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Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 31
Performance
review
Rio de Janeiro, Brazil
32 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Building on the successes of
previous years and continuing
to execute our disciplined
growth strategy, we performed
strongly across our portfolio of
internet, video-entertainment
and media businesses.
Rising internet revenues,
increasing video-entertainment
subscribers, smart investments
in society-changing areas,
award-winning journalism on
important issues – we enjoyed
many successes across our
three segments.
79%
(1)
of group revenue now comes from our internet and
ecommerce activities
No.1
shopping/lifestyle apps in more than 22 countries
Note
(1)
On an economic-interest basis.
Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 33
Internet
From platforms that make communicating, INTERNET REVENUES GREW 50%
(51%) TO
TRADING PROFIT ROSE 50%
(56%) TO
THE INTERNET SEGMENT NOW
CONTRIBUTES
WE INCREASED OUR FOCUS ON
AND INVESTMENT IN
entertainment, shopping and paying for things easy,
safe and enjoyable to specialised ecommerce services
such as great local online food delivery – we focus on
high-growth internet businesses that make a lasting
US$15.9bn (1)
fuelled by ecommerce and Tencent’s
US$3.1bn
Note
(1)
79%
of group revenue, up from
key high-
growth areas
such as food delivery
positive difference to people around the world. remarkable results Presented on an economic- 73% last year
(1)
interest basis.
Highlights of the year
Classifieds Payments Online food Etail Travel Ventures Social and
OLX continued to grow PayU enjoyed healthy delivery We achieved strong MakeMyTrip strengthened We continued to invest in internet
around the world and
turned profitable and free
growth, with total payments
volume exceeding We continued to invest
growth across all our etail
businesses and eMAG’s
its leadership in India. In its
third quarter, MakeMyTrip
key opportunities such as
edtech. Post year-end we platforms
cash flow positive in the US$25bn, and made key in this promising sector, Romanian business became delivered 94% year-on-year invested US$35m in Honor,
year (excluding letgo). investments in Kreditech including a 22% stake profitable. (Post year-end growth on revenue less a mid-stage home-care Tencent continued to excel
and Remitly. in Swiggy and 23% stake we signed an agreement to service costs, while company that helps older in China.
in Delivery Hero. Revenue sell our stake in Flipkart for improving operational adults live safely and
for iFood was up 121% year US$2.2bn, representing an efficiencies. comfortably in their own Mail.ru strengthened
on year. internal rate of return (IRR) home by enabling reliable its position as Russia’s
of 32%). and high-quality care. number 1 internet group.
Read more on page 34 Read more on page 35 Read more on page 37 Read more on page 37 Read more on page 39 Read more on page 39 Read more on page 40
34 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Markets Our businesses Classifieds Payments Online food Etail Travel Ventures Social and
delivery internet
Indian ecommerce Online payments in emerging platforms
The Indian ecommerce market is still in markets
its early stages of development and Online payments in emerging markets
continues to hold significant long-term are expected to grow twice as fast as in
potential. With growing (mobile) mature markets. Two key factors are
internet penetration and a shift from driving this growth: the regulatory push
offline to online retail, India’s online towards cashless payments, eg UPI in
retail market is expected to grow India, and accelerating online
by a 22% compound annual growth cross-border payments, expected to be
rate (CAGR) to US$68bn by approximately 30% of the ecommerce
2021 (Euromonitor). volume by 2020, up from approximately
20%. Against this backdrop, the
South African online retail payments industry saw over US$40bn
South African online retail presents a of global M&A in 2017.
substantial opportunity. From 2016 to
2021 it is expected to grow at 15% Chinese growth
annually. Low rates of internet China’s internet population grew at 6%
penetration (58% in 2017) and online this year and reached 772m by the end
retail penetration (1% in 2017) suggest of 2017.
significant offline-to-online migration
will propel this growth.
Big opportunities
characterise the internet Performance Building trust across
SPOTLIGHT
ON OLX
markets we focus on. our marketplaces
Classifieds #1
It is a high-growth game We are committed to building
trustworthy online
ensure consistent and effective
combating of fraud.
shopping/lifestyle
apps in more than
and we are a meaningful REVENUE (US$’m)
(1) marketplaces. Trustworthiness is
key to the long-term success of The group invests heavily in
22 countries
global player. 2018 3 680
these marketplaces and of great advanced technology to monitor
2017
IFRS: 47% LC: 35%
3 401 value to customers and
merchants alike.
platforms, as well as in teams
around the world to prevent
80%
of person-to-person
inappropriate listings. For online trade in
TRADING LOSS(1) (US$’m) OLX has established a global example, it has built an India is done through
trust and safety programme automated moderation tool, OLX
(114) Hermes, which has increased the
2018
(under the auspices of the
general counsel) to act as the successful automatic moderation
25%
2017 (328)
IFRS: 65% LC: 59% glue for all trust and safety of illegal or bad content by up to
initiatives around the globe and 80% in some countries. of the Russian
Notes population uses
(1)
Presented on an economic-interest basis. Avito every month
LC = local currency.
We’re investing in online trust
and safety for customers around
the globe. 75m
downloads and
hundreds of millions
of listings added
by users
Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 35
Classifieds continued
OLX (excluding letgo) continued to The group continues to invest in mobile
grow around the world and this year apps for trading consumer goods, such as
returned a profit to Naspers Protecting intellectual OLX and letgo, and adjacent cars and
With more than 330m monthly users property real estate vertical platforms to serve
worldwide, OLX group’s mission is to markets where there is a high level of
make it as easy as possible for people to OLX rigorously protects its intellectual property, maturity. By consolidating expertise into
buy and sell almost anything. This fuels notably the source code and domains that are regional hubs, OLX increased efficiency
local economies. Through consumer at the heart of its global brand. This involves and scalability while realigning investment
brands, including Avito, Dubizzle, letgo, defending the assets across more than levels to match opportunities in some
OLX and a dozen others, more than 40 countries. local markets.
15m items are exchanged on OLX’s
platforms every month. We have a very active and successful team of Across its markets, OLX is investing in
IP experts (Naspers IP team and the domain and experimenting with innovative
OLX is building an enduring business office in Naspers) to monitor and act against trading formats to use local market
by striving to offer buyers and sellers any IP infringements. knowledge and solve customer
flawless user experiences, through problems. The group has started to
intelligent technology and convenient For sharing of open source code, our developers operate a very popular payment and
services. are being trained by our Naspers head of IP and delivery service in the Ukraine, and
OLX general counsel to ensure that minimum continues to explore new verticals
The group is expanding monetisation standards are followed for sharing open source including Shedd for fast fashion and
in Russia, the UAE, Poland, Portugal, code and to ensure that we do not provide our Tradus for heavy machinery.
Romania and the Ukraine, deepening proprietary code to the open source community.
relationships with professional sellers We encourage responsible open source code
through local commercial operations. sharing, under licence, to ensure that our Payments
OLX revenues have shown solid developers are engaged with the outside
growth in the past years and this year developer world. This increases our profile as REVENUE(1) (US$’m)
the group returned a profit to Naspers, a group among tech talent as an attractive place
excluding investments in letgo. to work. 2018 294
2017 186
OLX is enhancing product centricity. Across the group we protect our brand, domains IFRS: 58% LC: 37%
The group is applying machine learning and trademarks aggressively and we have seen
and artificial intelligence to enhance the great success in our efforts to reduce infringement.
user experience, including features like TRADING LOSS(1) (US$’m)
image recognition and multi-language
smart chat. 2018 (64)
2017 (69)
Three important acquisitions were IFRS: 7% LC: 42%
made in the year: AutoTrader, the
leading car vertical platform in South Notes
Africa, and Expat Wheels and (1)
Presented on an economic-interest basis.
LC = local currency.
Wecashanycar in the UAE. The latter
two complement the group’s local
Dubizzle platform in offering a total of PayU enjoyed healthy growth
three car selling options designed to and is expanding its fintech offer
bring more convenience to buyers and With operations in 17 high-growth
increase revenue for sellers. markets, five of which are among the
top 10 fastest-growing payments
markets globally, PayU is ideally
One of the key distinctive positioned to benefit from the strong
strengths of OLX is that it market opportunities.
is a global business that We’re defending intellectual property In the year, PayU recorded healthy
is extremely localised in across more than 40 countries. revenue growth shown above, driven
by a 48% increase in transactions
each of its 41 markets. processed to over 650m. TPV
exceeded US$25bn, more than
doubling in the last two years.
36 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Payments continued
PayU grew while containing costs in the
SPOTLIGHT
core business, principally by achieving
scale efficiencies. Consequently the Enabling a borderless Protecting valuable assets
trading loss as a percentage of revenue
improved significantly – reducing to
financial world 58%
PayU revenue
(1)
PayU focuses on protecting its valuable
22% from 37% last year. PayU’s aim is to enable a assets, notably its local payment
growth in 2018
borderless financial world in platforms and data. The platforms are
It was also a critical year to transform which everyone can prosper. largely developed inhouse and are
PayU from a payments business into a To this end the company focuses crucial to the company’s performance
broader fintech financial services on making sure payment
US$ and potential.
business. PayU launched credit products
in India and Latin America, invested
transactions are frictionless
across mobile and other
>25bn To protect assets, PayU has
US$99m (and €20m in convertible loan platforms. This benefits both
PayU total payment comprehensive risk management and
volume in 2018 internal controls in place ranging from
funding) in Kreditech, a credit-scoring consumers and merchants.
business, and US$100m in Remitly, a increasingly harmonised platform
technology-driven remittance business. Innovative technology, developed development processes and
Note
PayU is partnering with both companies inhouse as well as through (1)
On an economic- governance to ethical hacking exercises
to deliver credit and remittance investments and strategic interest basis. and a continued focus on automation
solutions in its key markets. partnerships, empowers many to facilitate standardisation.
people and merchants to buy
Growing across fintech and sell online, extending the
It is an exciting time for PayU. Looking reach of financial services.
ahead, as well as continuing to grow the
size and value of the payments business, The company is also working on
PayU will also increasingly focus on increasing digital inclusion in
other key fintech areas, notably credit, other ways, for example access
for example by offering quick and easy to alternative sources of credit.
technology-based sources of funding to Technology can do a great deal
underbanked people. to free up and improve the
speed and convenience of
lending to underbanked people
who would make good use of
funds if these were readily
available.
PayU wants everyone to be
able to prosper in a borderless PayU has comprehensive protection
financial world. for its payment platforms and data.
Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 37
Online food delivery Etail
REVENUE(1) (US$’m) SPOTLIGHT REVENUE(1) (US$’m)
2018 166 Using cutting-edge 2018 2 060
2017
IFRS: >100% LC: >100%
53 292m
Delivery Hero
technology to cut food-
delivery times
2017
IFRS: 24% LC: 36%
1 659
orders in 2018
TRADING (LOSS)/PROFIT(1) (US$’m) iFood is using artificial intelligence TRADING LOSS(1) (US$’m)
2018
2017
(30)
5
18 000
restaurants on
and machine learning to reduce
delivery times. Guided by the
technology, bikes with margherita
2018
2017
(270)
(281)
IFRS: >100% LC: >100% Swiggy’s platform pizzas can be dispatched to IFRS: 4% LC: 10%
Notes neighbourhoods with high demand
(1)
Presented on an economic-interest basis. so they are closer to customers Notes
(1)
Presented on an economic-interest basis.
LC = local currency.
before the customers have actually LC = local currency.
ordered. As a result, they can
We are continuing to build on our deliver the pizzas far quicker –
strong presence in online food delivery. Focus on electronic retail
in 10 minutes, rather than 40. eMAG grew strongly across
Delivery Hero its markets
Delivery Hero is a leading online This is an extensive eMAG delivered another year of strong
food-delivery company globally, growth rates and high market shares in
market filled with its key markets.
operating in more than 42 countries
and leading in 36. Delivery Hero is opportunities and we
predominantly a third-party (3P) are still early in the cycle eMAG also performed well on
marketplace model, where its platforms strategic KPIs such as 3P marketplace
arrange for restaurants to deliver food
of bringing technology share of GMV and units sold per active
to users. But it also has a first-party (1P) to an important part customer.
marketplace model, where it provides of people’s lives – eating
the delivery services as well. Delivery UNITS SOLD PER CUSTOMER PER YEAR
Hero achieved 292m orders in the 2018 at home and at work.
financial year. 10.8
9.9
Swiggy 7.8
Swiggy is a leading online food-ordering 6.0
and delivery company in India, an 4.9
underpenetrated but high-potential
market. Swiggy has attracted over
18 000 restaurants to its platform and
has earned strong consumer trust by FY14 FY15 FY16 FY17 FY18
delivering meals in an industry-best
average of 35 minutes per order. It is
India’s fastest-growing food platform.
3P MARKETPLACE SALES AS % OF GMV
iFood
iFood, a subsidiary of Movile, is a GMV 1P
leading online food-delivery platform GMV 3P
in Latin America. In Brazil, iFood is the %
preferred destination for food delivery. 3
FY14
97
2
FY15
98
Quicker delivery times mean happier FY16
17
customers; technology’s the key. 83
21
FY17
79
30
FY18
70
38 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Etail continued
In addition, the Romanian business
reached profitability, a milestone for
Attracting and eMAG. This was achieved by scale, eMAG’s fourth
retaining top talent enabling eMAG to increase margins, hackathon
grow purchasing frequency and
Across the group we focus on attracting optimise operational efficiency. Each year eMAG holds a
and retaining exceptional talent. At eMAG, hackathon – 24 hours when
for example, attraction strategies include eMAG continues to focus on increasing coders unite to code something
rewards, ensuring market-competitive quality of service and delivery for amazing, impress the judges and
compensation, and specific talent-sourcing customers and on controlling costs. win great prizes. It’s an excellent
strategies such as hackathon events, eMAG bought its own courier company way to attract the best tech talent
university relations and graduate during the year and has started to a business with a strong focus
recruitment, internship programmes and construction on building a 120 000m2 on IP that likes to develop its own
employee referral programmes. Retention warehouse. software.
strategies include ensuring there are plenty
of on-the-job development opportunities Flipkart This year each team had to build a
as well as specific high-potential talent- In May 2018 the group announced the project using artificial intelligence,
development initiatives. sale of its interest in Flipkart Limited – virtual reality, augmented reality
its equity-accounted etail investment in and internet-of-things technologies
The initiatives are proving successful, with India – to US-based retailer Walmart to address themes including:
eMAG being named the number one IT Inc. for US$2.2bn. The transaction is
employer of choice in Romania in 2017. subject to regulatory approval. • improving customer experience
in eMAG showrooms or at home
Myntra also performed • improving the payment method
for the showrooms, web
well, improving topline or mobile
growth and EBITDA. • improving the buying experience
on mobile, app or web, and
Myntra’s strong results • improving delivery and
reflect its higher private- warehouse logistics efficiency.
label sales, greater buying Sixteen teams competed and
power from increased 24 hours later, winners were
scale, and cost savings announced in the following
categories:
from Myntra and Jabong’s
integration. • best hack
• most innovative project
• customer and user experience
• project with the best code, and
• most popular project.
In Romania eMAG is the number To attract the best tech talent
one IT employer of choice. eMAG holds an annual hackathon.
Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 39
Etail continued Travel
Takealot continues to SPOTLIGHT REVENUE(1) (US$’m) SPOTLIGHT
grow its business in a Recycling packaging? 2018 276
sustainable way. It is all US$ 100%! 2017 123 No1
about executing a well-
2.2bn (1) IFRS: >100% LC: 21% MakeMyTrip is the
One of the things that goes hand in leading Indian online
made plan, focusing on proceeds from sale hand with etail is packaging. It is an
TRADING LOSS(1) (US$’m)
travel agency
growing the business and of Flipkart inevitable requirement for the
protection of the products that 2018 (61)
increasing margins and on customers buy and look forward to US$
No1
2017 (88)
becoming more efficient receiving. Takealot has taken on the
throughout its distribution Takealot is the
leading etailer
challenge to make 100% of their
delivery packaging recyclable. Not only
IFRS: 31% LC: 21%
Notes
(1)
Presented on an economic-interest basis.
155m
Our 2018 additional
and supply chain. in South Africa the boxes they use, but also the LC = local currency. investment in
padding material that safeguards MakeMyTrip
Takealot continued to grow as the customers’ products. With this MakeMyTrip strengthened its
leader in South African etail Note initiative Takealot aims to balance the leadership in India
As the market leader in South African (1)
Disposal is subject to needs of both customers and the Following its merger with goibibo the
etail, Takealot is well positioned to regulatory approval.
environment. previous year, MakeMyTrip (MMT)
continue growing its business. strengthened its leadership in the large,
fast-growing Indian online travel agency
During the year we increased our (OTA) market.
effective stake in Takealot from 47%
to 96% through two investments. MMT continues to focus investment on
In August 2017 we injected US$74m the high-growth hotels segment. It plans
into the business to fund ongoing to expand this market by bringing more
operations. In December 2017 we customers online and increasing the
bought out other shareholders at transaction frequency of existing
a cost of US$128m. customers.
Optimising our etail portfolio In May 2017 we contributed US$132m
As part of our ongoing portfolio of a MMT US$330m fundraising round,
optimisation, we exited non-strategic which also included Ctrip and other
etail assets Souq and Konga. In May shareholders. This additional capital gives
2017, Souq was sold to Amazon. In MMT the resources to continue growing
February 2018, Konga was sold to the online-travel market in India.
Zinox Technologies, a local Nigerian
retail business. We invested an additional US$23m
during the year to maintain our relative
shareholding.
Ventures
REVENUE(1) (US$’m)
2018 223
2017 155
IFRS: 44% LC: 37%
TRADING LOSS(1) (US$’m)
All of Takealot’s delivery packaging 2018 (134)
is now recyclable.
2017 (107)
IFRS: 25% LC: 17%
Notes
(1)
Presented on an economic-interest basis.
LC = local currency.
40 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Ventures continued Social and internet platforms
Through Naspers Ventures we partner In Poland 85% of all Tencent is increasing its investment in
SPOTLIGHT REVENUE(1) (US$’m) SPOTLIGHT
with local entrepreneurs to build select areas including video, payments,
leading technology companies in school kids access Brainly Increasing awareness 2018 12 281 cloud, AI technologies and smart retail.
high-growth markets. We identify
companies and founders with high
at least once a month. >110m and respect 2017 7 692 The group remains committed to
enhancing its development and
56%
Brainly students IFRS: 60% LC: 56% year-on-year
potential and the ambition to scale Brainly Movile runs a diversity awareness innovation capabilities. increase in Tencent’s
globally. Our goal is to identify the next Brainly is a social learning platform programme called Respect, revenues
phase of growth for Naspers –
identifying trends, technologies,
serving more than 110m students in
more than 35 countries. Brainly assists 45m which plays an active part in the
company culture. The
TRADING PROFIT(1) (US$’m)
2018 3 726
Tencent is listed on the Hong Kong
Stock Exchange and extensive further
segments and geographies that will
experience significant growth in the
students with an infinite number of
school subjects, including maths, history,
people have taken
Codecademy
courses
programme changes the way
commemorative dates are
2017
IFRS: 35% LC: 33% *Restated
2 761
information is available on its website
www.tencent.com. 19m
mobile daily active
coming decades and investing in the literature, coding and science. celebrated and encourages Mail.ru strengthened its position Mail.ru users
Notes
best opportunities we see there. discussions on gender equality, as Russia’s number one internet group
>20m
(1)
Presented on an economic-interest basis.
Codecademy racism and religious tolerance LC = local currency. Mail.ru remains the largest internet
We evaluate consumer trends to Codecademy is a vocational learning across the company. In addition, group in Russia by users, with 19m
Udemy students
understand engagement at a deep level platform, with 45m people having taken Respect participants play a very Tencent continued to excel in China mobile daily active users (DAUs) across
and use this information to identify courses to learn how to code. With important social role within the Tencent continues to perform well in its platforms. Its leading platforms cover
investment opportunities. We are
currently focusing on a number of
more than 56% of registered users
learning code to find a new job, >100m company, becoming a focal point
for Movilians to seek support,
a highly competitive and dynamic
environment. Through its ecosystem
gaming, social networking, email, portal,
search, instant messaging, ecommerce,
specific segments including edtech, Codecademy is helping people in every monthly Movile share stories and address of online services and the excellent
users business services, and maps. It is the top
healthtech and agtech. Within these country around the globe to upskill and diversity subjects. management of Pony Ma and Martin mobile app publisher in Russia in terms
segments, we have made investments find better career opportunities. Lau and their teams, it remains the of both number of downloads and
in innovative companies with largest platform operator in China. consumer spending.
high-potential platforms, and we continue Udemy
to look for more great opportunities. Udemy is a global education marketplace Movile is increasing diversity For the year ended 31 December 2017, Mail.ru’s revenue for the year to December
for lifelong learners serving more than awareness through its Tencent’s revenues of RMB238bn were 2017 was up 34% to RUB57bn. Key
We are targeting businesses that are 20m students in 190 countries around companywide Respect programme. up 56%. Non-GAAP profit attributable revenue drivers were online games and
addressing big societal needs, such the world. It combines a business model to shareholders (Tencent’s measure of advertising. Mail.ru’s two largest games,
as online food, education and health, we know well, two-sided marketplaces, normalised performance) grew 43% to Warface and War Robots, continued to
where the right combination of with a sector we are excited about. RMB65bn. perform well. The online games business
technology and entrepreneurialism With 20 000 instructors teaching more Revenues from value-added services continued its expansion internationally and
can disrupt for the better – driving than 65 000 courses, you can literally (VAS) increased 43% year on year to across new platforms. International
down costs and driving up quality learn anything on Udemy. RMB154bn, with online games revenues revenue accounted for over half of Mail.ru’s
for consumers. growing 38% to RMB98bn and social online games revenues. Mail.ru continued
Movile networks revenue rising 52% to to see good growth in advertising revenue,
Providing ongoing global support Movile is the top mobile commerce RMB56bn. Online advertising revenues especially on mobile, benefiting from shifts
We provide ongoing global support to platform in Latin America, with over rose 50% to RMB40bn. Other revenues in advertising budgets towards online and
all our Naspers Ventures companies. 100m users per month. Movile develops (mainly payments and cloud services increased advertiser spending towards
The support ranges from human world-class mobile marketplaces and is a revenue) rose 153% to RMB43bn. social networks.
resources, product and growth leader in B2C mobile app-based services
strategy, finance and M&A expertise, Tencent’s Weixin platform strengthened VKontakte, the most popular mobile
in Latin America, including iFood and
research, general counsel, to IP and its ‘super-app’ status, with monthly active messaging and social networking app in
Sympla. A leading self-service ticketing
communications. In addition, Ventures users exceeding the 1bn mark in February Russia, continued to perform well. Over
platform in Brazil, Sympla is a one-stop
companies have the ability to tap into 2018. The group maintained its leading the year, the number of newsfeed views
shop for entertainment and events in
the resources of our global network position in the Chinese online games increased 30%, and every day more
Latin America. Movile is also ramping up
of entrepreneurs and businesses market and continued to grow its global than 9bn post views are generated.
its content distribution. It is one of the
across the group in 120 countries and largest distributors of digital kids’ content presence. Mail.ru continued to invest in new
markets. It’s part of our long-term in the world. strategic areas such as esports and
approach to increasing value in the Tencent’s strong presence in social media
and utility products drove healthy online food delivery in Russia. In January
businesses we back, on the way to SimilarWeb 2018, Mail.ru announced the acquisition
building leading technology companies. SimilarWeb provides digital market growth in advertising revenues from its
various platforms. The group extended of 100% of ESforce Holding, one of the
intelligence for online businesses. It largest esports companies globally.
Investing in edtech measures and analyses millions of mobile its leadership in mobile payments in
We are backing a number of ventures apps and billions of webpages, providing terms of active user accounts and further Mail.ru’s depository receipts are listed
to transform the way people learn insight into traffic flows and consumer expanded its presence in commercial on the London Stock Exchange. Further
around the world. behaviour to help companies make more transactions, with offline transaction information is available on its website
informed management decisions. volume more than doubling year on year. corp.mail.ru.Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 41
Video Entertainment
We are building Africa’s leading video-entertainment
business. The key to our growth and success is to offer
our customers great entertainment anywhere, anytime
across platforms including digital terrestrial television,
direct-to-home and subscription video-on-demand services.
Highlights of the year
SUBSCRIBERS INCREASED BY TRADING PROFIT GREW WE NOW HAVE OVER
1.5m
year on year
29%
24% to US$369m
(1)
13m
subscribers across Africa
Note
(1)
In local currency excluding M&A.
Total subscribers We continued to We invested We continued to
increased by implement our heavily in local drive costs down.
1.5m to over value strategy. content.
13m households.
Read more on page 42 Read more on pages 42 to 44 Read more on page 43 Read more on page 4442 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Markets Performance Focus on Launch of a
We are facing increased competition
from global and local players across
REVENUE (US$’m)
(1)
3 680
South Africa dedicated satellite
Giving our customers
our video-entertainment markets. 2018
Increasing subscribers
Competition is increasing with video 3 401
uninterrupted viewing is not
2017 Despite a tough economic and negotiable. MultiChoice’s journey
consumption on online platforms IFRS: 8% LC: 7% uncertain political environment, we as a premier satellite broadcaster
growing, and global players like Netflix, achieved subscriber growth of more took a huge leap forward with
Amazon, Facebook and iFlix continuing
TRADING PROFIT(1) (US$’m) than 500 000 and are now approaching Intelsat’s launch of the IS36
to offer alternatives to our service in 7m total subscribers. satellite. The satellite launched
our territories. In addition, local 2018 369
streaming players like Kwese, Cell C from the European Space
2017 287 Increasing profitability
Black and Vodacom VideoPlay have also Agency’s Guiana Space Centre
IFRS: 29% LC: 24% The trend of growth in the mass market in French Guiana on 24 August
emerged.
continues, while our Premium tier is 2016. The satellite has an
Notes showing declining growth and the intended lifespan of 15 years,
Aspiring direct-to-home (DTH) and (1)
Presented on an economic-interest basis.
Compact tier is starting to stabilise. thereby providing adequately
digital terrestrial television (DTT) LC = local currency.
Due to this change in our customer for MultiChoice’s DStv roadmap
players continue to invest across Africa,
A solid performance mix, average revenue per user (ARPU) until at least 2031.
notably StarTimes, Zap, Azam and
Our video-entertainment segment declined from R353 to R344 year
Kwese. Free-to-air channels and
once again produced a solid on year.
analogue switch-offs in many countries
are also creating further competitive performance, with subscribers
increasing by 1.5m and profitability Enhancing products
pressure on our products.
growing 29% year on year. We now We continue to enhance our product
have over 13m subscribers across offering to deliver the best customer
the continent. This reflects the success experience.
of the value strategy we have been
implementing for the past two years This year we repositioned the Extra
where we have reorganised our Bouquet as Compact Plus, to define
channel bouquets to attract more more accurately the product
subscribers as well as focusing on proposition and align with the naming
improving our systems and, in turn, convention in the rest of Africa. We
our customer retention. offered Showmax free to Premium
subscribers and discounted Showmax
to R49 for Compact subscribers,
resulting in excellent uptake. The DStv
Now channel line-up was increased
We performed well in the to match our satellite offering and
high-definition SuperSport channels
increasingly competitive world were also added.
of video entertainment.
Our dedicated satellite in space
helps ensure uninterrupted viewing
back here on earth.Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 43
Focus on South Africa continued
Our online properties are gaining This year we also increased our offering SPOTLIGHT
traction. To increase access to DStv of themed pop-up channels, which
Keeping data secure Now, we have opened it to all bouquet proved very popular with viewers. Wide-ranging corporate
Irdeto has developed several solutions
tiers. Explora penetration, BoxOffice
rentals and connected Explora Managing regulations
c7m
the number of
social investment
around encryption and key management. connections also recorded good and reputation Social and relationship capital its kind – the Let’s Play Schools
video-entertainment
growth during the year. Our teams continue to engage and subscribers in Across our video-entertainment Physical Education Challenge – to
Encryption allows information and data to work with our regulators to shape our South Africa segment we continue to contribute celebrate reaching its 10-year
be hidden so that it cannot be read without We have also created a connected video regulatory environment and limit towards various corporate social milestone in 2016. The primary
special knowledge, or a ‘key’. To read the division by combining our Showmax adverse operating conditions. They also responsibility (CSR) programmes – objective of this challenge is to
encrypted information a specific (secret) key
is needed to decrypt the information. There
are already many ways and standards to
Africa and digital media operations
to ensure we give adequate focus to
help to manage our reputational risk to
protect our brand.
R344
average revenue
from the Magic in Motion Academy
to SuperSport’s Let’s Play initiative.
reinforce the instruction of
curriculum-oriented physical
encrypt content and data, so that is not the online products moving into the future. per user It’s all part of our commitment to education and promote physical
challenge. However, what is extremely Showmax International continues to build Concerns about MultiChoice South enriching lives across the continent. activity in all schools. Let’s Play assists
difficult is dealing with the complexity of and grow our business in Eastern Europe. Africa’s relationship with ANN7 and the Department of Basic Education
issuing keys during the manufacturing questions about how it lobbied Total corporate social investment with its school infrastructure project,
process of devices, to distribute keys, to Serving our customers with government were raised in the media spend totalled R60m in 2018. together with partners Hitachi
encrypt keys (with using other keys) and top-quality content in November 2017. As a result, the Construction Machinery and
then to manage and revoke and redistribute We successfully renewed key MultiChoice audit and risk committees Project Thorn Builders. Eight multi-purpose artificial
new keys, eg when there is a hack. entertainment and sport rights, came together to assess: whether or not This programme helps stop crime, fields have been built at selected
including the English Premier League appropriate procedures were followed specifically human trafficking, with primary schools to date with another
Irdeto takes care of that challenge (EPL), Premier Soccer League (PSL) in in relation to the ANN7 contract; the the use of Irdeto technology. three to be built at beneficiary
by implementing and managing mostly South Africa, UEFA Champions League payments that were made by MultiChoice schools in 2018.
two-way systems where both ends send (UCL), as well as the Discovery, Disney to ANN7; and whether or not there MultiChoice Diski Challenge
and receive data. and Turner offerings. In addition, we were irregularities in the submissions Amounting to R45m per annum, M-Net Magic in Motion (MiM)
secured key once-off properties such MultiChoice made to the Minister of including rights, this multifaceted Film and TV Academy and
Irdeto is an industry leader in developing as the Conor McGregor vs Floyd Communications. After a thorough and programme is aimed at developing Career Expo
security building blocks to create secure Mayweather fight, which drew record comprehensive review the committees football and broadcasting. Through MiM, CSI projects include
key-based business systems such as Key viewership across platforms in the year. found no evidence of corruption or an extensive internship programme,
Generation Technology to embed the These successes allow us to continue to other illegal activity but did identify Let’s Play where young producers work
master key in devices and servers; key serve our customers with top-quality certain procedural shortcomings. SuperSport’s flagship social with industry experts for handson
distribution systems to ensure keys are international content. MultiChoice South Africa accepted investment initiative, the programme experience. The MiM Career Expo
only provided to legitimate business users; the findings and confirmed that it will is an implementation partner of was launched in August 2014. M-Net
software protection technology; hardware Our investment in local content is primarily address the shortcomings that were school sport for the Department of partnered with tertiary and financial
protection elements; secure telemetry through the Mzansi group of channels in identified. Accordingly, MultiChoice Basic Education and is now active in institutions, as well as production
to identify potential breaches and many South Africa and Africa Magic in the rest South Africa will ensure that robust thousands of schools nationwide, companies, to give learners a
more. At the same time Irdeto supplies of Africa. Our efforts have been well due diligence processes will always reaching over a million children complete view of the industry.
end-to-end security systems like Cloaked CA, received by subscribers, with our channels be followed for startup channels and annually. Attendees were also made aware
which is the world’s leading software-based among the top performers in their peer that management highlights issues of of the variety of jobs available in the
conditional access system; Control, which group. We also launched a new channel, controversy and reputational risk at The Let’s Play Schools Physical industry, such as presenting, acting,
is the most universal and powerful DRM 1Magic, to cater for the Premium local the quarterly audit and risk committee Education Challenge camerawork and directing, giving
licence system as well as KeyStone, which audience, anchored by a high-quality meetings. Key issues will be brought In partnership with the Department them valuable insights from industry
is an innovative connected vehicle access local telenovela – The River. to the MultiChoice South Africa board of Basic Education, Sport and experts and practical exposure to
and usage management system. for further consideration, including how Recreation South Africa, the Physical several disciplines.
We are investing heavily to formalise MultiChoice South Africa’s Education Institute of South Africa
lobbying process. In the absence of and Unicef SA, SuperSport launched
in local content – it is an national guidelines on lobbying and the biggest school sport initiative of
important differentiator interaction with regulators and
government, MultiChoice management
for us that our customers will develop guidelines for approval by
really appreciate. the board. MultiChoice South Africa In 2018 our video-entertainment
Irdeto is an industry leader in keeping confirmed that it would not renew segment invested R60m across
information and data secure. ANN7’s current contract when it ends various CSR initiatives.
in August 2018. It confirmed there will
be an open bid for a replacement local
news channel.44 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Focus on the SPOTLIGHT
Creating an Developing leadership
rest of Africa >13m
the number of
outstanding green
building for MultiChoice
and gender diversity
Across the video-entertainment This includes ensuring that all of
video-entertainment
Across the rest of Africa we continued subscribers across segment, we have a number our human resources policies,
our value strategy – focusing on MultiChoice City, based in South
Africa
Africa and home to our of established programmes processes and practices support
accelerated subscriber growth across to develop leadership abilities diversity and inclusion.
all bouquets while controlling costs. video-entertainment segment, is
5-star Green Star-rated, a rating and competencies at all levels
received from the Green Building of seniority. Managing talent
Improving products Our talent management
We further improved our product Council of South Africa. The
building offers a grey water Empowering women framework helps in the
offering with the successful launch of We implemented a Leading implementation of succession
Compact Plus in Namibia, Angola and reticulation system and heating and
cooling systems and processes to Women programme with the planning and the employment
Mozambique and the launch of GOtv Gordon Institute of Business to of women in senior roles.
Max, a new higher-tier bouquet on trap and disperse natural light.
develop women at a middle to
our DTT platform. senior management level. We also have affiliations with
This 5-star rating was achieved
by following the Green Building LGB Tech and Women in Tech
Reducing costs Other initiatives include internal as part of our commitment to
We removed substantial costs from the Council’s matrix, with key points
scored for: leadership development promoting recruitment diversity.
business by renegotiating international programmes, Women in
content agreements or dropping Management, Business and Public
non-performing content and reducing • Management – building tuning,
environmental management and Service (Wimbiz) and a women
local football rights. We made further empowerment programme with
investments in new content formats and waste management.
• Indoor environment quality the Lagos Business School.
local productions. We have also focused
on reducing overhead costs, despite – ventilation rates, air-change
effectiveness and volatile organic We have submitted a five-year
inflationary pressures. employment equity plan to the
compounds.
• Energy – greenhouse gas Department of Labour as part
Improving our customer journey of our compliance to the
We continued to improve on key emissions, energy sub-metering,
lighting power density, lighting Employment Equity Act.
capabilities such as sales and
distribution, retention and customer zoning and peak energy-demand
care, which are all geared towards reduction.
improving our customer journey. We • Water – occupant amenity
also continued to strengthen and build water, water meters, landscape
teams in growth areas of the business. irrigation and heat-rejection
water.
Irdeto • Materials – use of
Irdeto had another strong year with environmentally friendly material.
positive growth in revenues and
profitability. To reinforce its product Points were also scored for
portfolio, Irdeto completed the transport, land use and ecology,
acquisition of Denuvo, the number one emissions and innovations.
supplier of anti-tamper and anti-cheat
solutions to the video-gaming industry.
Our video-entertainment segment
MultiChoice’s head office has has a number of leadership and
a 5-star Green Star rating. gender diversity programmes.Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 45
Media
In our media segment, Media24 is building communities through
content, technology and commerce. We are focusing on building
a more diversified media player with market-leading mobile content
and a portfolio of ecommerce solutions, including efashion, efulfilment
and online job classifieds. This will enable Media24 to capitalise fully
on rising mobile internet connectivity across the continent as well as
on South Africa’s growing online retail sector.
Highlights of the year
MEDIA24 (EXCLUDING NOVUS)
REVENUE WAS FLAT YEAR ON
YEAR AT
US$
Media24 (excluding
Novus) revenue was
Online fashion store
Spree achieved
24.com achieved
double-digit year-on-
The larger portion
of Media24’s
374m
flat at US$374m. topline growth year revenue growth. investment in Novus
of 49%. was unbundled.
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Markets Investing in social and
We are navigating a competitive Media24 relationship capital
and fast-changing market Growing ecommerce and news
Media markets remain highly Online fashion store Spree Media24 aligns its strategic Working with governments
competitive and fast changing. Revenues outperformed revenue expectations corporate social investment (CSI) Media24 is working on two
in traditional media streams are under with topline growth of 49%. with core business interests to strategic agreements with
pressure whereas digital and technology Nearly 50% of sales came from enhance stakeholder relations governments. A partnership
changes create great opportunities mobile devices. and build its profile as a good with the Gauteng provincial
for players with the resources and drive corporate citizen. government will provide
to adapt. Spree also launched visual search training opportunities in
functionality and won the African Training tomorrow’s journalists digital, communication
Through its flagship CSI and entrepreneurship to
Performance
customer experience award for
innovation. programme, WeCan24, Media24 unemployed youth via the
equips young people with digital Tshepo One Million programme.
24.com achieved double-digit journalism skills. Young people A partnership with the Western
REVENUE(1) (US$’m) year-on-year revenue growth and learn how to use digital Cape government’s Premier’s
507 increased daily average unique technologies to research and Advancement of Youth (PAY)
2018
browsers by 6% year on year and produce news and information. programme has enabled
2017 588
pageviews by 9% during the period. During the year, nearly 2 000 Media24 to include internships
IFRS: 14% LC: 1% young people were trained at 350 for youth with its enterprise
The News24 app’s engagement schools and more than 2 000 development partner,
TRADING PROFIT(1) (US$’m) reached all-time highs in the financial articles were published on the Mikateko Media.
year. WeCan24 platform. Going
2018 3
forward, the WeCan24 platform
2017 19 and programme will have a
IFRS: 84% LC: >100% stronger digital focus. Face-to-face
training is being converted into
Notes a Massive Open Online Course
Presented on an economic-interest basis.
(MOOC) that will enable young
(1)
LC = local currency.
people everywhere to access the
material at any time. They will be
able to learn writing and research
skills via an accredited digital
journalism course. The plan is
for the programme to be
self-sustaining by becoming a
As the competition and training conduit for partners who
pay to use the platform.
speed of change in media
markets continue to rise,
we are adapting our
businesses for success.
Media24 is helping to train the next
generation of digital journalists.Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 47
Performance continued
Netwerk24 Preparing for a
6 months. On the Dot
potential water crisis
32 engineers. In South Africa we have a tradition South Africa has recently
30 stakeholders. of volunteering ‘67 minutes for declared a national disaster due
113 standups. Madiba’ on Mandela Day, to severe drought conditions in
689 tasks logged. honouring the life and work of the several provinces. The Western
7 232 cups of coffee. late President Nelson Mandela. Cape province is a particular
Rika Swart, general manager of concern as it is experiencing its
This is what it took to integrate On the Dot, Media24’s distribution worst drought on record. The
Media24’s digital lifestyle properties business, challenged her team to City of Cape Town disaster
into Netwerk24, the subscriber- do 67 good deeds for Madiba by management plan called for Day
based home of Afrikaans content. the end of July. Despite working to Zero to be implemented when
Designing one home that would tight schedules and deadlines, with dam levels reach 13.5%. On Day
feel right for each of the brands, the constant pressure to do more Zero the water reticulation
and which their audiences would with less, the team embraced the system to most areas in the city
want to pay for, was no mean feat. challenge bravely, pulling on their will be turned off and residents
The small team ran six key projects overalls to repaint schools, feed the will need to collect their quota
in six months – app content hungry through soup kitchens, care of 25 litres per person per day
integration, site designs and for the elderly and many other at 200 distribution points across
rebuilding, print content, paywall initiatives. By the end of July, the the city.
enhancement, emagazines, and team had volunteered for 72
rebranding. Through innovation, separate initiatives. They made a At Media24 and other Naspers
creativity and exceptional difference, and inspired themselves businesses in Cape Town, we
collaboration, the team achieved and the rest of Media24. But the have been preparing for a
what had seemed like an story doesn’t end there. Their potential water crisis identified by
impossible task. Subscriber heart and courage carried the the government by implementing
numbers are up significantly and team through tough times a few water-saving and resilience
the team is applying the lessons months later: they went through initiatives, running awareness
they learnt along the way to their a restructuring process that campaigns, and developing plans
next project. affected the whole middle to work differently in the event
management team. And yet, their of Day Zero.
engagement scores have never
been higher.
Our South African businesses
are well prepared for a severe
water crisis.
Media24’s distribution business
On The Dot performed a variety of
good deeds on Mandela Day – 72 in all.48 Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information
Performance continued
The migration of our Afrikaans lifestyle
titles to Netwerk24 on 1 November Optimising distribution
Data-driven engineering 2017 showed promising early results,
with a solid increase in subscribers. across the business
At Media24 we employ only the best Netwerk24 is the largest digital
– and we seek out talent that will raise subscription news destination in Any media company knows machine
the bar and challenge us. Some of the South Africa. learning (ML) and artificial intelligence
new appointees to our 24.com (AI) are integral to its tech and product
engineering team include an actual Posting positive results in print media suite. Media24 embraced this by
rocket scientist, and a PhD biochemistry Our print media, book publishing and launching apps based on ML and AI in
graduate – not traditional skills in the distribution portfolio posted excellent FY18. Our aggregator and personalised
media business, but critical to our results. Better than expected app suite now include News24 Edge,
data-driven approach. advertising revenue, the phenomenal a personalised version of flagship online
success of The President’s Keepers title News24, as well as soccer
(Jacques Pauw’s best-selling exposé aggregator Daily Kick, general news
on President Jacob Zuma, published aggregator Sliced and Nigerian news
by NB Publishers), good textbook aggregator Bounce. Spree, our efashion
orders and strict cost management business, also piloted an AI-powered
all contributed. visual image search functionality on its
app whereby shoppers can upload
Playing our part in investigative pictures of clothing they like and then
journalism view similar items for sale on Spree.
Investigative journalism in South Africa It was the first of its kind for efashion
is flourishing, exemplified by the success in Africa. News24 Edge was named
of The President’s Keepers. The the top mobile news service by the
#Guptaleaks team, included 24.com World Publishing Expo and the World
investigative journalists Pieter-Louis Association of Newspapers and News
Myburgh and Angelique Serrao, won Publishers, while Spree won the
the Vodacom Journalist of the Year prestigious African Customer
award for their series of revelations on Experience Innovator Award for
state capture. At the Standard Bank its image search functionality.
Sikuvile awards, Suzanne Venter won
the investigative journalism award and
SA story of the year for her work on
the Life Esidimeni story.
Media24 seeks best talent –
raising the bar and challenging us. We are immensely proud
of our awarding-winning
investigative journalists
Unbundling Novus Holdings
Effective 26 September 2017, the
majority of Media24’s investment in
Novus Holdings Limited was unbundled
via Naspers, in accordance with the
Competition Tribunal’s merger approval
condition. Post unbundling, Media24
retained a 19% investment in Novus
(down from a pre-unbundling
shareholding of 66.5%). Since
30 September 2017, the investment in Media24 embraced ML and
Novus is carried as an available-for-sale AI launching News24 Edge.
investment and its results are no longer
consolidated on a line-by-line basis.Naspers integrated annual report 2018 Introduction Group overview The Naspers approach Business overview Performance review Governance Financial statements Further information 49
Our people
At heart, we are entrepreneurs. HEADCOUNT BY REGION
Each year we organise internal
We focus on attracting the world’s networking and learning events to bring
best talent to build leading companies together teams and communities of MyAcademy
that empower people and enrich expertise, often from across the group,
communities through outstanding to share ideas and learn from internal We launched our online and
products used by millions of people and external experts. offline learning environment,
every day. MyAcademy, in September 2016
We perform and this year more than 20 000
Talent, particularly in the fields We push for performance in everything people accessed content
of ecommerce, technology and we do, and we link achievements and on MyAcademy online.
engineering, is scarce globally. As such, rewards. We agree on clear and MyAcademy online offers the
being seen as an attractive and ambitious goals, have continuous very best online learning content
meaningful place to work is key to conversations about achieving even from global providers such as
our strategy. more and reward our people for what Udemy, Big Think, Harvard
they deliver and how they deliver it. We Business School, Codecademy,
% Ready, Vado, and Rosetta Stone.
encourage innovation from all our
PERMANENT EMPLOYEES
EUROPE, MIDDLE EAST AND AFRICA 76
people. To attract and retain the skills Our MyAcademy classroom-
24 887
ASIA-PACIFIC 6 on which our sustainability depends, based programmes offer our
AMERICA 8 and to reward superior performance, people the opportunity to grow
LATAM 10 most of our group companies grant their leadership skills regardless
share options/share appreciation rights of where they are in the world.
*Excludes associates and joint ventures. to their employees under a number of We also focus on developing key
long-term incentive plans. functional skills in the areas
of technology, sales and business
During the year we brought fresh We matter development, finance, law and
HEADCOUNT BY BUSINESS SEGMENT
talent into the group at all levels and We matter to the communities we human resources. This year more
strengthened our focus on people serve and, wherever we operate, we than 1 500 people attended such
across the organisation, providing new hold ourselves to high standards. Our programmes.
opportunities to existing employees. code of business ethics and conduct
The group employs 24 887 (2017: defines our commitment to conducting During the year ended March
25 000) permanent employees in business fairly, ethically and with 2018 active learners from around
some 120 countries and markets. integrity. This code and related policies the group had consumed more
are communicated to group employees than 26 000 online lectures and
We empower and are available on www.naspers.com. engaged in more than 43 000
We back local teams and learn from hours of training on this platform.
each other. We encourage diversity in Many of our companies invest in
our teams and in our thinking. Our corporate social responsibility
people are empowered to be programmes and we encourage our
responsible and make decisions because % people to support these by investing their
we trust them to do a great job. We time. Wherever we operate we employ
B2C 15
believe in them and we want them to local people and we create supportive,
share their talent and expertise across CLASSIFIEDS 18
flexible and pleasant environments to
the group. Through MyAcademy (the CORPORATE 2
help them perform at their best while
offline and online learning environment NASPERS VENTURES 13 developing their skills. We focus on the
for the group) and local learning and PAYMENTS 4 ongoing development of our managers, as
development initiatives, we invest in our PRINT AND DIGITAL MEDIA 19 creating an environment where our
people so they can build their skills, their people feel cared for, heard and
expertise and ultimately, their careers. VIDEO ENTERTAINMENT 29 Through MyAcademy,
supported in their ambitions, is ultimately our people can tap into
*Excludes associates and joint ventures. in their hands. Together we are all online learning.
responsible for the positive impact we
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