Naspers Limited Class N · JSE:NPN
Naspers Limited Class N — FY2016 Earnings Presentation
54 slides from Naspers Limited Class N's earnings presentation, March 2016
Slide 1: Briefing Booklet – additional financials
Briefing Booklet – additional financials For the year ended 31 March 2016
Slide 2: Important information
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 i
Slide 3: Financials
FINANCIALS
Slide 4: Synopsis of financials
Synopsis of financials • Results in functional currencies were translated into US$ for reporting purposes. • Weakness in emerging-market currencies means performance was dampened by the translation impact. • Growth in local currencies quoted in brackets. • All amounts quoted on an economic- interest
Slide 5: Revenue growth driven by Tencent and ecommerce
Revenue growth driven by Tencent and ecommerce • 6% revenue growth, growth 22% if measured in local currencies. • Tencent revenues up 36% YoY on the back of advertising and mobile growth. • Internet now accounts for 68% of revenues (61% in FY15). • Video entertainment revenues up 10%, but down 11% Y
Slide 6: Diversified business mix
Diversified business mix • 77% of revenues now earned offshore, compared to only 28% in 2005. • SA accounts for only 23% of revenue (FY15 28%). • Annuity income (i.e. subscription revenues, IVAS and gaming) represent more than 50% of revenue base. • Cyclical advertising revenue is only 11% of total
Slide 7: Development spend flat on an economic interest basis
Development spend flat on an economic interest basis • Economic interest development spend impacted by: ‐ US$119m organic increase in spend by our etail associates. ‐ US$193m investment in new initiatives (letgo, Showmax, Indian hotels and Naspers ventures). ‐ US$59m saving in classifieds (OLX). ‐ U
Slide 8: Consolidated development spend
Consolidated development spend • Consolidated development spend was impacted by: ‐ US$38m increase in spend by B2C ecommerce. ‐ US$12m higher spend in payments ‐ US$26m step-up in spend by ventures. ‐ US$97m lower spend in video entertainment. • Impact of currency translation decreased spend by 13%.
Slide 9: Ecommerce: economic interest development spend
Ecommerce: economic interest development spend 9
Slide 10: Ecommerce: consolidated development spend
Ecommerce: consolidated development spend 10
Slide 11: Trading profit on an economic interest basis
Trading profit on an economic interest basis • Trading profit increased 18% (38%), driven by expansion of 39% (43%) in the group’s share of Tencent’s trading profit. • Lower losses in classifieds and DTT, combined with ibibo’s air-travel business turning profitable and a reduction in PayU’s PSP loss
Slide 12: Ecommerce continues to gain traction
Ecommerce continues to gain traction 12
Slide 13: Ecommerce delivers solid results
Ecommerce delivers solid results • Classifieds generated strong revenue growth of 35% (46%). • Marketplaces continue to deliver stable revenue and positive margins (38%). • The travel segment benefited from 37% local currency growth in revenues from Redbus. • Etail revenue increased by 12% (27%), an
Slide 14: Profitable ecommerce businesses gaining momentum
Profitable ecommerce businesses gaining momentum • A 40% increase in number of profitable ecommerce businesses from 15 in FY15 to 21 • In local currency, the profitable business delivered 18% revenue growth and a 48% increase in trading profit. Trading margins are a healthy 37%, up from the 28% in t
Slide 15: VE financials reflective of challenging macro environment
VE financials reflective of challenging macro environment • As customers are billed in local currencies, the rapid devaluation of many African currencies resulted in lower US$ revenues. • With ~60% of total costs denominated in US$, it resulted in the trading margin contracting from 19.1% to 17.9%.
Slide 16: Avito a transformational M&A transaction
Avito a transformational M&A transaction • $1.2bn deal to take control of Avito in Russia was funded from the capital raise in Dec 2015. • Avito is delivering ahead of expectations. • Etail investments included funding rounds of Souq, Konga and Takealot. • Other M&A include investments by Naspers Ve
Slide 17: Summarised income statement
Summarised income statement • Finance costs impacted by: • US$49m increase in net foreign exchange losses. • US$25m increase in interest expense due to US$1.2bn bond issues in July 2015. • Equity accounted earnings due to net gains from remeasurements relate to gains and losses on disposals of inves
Slide 18: Equity accounted results
Equity accounted results Associate and JV contributions (USSm) FY 14 Fy 15 FY 16 Normal contribution — @ Once-off adjustments
Slide 19: Contribution by associated and joint ventures
Contribution by associated and joint ventures 19
Slide 20: Net finance costs
Net finance costs ussm Interest paid Loans and overdrafts Transponder leases Other Interest received Loans and bank accounts Other Other finance costs, net Net FX differences and FV adjustments on derivatives Preference dividends received Total finance costs FY15 (247) (182) (34) (31) FY 16 (292) (2
Slide 21: Core headline earnings trend
Core headline earnings trend 21
Slide 22: Core headline earnings drivers
Core headline earnings drivers 22
Slide 23: Core headline earnings reconciliation
Core headline earnings reconciliation 23
Slide 24: Balance sheet strong following equity raise
Balance sheet strong following equity raise • Following the US$2.5bn capital raising in Dec 2015, net gearing dropped to 12%. • Our US$2.5bn RCF remained unutilised. 24
Slide 25: Current assets and liabilities
Current assets and liabilities 25
Slide 26: Free cash flow affected by weaker results from VE outside SA
Free cash flow affected by weaker results from VE outside SA • Lower operating profit due to reduced contribution from video entertainment. • Capex saving due to completion of new VE headoffice in Randburg and lower spend on DTT transmission equipment due to completion of rollout. • A US$50m increas
Slide 27: Capital expenditure
Capital expenditure usSm Land, buildings & manufacturing equipment Transmission equipment Computer, software & network equipment Other (including vehicles, furniture) Capital expenditure Capex/Revenue FY15 88 75 58 292 4% FY 16 27 93 64 228 4% Split by business Video Entertainment (56%) mEcommerce (
Slide 28: FX exposure: hedging
FX exposure: hedging USS FX Cover 12 months out 24 months out EUR FX Cover, 12 months out GBP FX Cover 12 months out Ussm 550 144 EURm 57 EURm ZAR rate 14.10 16.89 ZAR rate 17.75 ZAR rate 20.50 Open FEC positions Video entertainment: US$438m and EUR32m (programming rights and leases) Corporate: US$2
Slide 29: Consistent dividend growth
Consistent dividend growth 29
Slide 30: Debt maturity profile and debt position
Debt maturity profile and debt position 30
Slide 31: Internet
INTERNET
Slide 32: B2C: building scale in etail and structured marketplaces
B2C: building scale in etail and structured marketplaces • B2C ecommerce includes etail and marketplace. • Viewed as the single largest revenue opportunity in ecommerce. • Very cash generative, at scale. • Focus for us is on building scale at the right margin and cost profile. 32
Slide 33: India B2C: Flipkart well positioned
India B2C: Flipkart well positioned • India and attractive market due to limited structured offline retail. • Multiple winners likely given potential size of market. • Flipkart has a leading market share and mobile presence. • Also has an advantage in logistics through E-Kart and in fashion through
Slide 34: Allegro: accelerating growth and improving profitability
Allegro: accelerating growth and improving profitability • Allegro is the #1 shopping destination and #1 internet brand in Poland. • Very successful year, re-acclerated growth while maintaining profitability. • Launched direct selling (1P) and moved Ceneo under Allegro to provide more holistic servi
Slide 35: India travel: capitalising on a large opportunity
India travel: capitalising on a large opportunity • Travel in India currently accounts for ~50% of the total ecommerce. • ibibo is OTA market leader based on total number of transactions, outgrowing competition by 55% vs 12% YoY. • ibibo has number one position in hotel and bus. • We recently commit
Slide 36: Classifieds: building leading platforms
Classifieds: building leading platforms • Strong performance by classifieds – revenue +35% (46% organic) while reducing marketing spend by 11%. • Operating leverage improved due to operational excellence and improved competitive positions. 36
Slide 37: Classifieds: continue to monetise and extend current positions
Classifieds: continue to monetise and extend current positions • Shifted from market expansion to market consolidation in FY16. • Now leading in 34 markets of our 40 markets. • Monetising in Russia, UAE, Portugal, Brazil, Poland, Bosnia, Bulgaria, Romania, Ukraine and Ecuador. 37
Slide 38: Classifieds: ramping monetisation in Russia
Classifieds: ramping monetisation in Russia • Revenue growth accelerated and outpaced user growth over past year. • Driven by continuous optimisation of value added services and advertising, and introduction of listing fees. 38
Slide 39: Listed internet: Tencent delivers another strong performance
Listed internet: Tencent delivers another strong performance • Results incorporated on a 3 month lag basis. • Strong performance all round. • Good progress on “connection” strategy which seeks to capture mobile internet opportunities. • Started monetising mobile news service via in-feed ads, buildin
Slide 40: Listed internet: Mail.ru navigating a challenging environment
Listed internet: Mail.ru navigating a challenging environment • Results also reflected on a 3-month lag basis. • Affected by tough macro environment. • Continues to grow albeit at relatively slow pace. • IVAS and gaming negatively affected, advertising revenue better. • Continued focus on ‘communita
Slide 41: Video Entertainment
VIDEO ENTERTAINMENT
Slide 42: VE: Significant scale across African countries
VE: Significant scale across 50 African countries • Due to pressure of weak currencies on margins, we increased prices ~25% in 2015. • Combination of higher prices and weak consumer sentiments resulted in loss of 228,000 DTH subscribers. • Total subscriber base 10.4m households, up 2% YoY. • Mix shi
Slide 43: VE: impact of currency devaluations on the business
VE: impact of currency devaluations on the business • Customers billed in local currencies across the continent. • 24% weighted average decline in currencies/US$ hit DTH hard. • Price increases resulted in negative (-11%) subscriber growth. • Combined with fx pressure, subscription revenue declined
Slide 44: VE: strong economic headwinds hit DTH sub-Saharan Africa
VE: strong economic headwinds hit DTH sub-Saharan Africa • Decline in the customer base ARPU declining 11%. • Mismatch of local billing and US$ costs and higher content costs hit margins. • Operating cash flow down substantially, despite stable capex. • Difficult to extract cash from Angola, Nigeria
Slide 45: VE: DTT continue to scale, approaching break-even
VE: DTT continue to scale, approaching break-even • DTT subs up 7% YoY (147k subs), despite no ASOs. • Capex significantly lower due to completion of footprint. • Development spend trending down due to scale benefits. • Currently in 9 markets (Sierra Leone and Zimbabwe not operational). 45
Slide 46: VE: DTH South Africa holding up better, for now
VE: DTH South Africa holding up better, for now • SA DTH base up 6% YoY, i.e. 325k subs. • Growth predominantly at lower-end of market. • Strong PVR growth, typically low propensity for churn. • 17% decline in US$ ARPU highlights challenges given 50% of costs in US$. • Cost containment initiatives t
Slide 47: Outlook
OUTLOOK
Slide 48: FY17 Outlook: continue building our platforms
FY17 Outlook: continue building our platforms 48
Slide 49: Appendix
APPENDIX
Slide 50: Print Media
Print Media‘ MED|AW”! USSm* Mar 15 Mar 16 % change Revenue 742 586 -21 Operating profit 11 20 81 Operating margin 1% 3% ory results as reported converted at Revenue mix Advertising (26%) @ Printing (33%) Circulation (14%) Books (8%) ® Distribution (4%) @ Other (14%)
Slide 51: Classifieds: massive footprint for the OLX Group
Classifieds: massive footprint for the OLX Group 51
Slide 52: Naspers strategy summarised
Naspers strategy summarised 52
Slide 53: Glossary of terms
Glossary of terms — _ ARPU: — ASO: — B2C: — (2c: — CAGR: — DTH: — OTT: — EPL: — EPS: — FCF: — GMV: Average Revenue Per User Analogue Switch Offs Business to Consumer Consumer to Consumer Cumulative Annual Growth Rate Direct-to-Home Digital Terrestrial Television English Premier League Earnings per S
Slide 54: Thank you
THANK YOU Meloy Horn +27 11 289 3320 +27 82 7727 123 [email protected] www.naspers.com