Nasper’s earnings from video entertainment tumbled to US$3.4 billion for the year ended 31 March 2016, an 11% drop from the sector’s earnings in the previous year.
The South African media giant attributes the fall to “a rapid weakening of currencies in many African markets, driven by a rout in commodity prices” which resulted in lower US dollar revenues – the currency that Naspers has reported in since April. Customers being billed in local currencies also added to the revenue drop.
Naspers’ pay-TV base grew by 325,000 in South Africa over the past year but across the whole of sub-Saharan Africa it lost 288,000 direct-to-home (DTH) customers. By the end of March 2016, the company provided digital terrestrial television (DTT) services to 2.4 million homes, while the subscription video-on-demand (SVOD) service ShowMax has had what Naspers described as “a good start” in South Africa.
Overall, the company’s headline earnings grew 21% (or 49% in local currency) to US$1.2 billion, with 77% of earnings generated outside South Africa. Growth from Tencent and e-commerce accounted for the lion’s share of Naspers’ growth.
However, net profit for the year dropped 21% to $994 million, while consolidated revenue fell 10% to $5.9 billion during the period.
“Overall the group delivered a satisfactory performance,” said Koos Bekker, chair, Naspers. “While we will continue seeking new growth opportunities, in some sectors of ecommerce we are starting to benefit from scale. Deteriorating currencies mean that the video-entertainment business is under considerable pressure.”
Basil Sgourdos, Naspers’ chief financial officer, said the company expects that “over time” currencies will normalize. However, the South African company expects that the weakened South African rand and a poor macroeconomic outlook could reduce growth and profitability still further in the video entertainment sector.
“To reinvigorate growth [in the pay-TV business], the focus is now on managing and absorbing costs ourselves where possible, to minimise further price increases to the consumer. We are also strengthening content in the mid- and lower segments,” Naspers said.
