The directors present their annual report, which forms part of the audited annual financial statements of the company and the group for the year ended 31 March 2010.
NATURE OF BUSINESS
Naspers Limited was incorporated in 1915 under the laws of the Republic of South Africa. The principal activities of Naspers and its operating subsidiaries, joint ventures and associated companies (collectively “the group”) are the operation of pay television and the provision of related technologies, the operation of internet and instant messaging subscriber platforms, e-commerce platforms and the publishing, distribution and printing of magazines, newspapers and books. These activities are conducted primarily in South Africa, sub-Saharan Africa, China, Central and Eastern Europe, Russia, India and Latin America.
OPERATING REVIEW
Over the past year the Naspers group continued to expand. Most emerging markets in which we operate survived the global economic downturn reasonably well, particularly when compared to developed economies.
The internet industry showed bold growth in emerging markets. Our pay-television operations held up well whilst the technology business returned to operating profitability. Print businesses globally, including our own, suffered in the recession. Overall, however, it was a good year.
The internet segment, comprising mainly Allegro in Central Europe, Tencent in China and Mail.ru in Russia continued to reflect growth.
Our pay-television businesses again proved resilient to prevailing economic conditions with slightly lower operating margins as we invested to grow the subscriber base. Irdeto, the technology business, also felt economic headwinds, but cut costs effectively.
The print media businesses, however, suffered a decline in its top line because of pressure on advertising revenues.
Internet
In aggregate, the internet segment recorded revenue up by 24% to R9,2bn. Operational profit grew to R2,4bn.
In China, Tencent performed ahead of expectations with revenue growth of 49%. Registered users to the IM platform now total 568 million with peak concurrent users around 105 million.
The strong rand had a significant effect on the other internet businesses where, nominally, revenues were marginally up and profits down. Calculated on a stable currency basis, we estimate revenues and operational profits would have advanced 19%.
The Allegro platform in Poland continued to deliver solid growth. In local currency the gross merchandising value transacted on the platform grew by 20%, generating revenue growth of 24%. New services were launched.
In India ibibo, our joint venture with Tencent, is developing social gaming and e-commerce platforms.
In Russia Mail.ru expanded its base to 81 million active email users. Mail.ru has completed the acquisition of Astrum, the online games platform operator in Russia.
In Latin America, BuscaPé was added to the group in September 2009. This unit is growing its core comparison shopping business and broadening its base by rolling out new business segments including electronic payments, classified advertising and affiliate advertising networks.
In South Africa, 24.com remains a leading local internet publisher, growing its users by 34%.
Pay television
Overall, the pay-television segment expanded revenues by 12% due to subscriber growth of 634 000 net households. After a satisfactory festive season, subscriber growth did slow in the last quarter of the financial year. Operating margins were slightly lower due to the cost of building the subscriber base, as well as higher content costs resulting from increased competition and more local production.
In South Africa the base grew by 450 000 to 2,85 million homes. The service now offers nine diffierent bouquet offerings and three high definition channels. With a strong content offering of soccer, general entertainment and movies, the mid-priced Compact bouquet attracted many customers. Advertising revenues were marginally better. The coming year will see more competitors entering this market.
In the other 47 countries in the rest of sub-Saharan Africa, a focus on local content and additional sport delivered 184 000 additional subscribers, taking the base to 1,1 million homes. The Compact and Family bouquets stand at 447 000. Hausa and Yoruba language content was added in Nigeria. SuperSport is now one of the main supporters of local sports leagues across the African continent, which means higher content costs for us. However, if African sport is to become globally competitive, it needs funding.
Mobile-television operations were launched in Ghana, Kenya, Namibia and Nigeria, whilst we still await a licence in South Africa.
Technology
Irdeto delivered some 15,8 million conditional access units in the period, a 5% increase. Revenues in other divisions were flat due to the global slowdown. Consolidation of various technology businesses into Irdeto has reduced operating costs through synergies gained, and the segment reversed an operational loss last year into a profit of R47m.
Print media
The print media operations in South Africa recorded a top-line decline of 5%. Circulation and readership of newspapers and magazines held up remarkably well, but advertising felt the blows. In a recession people read more, but advertisers spend less. Operating costs have been reduced and capital expenditure reined in. We were able to grow market share marginally.
In Brazil the magazine publisher Abril also had a challenging year, particularly for advertising. This was largely offset with prudent cost controls.
Strategy and prospects
Looking ahead, we mostly have resilient businesses in emerging markets that are still expanding. Competition in pay television, regulation and consumer spending levels remain concerns.
Focusing on the internet, we plan to continue with our growth strategy through a combination of organic growth and acquisitions. Stringent processes are applied when evaluating investment opportunities. We aim to deliver value over the medium to longer term.
