers include OLX brand only
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Classifieds: operational overview OLX now the largest global online classifi eds operator by Naspers positions (number of countries) 23 geography. 20 16 12 Dubizzle is the leading online 8 55 6 classifi eds and community 33 2 1 portal in the Middle East and Entering Fighting Leading Leading and monetising North Africa, with over 28 million 2014 1HFY15 FY15 visits in March 2015. Avito is the leading classifi eds site in Russia, Daily visits (m)* Daily page views (m)*
32% 53% with over 27 million visits in 37 657 December 2014. 28 429 Currently monetising 8 countries: Russia, UAE, Portugal,
Mar 14 Mar 15 Mar 14 Mar 15 Poland, Bosnia, Bulgaria, *Reflects associates on a proportionate basis Romania and Ukraine. Leading 37 in another 23 markets.
FY15 development spend +10% YoY to ZAR4bn (+5% in constant currency).
Investor briefi ng book 2015 18 MAIL PRINT Internet
Classifieds: mobile is transformational
Monthly active users over mobile devices (YoY growth), selected countries Mar 14 Mar 15
60%
72%
129% 144%
55% 191% 170%
Colombia Argentina South Africa Ukraine Poland Indonesia India
Mobile % 52 47 72 34 33 75 80
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Classifieds: maturing the market in key Schibsted JVs
Market maturity index (# monthly listers / capita),Q1 2015
Russia Poland Portugal Brazil Indonesia
JVs established successfully Pushing for further growth to mature the markets
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Investor briefi ng book 2015 19 MAIL PRINT Internet Commentary
Classifieds: solid performance in India India online classifi eds market is immature and very competitive. India: Relative inflow of new listings (goods and cars) India: Brand awareness OLX Quikr OLX.in maintained a lead of 2 – 3x over direct competitor Quikr, measured in new listing 2.3x 2.4x 2.4x 2.2x 2.3x infl ow and brand strength.
Strong focus on mobile offering
May 14 Jul 14 Oct 14 Feb 15 May 15 going forward.
Source : Website data Source : Google trends
Indian market still nascent, yet competitive Solid and sustained lead on key metrics
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Listed internet: Currently own 33.6% of Tencent. Solid business performance with Tencent operating profit (RMBm) Revenue mix FY14* expanded mobile user base
59% and increased engagement from enriched media and CAGR 30,542 +33% entertainment content.
Strong growth in advertising 19,194 driven by video and mobile 15,479
12,254 performance-based advertising. 9,838 Value-added services (80%) Reduced subsidies for taxi Ecommerce transactions (6%) Advertising (11%) bookings via Weixin payments Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Other (3%) benefi ted operating profi ts.
*Reflects 100% of FY14 results available on www.tencent.com Effective from Mar 11 2014, Tencent has divested its B2C and C2C ecommerce marketplaces and deconsolidated such revenues FY15 ZAR/RMB1.796(1.664) 1Q15 statistics: • Weixin & WeChat: 549m 41 combined monthly active user accounts (+39% YoY) • QQ IM: 603m monthly active user accounts on smartphone devices (+23% YoY), 832m total monthly active user accounts (-2% YoY)
Contributed ZAR14.6bn to core earnings (+50% YoY). ZAR1.7bn profi t on sale of investments and dilution of interest in Kakao.
Investor briefi ng book 2015 20 MAIL PRINT Internet Commentary
Listed internet: Currently own 29% of Mail.ru. The economic and geopolitical Mail.ru EBITDA (RURm) Revenue mix FY14* environment remains 13% challenging, impacting 18,297 CAGR long-term visibility. +50% 16,122 Structural drivers of the business
11,535 remain unchanged • MMO games and community 8,381 IVAS revenues in line
Display advertising (35%) • Advertising revenues and 3,628 Community IVAS (33%) Headhunter business under MMO Games (24%) Other (8%) pressure Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 • Focusing on mobile and
*Reflects 100% of FY14 aggregate segment performance as reported For IFRS results with full disclosure refer to www.corp.mail.ru video advertising FY15 ZAR/RUR 0.25 (0.31) opportunities
42 During the year Mail.ru contributed ZAR983m to core earnings (+9% YoY).
Mail.ru reported 64m monthly unique users on its platform as at Q1 2015.
Investor briefi ng book 2015 21 MAIL PRINT Video entertainment Commentary
Video Entertainment strategy: ongoing investment in various platforms
• StrongStrong accelerationacceleration in subscribsubscriber ggrowth;rowth; added 1.4m susubsbs 2H2H 1 Grow DTT base
• LaunchedLaunched connectedconnected DStv Catch Up (catalogue(catalogue offers >1,200 hours content)content) Focus on better • AddedAdded several new channels (12(12 in SA and 24 in SSASSA)) 2 • 7 newnew HD channelschannels mademade availableavailable products • HD channels now available across all tiers
• MoreMore thanthan ZAR2bnZAR2bn investedinvested in locallocal contentcontent in SA • SuperSportSuperSport remainsremains larlargestgest funder of sport on African continencontinentt 3 Ongoing investment in local content
3
Video Entertainment: consistent solid performance Subscriber base grew by 2.2m net additions during the year, Video Entertainment subscriber homes (‘000) 27% CAGR now 10.2m subscribers in total. 20% Growth driven by lower-priced 4,819 3,051 bouquets, premium base 2,288 1,630 1,439 remained stable 5,008 5,406 3,489 3,981 4,451
Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 At year-end we had 2.2m DTT South Africa Sub-Saharan Africa subscribers, and our PVR base
Video Entertainment financials (ZARm) increased 9% YoY to 1.2m. DTT investment phase 27% BoxOffi ce billable rentals now 25% 25% 23% average >600,000 p.m.
42,419 19%
36,271 Revenue growth of 17% YoY 30,257 8,520 7,559 8,009 6,379 25,259 5,927
22,259 was impacted by changing
Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 business mix. Revenue Trading profit Margin
45 Margin pressure due to development spend increasing to R2.4bn (mainly subsidies on DTT set-top boxes), higher content costs due to weaker ZAR and continued investment in local content. Margins expected to benefi t from lower DTT spending in future.
Investor briefi ng book 2015 22 MAIL PRINT Video entertainment Commentary
Analogue switch-offs in DTT: strong acceleration in subscriber growth Mozambique, Namibia and
DTT Subscribers (‘000) Kenya during FY15; delayed in 2,256 Nigeria.
Due to delays, decided to 817 873 541 377 aggressively pursue DTT market 151 23
Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 to advance our strategic position. Leveraged existing 11 Total DTT spend (ZARm) inventory and made service countries 1,148 more affordable by introducing 2,359 160 higher decoder subsidies. As a 2,194 sites 892 383 1,327 result, development spend on 185 425 Mar 12 Mar 13 Mar 14 Mar 15 DTT rose to ZAR2.2bn.
Development spend Capex Invested ZAR1.1bn in DTT capex -XQ in FY15, bringing cumulative 46 investment to R4.8bn. Network now largely complete.
Video entertainment: operational dynamics Video entertainment fundamentals remain strong. DTH ARPU (ZAR) Programming and production costs (ZARm)
335 349 CAGR DTT ARPU negatively affected 21% 12,607 by deeper subsidies to market Mar 14 Mar 15 9,956 our GOtv products more 8,046 DTT ARPU (US$)* 6,685 5,837 aggressively. 7 6 Capex expected to continue to Mar 14 Mar 15 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 * Impacted by promotional activities decline as DTT roll-out is largely
Development spend (ZARm) Capital expenditure (ZARm) completed.
CAGR 3,720 54% 2,389
1,812 2,398 2,030
1,204 1,288 730 607 424
Mar 12 Mar 13 Mar 14 Mar 14 Mar 15 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15
47
Investor briefi ng book 2015 23 MAIL PRINT Commentary
Print media: Listed Novus Holdings (previously Paarl Media) on JSE. Novus improved core ZARm* Mar 14 Mar 15 % Change productivity and effi ciencies, Revenue 8,171 8,250 1% diversifi ed into new market Trading profit 519 247 -52% segments. Trading margin 6% 3% *Data for FY15 reflect Media24’s stand-alone results available on www.media24.com Consolidated all digital media assets under 24.com to drive Revenue mix FY15 Capital expenditure (ZARm) scale and monetisation of
Advertising (28%) 428 audiences. Retained market Printing (32%) 348 360 354 leadership in newspapers and Circulation (16%) 302 magazines. Spree building on Books (7%) Distribution (4%) online-fashion leadership Other (11%) position (launched new Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 categories and private label).
48 Tough trading conditions hampered revenue growth: book publishing -24% YoY (lower schoolbook orders in SA and Botswana); advertising revenue -9% YoY.
Margins affected by lower revenues, accelerated investment in digital initiatives and expansion into other new areas to diversify revenues. Initiatives implemented to increase effi ciencies and reduce costs in mature operations.
Investor briefi ng book 2015 24 MAIL PRINT Outlook Commentary
FY16 Outlook: continue building our platforms 1. Expect to continue to see rapid audience and topline 1 growth. Continue rapid audience and topline growth Leadership in ecommerce 2. To invest primarily in 2 segments with growing Classifieds, etail and online services consumer engagement, Continue focus on Connected video entertainment and DDT fast growing segments such as classifi eds, etail and online services. Also foresee 3 Prioritise investment outside mature markets growth in connected video Target high growth Focus on areas with strong mobile internet growth products and DTT in Sub markets Saharan Africa. 4 Transform further Prioritise mobile apps across business 3. Continue to prioritise our into mobile investments in geographies 5 Allocate capital to high growth opportunities with signifi cant growth Pursue operational cost savings Optimise returns potential, particularly those 1 promising mobile internet growth.
4. Expect mobile apps to become most important interaction mechanism with customers, to prioritise those across all our business units.
5. Ensure right return on investment by allocating our capital to high growth opportunities, and pursuing operational cost savings.
Glossary of terms
ARPU: Average Revenue Per User IM: Instant Messaging
ASO: Analogue Switch Offs IVAS: Internet Value-Added Service
B2C: Business to Consumer JV: Joint Venture
C2C: Consumer to Consumer MAL: MultiChoice Africa Limited
CAGR: Cumulative Annual Growth Rate M&A: Mergers and Acquisitions
DTH: Direct-to-Home Television MAU: Monthly Average Users
DTT: Digital Terrestrial Television MMO: Massively Multiplayer Online
EPS: Earnings per Share OCS: Online Comparison Shopping
FCF: Free Cash Flow PV: Page Views
FEC: Forward Exchange Contract PVR: Personal Video Recorder
FX: Forex ROI: Return on Investment
GEM: Global Emerging Markets SSA: Sub-Saharan Africa
GMV: Gross Merchandise Value STB: Set-top box
HD: High Definition VOD: Video-On-Demand IM: Instant Messaging
51
Investor briefi ng book 2015 25 MAIL PRINT Segmental review
Revenue Year ended 31 March
2015 2014 % R’m R’m change
Internet 78 010 57 018 37
– Tencent 47 911 34 256 40 – Mail.ru 2 327 2 407 (3) – Ecommerce 27 772 20 355 36
Video entertainment* 42 419 36 271 17 Print media 12 016 11 692 3 Corporate services 1 ––
Economic interest 132 446 104 981 26 Less: Equity-accounted investments (59 354) (42 253) 40
Consolidated 73 092 62 728 17
EBITDA Year ended 31 March
2015 2014 % R’m R’m change
Internet 15 457 8 540 81
– Tencent 19 832 12 232 62 – Mail.ru 1 263 1 286 (2) – Ecommerce (5 638) (4 978) (13)
Video entertainment* 10 098 10 370 (3) Print media 825 1 073 (23) Corporate services (335) (150) (>100)
Economic interest 26 045 19 833 31 Less: Equity-accounted investments (20 089) (13 442) 49
Consolidated 5 956 6 391 (7)
EBITDA refers to earnings before interest, tax, depreciation and amortisation.
Investor briefi ng book 2015 26 MAIL PRINT Segmental review continued
Trading profit Year ended 31 March
2015 2014 % R’m R’m change
Internet 13 042 6 638 96
– Tencent 17 987 10 792 67 – Mail.ru 1 148 1 175 (2) – Ecommerce (6 093) (5 329) (14)
Video entertainment* 8 009 8 520 (6) Print media 314 606 (48) Corporate services (338) (151) (>100)
Economic interest 21 027 15 613 35 Less: Equity-accounted investments (17 877) (11 707) 53
Consolidated 3 150 3 906 (19)
* Previously pay-television segment.
Reconciliation of trading profi t to operating profi t
Year ended 31 March
2015 2014 R’m R’m
Trading profit 3 150 3 906 Finance cost on transponder leases 376 356 Amortisation of other intangible assets (751) (711) Other gains/(losses) – net (688) (1 320) Retention option expense (149) (132) Equity-settled share-based payment expenses (343) (81)
Operating profit 1 595 2 018
Note: For a reconciliation of operating profi t to profi t before taxation, refer to the summarised consolidated income statement.
Investor briefi ng book 2015 27 MAIL PRINT Summarised consolidated income statement
Year ended 31 March
2015 2014 % R’m R’m change
Revenue 73 092 62 728 17 Cost of providing services and sale of goods (42 759) (35 416) Selling, general and administration expenses (28 050) (23 974) Other gains/(losses) – net (688) (1 320)
Operating profit 1 595 2 018 (21) Interest received 501 606 Interest paid (2 752) (2 466) Other finance income/(costs) – net (573) (267) Share of equity-accounted results 16 384 10 835
– excluding net gain resulting from remeasurements* 10 772 7 906 36 – net gain resulting from remeasurements* 5 612 2 929
Impairment of equity-accounted investments (478) (1 201) Dilution gains/(losses) on equity-accounted investments 1 499 (852) Gains on acquisitions and disposals 1 605 751
Profit before taxation 17 781 9 424 89 Taxation (3 757) (2 895)
Profit for the year 14 024 6 529 115
Attributable to: Equity holders of the group 14 023 5 751 Non-controlling interests 1 778
14 024 6 529
Core headline earnings for the year (R’m) 11 228 8 616 30 Core headline earnings per N ordinary share (cents) 2 782 2 181 28 Fully diluted core headline earnings per N ordinary share (cents) 2 717 2 125 28 Headline earnings for the year (R’m) 7 234 5 981 21 Headline earnings per N ordinary share (cents) 1 792 1 514 18 Fully diluted headline earnings per N ordinary share (cents) 1 731 1 475 17 Earnings per N ordinary share (cents) 3 475 1 456 139 Fully diluted earnings per N ordinary share (cents) 3 407 1 418 140 Net number of shares issued (’000) – At year-end 411 998 397 625 – Weighted average for the year 403 576 395 078 – Fully diluted weighted average 405 171 405 469
* Remeasurements refer to business combination-related gains and losses and disposals of investments.
Investor briefi ng book 2015 28 MAIL PRINT Summarised consolidated statement of comprehensive income
Year ended 31 March
2015 2014 R’m R’m
Profit for the year 14 024 6 529 Total other comprehensive income, net of tax, for the year(1) (2 456) 6 727
Translation of foreign operations(2) (3 805) 4 910 Net fair value losses (22) (7) Cash flow hedges 350 (204) Share of other comprehensive income and reserves of equity-accounted investments 1 094 1 951 Tax on other comprehensive income (73) 77
Total comprehensive income for the year 11 568 13 256
Attributable to: Equity holders of the group 11 552 12 492 Non-controlling interests 16 764
11 568 13 256
(1) These components of other comprehensive income may subsequently be reclassifi ed to profi t or loss, except for gains of R1,2bn (2014: R552m) included in the Share of other comprehensive income and reserves of equity-accounted investments as well as losses of R25m included in Net fair value losses relating to remeasurements on the group’s post-employment benefi t plans. (2) The movement on the foreign currency translation reserve for the year relates primarily to the effects of foreign exchange rate fl uctuations related to the group’s net investments in its subsidiaries.
Investor briefi ng book 2015 29 MAIL PRINT Summarised consolidated statement of changes in equity
Year ended 31 March
2015 2014 R’m R’m
Balance at the beginning of the year 68 205 55 853 Changes in share capital and premium Movement in treasury shares 1 012 (17) Share capital and premium issued 3 670 1 293 Changes in reserves Total comprehensive income for the year 11 552 12 492 Movement in share-based compensation reserve 819 487 Movement in existing control business combination reserve (1 016) (340) Movement in valuation reserve 356 – Direct retained earnings movements (136) 23 Dividends paid to Naspers shareholders (1 702) (1 526) Changes in non-controlling interests Total comprehensive income for the year 16 764 Dividends paid to non-controlling shareholders (1 447) (1 142) Movement in non-controlling interest in reserves 2 479 318
Balance at the end of the year 83 808 68 205
Comprising: Share capital and premium 21 019 16 337 Retained earnings 44 156 31 971 Share-based compensation reserve 6 904 5 082 Existing control business combination reserve (1 856) (1 065) Hedging reserve (23) (262) Valuation reserve 3 218 3 005 Foreign currency translation reserve 7 290 11 085 Non-controlling interests 3 100 2 052
Total 83 808 68 205
Investor briefi ng book 2015 30 MAIL PRINT Summarised consolidated statement of fi nancial position
Year ended 31 March 2015 2014 R’m R’m Assets Non-current assets 124 276 100 212 Property, plant and equipment 17 300 17 053 Goodwill 22 956 25 811 Other intangible assets 5 476 5 702 Investments in associates 73 547 47 755 Investments in joint ventures 2 769 1 727 Investments and loans 952 1 193 Derivatives 102 2 Deferred taxation 1 174 969 Current assets 32 767 28 390 Inventory 3 183 2 882 Programme and film rights 1 868 1 979 Trade receivables 4 834 4 849 Other receivables and loans 5 307 4 807 Derivatives 449 209 Cash and cash equivalents 14 881 13 664 30 522 28 390 Assets classified as held-for-sale 2 245 –
Total assets 157 043 128 602 Equity and liabilities Share capital and reserves 80 708 66 153 Share capital and premium 21 019 16 337 Other reserves 15 533 17 845 Retained earnings 44 156 31 971 Non-controlling interests 3 100 2 052 Total equity 83 808 68 205 Non-current liabilities 46 767 36 549 Capitalised finance leases 7 486 6 768 Liabilities – interest-bearing 37 111 27 395 – non-interest-bearing 306 452 Post-employment medical liability 203 176 Derivatives 151 364 Deferred taxation 1 510 1 394 Current liabilities 26 468 23 848 Current portion of long-term debt 4 295 2 628 Trade payables 5 436 5 318 Accrued expenses and other current liabilities 15 721 13 981 Derivatives 569 840 Bank overdrafts and call loans 312 1 081 26 333 23 848 Liabilities classified as held-for-sale 135 –
Total equity and liabilities 157 043 128 602 Net asset value per N ordinary share (cents) 19 589 16 637
Investor briefi ng book 2015 31 MAIL PRINT Summarised consolidated statement of cash fl ows
Year ended 31 March
2015 2014 R’m R’m
Cash flow generated from operating activities 1 671 3 274 Cash flow utilised in investing activities (6 021) (8 036) Cash flow generated from financing activities 6 181 2 114
Net movement in cash and cash equivalents 1 831 (2 648) Foreign exchange translation adjustments 205 1 001 Cash and cash equivalents at the beginning of the year 12 583 14 230 Cash and cash equivalents classified as held-for-sale (50) –
Cash and cash equivalents at the end of the year 14 569 12 583
Investor Relations Meloy Horn Offi ce: +27 11 289 3320 Mobile: +27 82 7727 123 E-mail: [email protected] Website: www.naspers.com
Investor briefi ng book 2015 32