OVERVI EW by the chairpre cto r m a na g i ng di and e rson holders. The Educor delisting was concluded in May G ro up ove rv i ew and the M-Web delisting is expected to be finalised in July. In line with our strategy to become one of the leading media businesses in Africa and Asia, the group made Fin an ci al rev i ew steady progress in developing its subscriber platforms and technology interests. At the same time, the Growth in Ebitda was recorded in the television, print maturer media interests delivered increased returns. media and education businesses. Extensive develop- While this growth strategy will have a negative impact ments were undertaken in the internet and technology on short-term earnings, over the medium term businesses, resulting in an aggregate group Ebitda prospects for building shareholder value are promising. loss of R295 million. Depreciation increased by 43% to R517 million, the Progress was made in the midst of turbulent market result of increased satellite transponder capacity and conditions. Operationally, group revenues for the the new investment in printing infrastructure. Due period grew by 29% to R9 billion. The traditional to the prescribed change in accounting policy the media businesses all reported satisfactory growth in group for the first time reported a goodwill and earnings before interest, tax, depreciation and intangibles amortisation charge of R948 million. amortisation (Ebitda). Net exceptional profits of R3,3 billion were recorded, The internet and technology businesses made largely from the MIHL secondary offering of shares significant gains, as reflected by revenue growth of and the OpenTV/SpyGlass merger in the USA. 78% and 93% respectively. Despite market fluctuations these technologies continued to flourish and transform The net headline loss per N ordinary share amounted the media industry. Prospects for further revenue to 299c, and fully diluted earnings per N ordinary growth and value creation from these businesses share to a positive 616c. remain promising. On 31 March 2001 the group had net consolidated In view of the slump in the stock market and the fact cash resources of R1 994 million and interest-bearing that both businesses required funding for liabilities of R865 million (excluding satellite leases). development, Naspers delisted Educor and M-Web The group has adequate cash resources to fund its with the approval of the relevant minority share- existing business plan. 3 A N N UA L R E P O RT 2 0 0 1 Progress was made in the midst of turbulent market conditions. Operationally, group revenues for the period grew by 29% to R9 billion. The traditional media businesses all reported satisfactory growth in earnings before interest, tax, depreciation and amortisation (Ebitda). ove r view . . . S EGM ENTA L R E VI EW Revenues and earnings before interest, tax, depreciation and amortisation (Ebitda) of the key business segments were as follows: Revenue (R’m) EBITDA (R’m) 2001 2000 % 2001 2000 % Subscriber platforms Subscriber platforms - pay television 4 558 3 909 17 - pay television 347 229 52 - internet (648) (342) (89) - internet 411 231 78 Print media 338 288 17 Print media 1 922 1 653 16 Technology (365) (170) (115) Technology 1 056 546 93 Book publishing 22 21 5 Book publishing 545 434 25 Private education 22 (5) * Private education 519 217 * Corporate services (11) (14) 21 9 011 6 990 29 (295) 7 * not comparable SU BSC R I B ER P LATFOR MS P ay te lev ision Over the period under review, the aggregate subscriber base increased by 100 000 homes to 2,16 million. Importantly, the transition of 4 subscribers from the analogue to digital service continued, with the digital subscriber base for the first time now comprising a 51% majority of the total (March 2000: 41%). As a consequence, revenues grew by 17%. This transition not only A N N UA L R E P O RT 2 0 0 1 enhanced revenues and operating margins per subscriber, but also the ability to offer additional electronic services to the home. Ebitda improved by a sturdy 52% to R347 million. We anticipate that growth in the pay television subscriber base will slow down as the industry starts to mature. Nonetheless, it is expected . . . EBI TDA imp roved by a stu rd y that the transition to digital will continue, and that the group will expand its offering of interactive services to subscribers. 52% to I nt e rn e t R347 million . . . Over the past year, market perceptions of the internet swung from being unrealistically euphoric to depressive. History reflects that such oscillations are typical of major innovations. While market sentiment has fluctuated wildly, the internet industry continues to show steady organic growth and no substitute technology has emerged. It appears that the internet will continue to transform the broad economy and, of particular interest to the group, the media industry in every country. In our assessment the current market climate, now characterised by more realistic expectations, is more conducive for our group to implement its strategic plans and build more sustainable businesses on lower cost structures. The internet developments across the group continued to show good progress as reflected by an overall revenue growth of 78% to R411 million. Development losses amounted to R648 million. In South Africa M-Web maintained its position as the country’s leading on-line service provider, content portal and corporate e-business enabler. Over the past year the subscriber base grew to nearly a quarter of a million households. Turnover grew by 48% to R336 million. While the rate of subscriber growth in the market has slowed down, e-commerce revenues are gradually starting to gain momentum. The effect of free internet service providers (ISP) services in South Africa is likely to result in a temporary slowdown in new subscriber growth, but the economic model of a completely free, uncapped ISP service has proved to be flawed elsewhere in the world. The advent of interactive television is bringing the internet closer to television. With this in mind, M-Web will align its business more closely with MultiChoice Africa’s pay television platform. M-Web Thailand is a premier local on-line service provider comprising of 11 consumer-focused websites. The group owns portals, a Thai-language search engine, and has a majority interest in KSC, one of the country’s largest ISPs with 200 000 users. M-Web Thailand’s websites attract about 3,5 million page views per day, which is even more than in South Africa. M-Web Indonesia was launched in May 2000. The portal now receives 1,5 million page views per day, representing approximately 60% of the market, and has 500 000 e-mail users. This business is still young but can be expanded. The Chinese market has great potential but uncertainties due to the entry into the World Trade Organisation (WTO) and changes to investment laws and regulations demand a cautious investment approach. The focus is on growing our sport and financial portals, while exploring new investment opportunities. PR INT M EDI A The print media operations in South Africa experienced static circulation levels in the aggregate and muted conditions as regards advertising revenues. These factors limited revenue growth to 16%. Countering this was an improvement in operating margins, largely the result of recent extensive investments in infrastructure such as printing plants. As a result, Ebitda grew by 17% to R338 million. Of all South African media groups, Media24 has the most advanced technology. Over the past four years we invested in excess of R1 billion in our traditional print media businesses, both in the renewal of infrastructure and the acquisition of new titles. This confirms our belief that, while mature, the business offers sound prospects over the next decade. In the short term, continued pressure on 5 circulation and advertising revenues, coupled with steep increases in paper prices, will slow down profit growth. A N N UA L R E P O RT 2 0 0 1 . . . the ad vent of rac in te r ac ti ve levi te le vi sion is b ringing the inte rnet close r to the t e l ev i s i o n s e t . . . ove r view . . . T ECHNOLOGY Revenues from the group’s technology businesses reflected spectacular growth of 93% to in excess of R1 billion. OpenTV experienced excellent revenue growth as its installed base almost doubled to 16 million digital decoders across 43 network operators in some 50 countries. It is now the most widely deployed system worldwide. Revenues from the applications business are also coming on stream. Globally, interactive television services are still in the early stages of development. OpenTV is well positioned to sustain growth in this market. Mindport’s aims were expanded to address the growing demand for content management, encryption and billing solutions in the internet protocol (IP) broadband markets. Its customer care and billing business was merged with Noochee, a USA-based IP infrastructure and application software company. The merger strengthened the Mindport IBS sales channels and product base. Irdeto Access, the fourth largest worldwide provider of content protection solutions, . . . t h e b o o k p u bl i s hi n g b u s i n e s s e s re co rd e d extended its base to 60 customers operating in 50 countries with seven million users. revenue g row th o f 25% t o R5 4 5 million BOOK PUB LI SHI N G and Ebitd a imp rov ing The book publishing businesses recorded revenue growth of 25% to R545 million and to R22 million . . . Ebitda improving to R22 million. The book distribution division was transferred to a business under the brand name On the Dot. 6 PR I VAT E E D UCAT I ON Due to the merger between National Private Colleges and Educor comparison with the previous year’s figures is meaningless. Revenue for the year amounted to A N N UA L R E P O RT 2 0 0 1 R519 million and Ebitda R22 million. The private education industry experienced turbulent conditions over the past year. In particular, uncertainty over how the industry is to be regulated and Government’s decision to refuse deductions on the state payroll system to private educators has had a negative impact on enrolments. In the medium term, it is anticipated that private education will play a steadily larger role in the world economy as the pace at which technologies change accelerates and because people live longer, they will have to learn new skills during their working lives. DI VI D END The board has recommended that the annual dividend be maintained at 24 cents per N ordinary share. The dividend is payable to shareholders registered on 10 August 2001 and will be paid on or after 24 August 2001. STR AT E Naspers is scheduled to be converted to Share Transactions Totally Electronic (STRATE), an electronic settlement platform for share transactions on the JSE in November 2001. The move to STRATE will ensure Naspers' participation in a sophisticated settlement process in line with the international best practice. Shareholders will receive further communication in this regard in due course.