Naspers Limited

Thank you, Dylan. On behalf of Naspers, I would just like to introduce today's presentation party.

With us on the call today, Koos Bekker, our CEO; Steve Pacak, the CFO; Mark Sorour, our CIO; Basil Sgourdos, CFO for MIH; Charles Searle, the CEO for our Enlisted Internet Investments; and Eben Greyling, CEO of Pay-TV; Esmare Weideman, CEO for Media24; and Nico Meyer [ph], who's our GM Finance [ph]. I'd also like to refer you to Slide 2 of our results presentation with all the important information, which I'm not going to read to you.

I'd like to now hand you over to Koos Bekker, our CEO, to start the presentation.

Thank you, Meloy. If I welcome people in Asia, it's probably the evening over there and good afternoon to Europe, and good morning to the States.

My job is simply to orientate you for the more detailed presentation by my colleagues to follow, and I'll do it in just a few slides.

Let's start on Slide 5. To give you a broad idea of how the year went, revenue on a consolidated basis is up 27%, that's top left.

At the bottom middle, core headline earnings per share is what we regard as the most reliable indicator of future performance, it strips out the accounting funnies, that's up by 20%. So you could say the engine turns 27% faster and profitability is up by roughly 20%.

You'll quickly see there was a growth element to the latter and then an exchange currency issue.

In terms of trading profit, both trading profit and cash flow is about the same as last year. And the reason you'll see on the top right-hand side, development spend is up by 51%.

And development spend is what we devote to the future. So that's the engineers and the software creation and so forth, that build the next generation of services.

That's our investment in the future. Now dividends is, of course, what goes out to our shareholders as a reward for holding our shares, and the proposal is that, that lifts by 15%.

So that's, at the top line, the summary of the year.

In slightly more detail, let's turn to Slide 6. On a managed basis, in other words, Steve, our financial chief, will shortly explain to you, that we distinguish between consolidated, which is the way the accounting guys reflect the results, and managed results, which is what we control, where we pick up our percentage of minorities we might have in certain businesses.

For the last year, it's up 36%, and historically, over the last 5 years, it's 25%. So you can see the engine is spinning faster by that percentage.

Firstly, in terms of revenues, the Internet is now, for the first time, our biggest source of revenue over to [ph] Pay-TV. So you have 2 strong flows, one from Internet, one from Pay-TV.

The next split is geographic. We used to be a South African company, we're no longer so.

Less than 40% of our revenues currently come from South Africa, and in the future, it will decline further. The third type of split is where the revenues come from functionally.

Our biggest source is subscription. That's about 1/3 of our total income.

Then you have value-added services, games, e-commerce and so on. Advertising is relatively unimportant at 11%.

Advertising tends to fluctuate with economy and the rest tend to be pretty insulated from short-term economic cycles.

If I could refer you to Slide 8, you'll notice that there's a buildup in our development spend. I referred to it earlier.

That's the investment we make in the future. And we spent about ZAR 4.2 billion for that in the past year.

Slide 9 indicates to you the earnings. Now I referred already to 20% core headline earnings per share growth, which is probably the most useful figure you can have.

This one is close to that, that's basically earnings in total, and there's a 23% lift and about half of that is due to currency and 1/2 to proper organic growth.

And in Slide 10, you see the payout to shareholders. We propose to shareholders at the AGM that we increase the dividend by 15% this year.

Over a 10-year horizon, the increase was 31% compound annually.

I now turn you over to Steve Pacak, our Financial Chief.

Thank you, Koos. If I can refer you now to Slide 12.

This is a summary of our consolidated income statement. And it can give you a good overview of our earnings.

And once we've gone through that, I will then do a deeper dive into the segments in the following slides. You'll note, on the top line, that based on the proportional consolidation of our associates, revenues grew by 36% to ZAR 76 billion in the year.

If you look slightly below that, consolidated revenues, where we actually exclude the associates, that also grew strongly at 27% to ZAR 50 billion in the year. So one of the key takeaways of this presentation is that whichever way you look at our revenues, we continue to have a robust revenue growth.

On the consolidated profit line, you will see that we're flat at ZAR 5.7 billion for the year. This is a consequence of stepping up our development spend, which as I'll explain to you, in prior years, we take all through the income statement.

On the finance cost line, you'll see some increase. There's a lot of accounting clutter in there, but if you look at the pure interest cost included in there, this totals ZAR 630 million, which is up 22% on last year, as we utilized debt to fund some of the acquisitions we made in the year.

Our share of earnings from our associates, you can see this jumped quite dramatically to ZAR 9 billion. As we show on the slide, there's 2 -- there is included in the ZAR 2.6 billion once of non-recurring profit flowing from Mail.ru who sold some Facebook shares during the course of the year.

If we strip out this event, the earnings from our associates grew 64% year-on-year.

Then you'll see the line item other, this includes an impairment charge of ZAR 2.1 billion, which relates mainly to our investment in Abril, which, as you know, is a Print Media investment. Given the poor performance of Print Media globally, we thought it prudent to partially write-down this investment, which is what we've done.

It is, however, worth noting that Abril has embarked on a substantial cost-cutting exercise to right-size the business for the environment that exists today.

The bottom line then on Slide 12 is that our core headline earnings grew by 23% year-on-year to ZAR 8.5 billion, but you must note that if we strip out the currency effect using our constant currency, the growth would have been approximately half that at 11%.

If you can then turn to Slide 13, here, we analyze the 36% growth in proportionately consolidated revenues, which now total just over ZAR 76 billion. If you look specifically at the 36% revenue growth and analyzing that, 20% of that was the organic growth.

So 20% of the 36% growth was organic. Acquisitions provided a 7% boost, and the currency effect amounted to 9%.

So if you stand back, you'll see the organic expansion is still a primary source of growth, making up just over half of our growth.

You'll note on the slide that the major growth came from the Internet segment, which, year-on-year, grew by 80%. And we actually recorded strong growth in all the major Internet platforms, with the eCommerce platform, in fact, doubling up in size year-on-year.

You'll also see on the slide that Internet revenues exceeded those of Pay-Television for the first time this year, it's the doughnut on the right-hand side.

And the Pay-TV business also had a good year, creating a subscriber base for 1.1 million net, taking our total cumulative households now to 6.7 million subscribers. This translates into revenue growth of 20% for the year.

On the next slide, Slide 14, we analyzed the step up in development spend. The main areas of focus, you'll see, are eCommerce and digital terrestrial television, DTT.

We will expand on both these things later on in the presentation.

On Slide 15, we analyzed a 23% growth in trading profits. This now totals just over ZAR 14 billion when we bring our proportional share of associates in.

As indicated, trading profits grew nominally at 23% year-on-year. And once again, if we did the analysis in constant currency terms, growth would have been 12%.

The lower trading profit margin is largely explained by the step-up in development spend in the year.

On Slide 16, we analyzed free cash flows. You'll see for the year, they totaled ZAR 3.5 billion for the current year.

So it's marginally lower than last year, and it's largely explained by the step-up in CapEx in the year, mainly in the Pay-TV segment.

On Slide 17, there's an analysis of our acquisitions over the past 17 years -- sorry, the past 5 years. The current year was quite active with $630 million of acquisitions concluded, virtually all of them in the eCommerce space.

And then on Slide 18, we analyzed our debt position. Our net debt at the end of March 2013, excluding transponder leases, totaled ZAR 6.6 billion.

And that gives us gearing of about 12%, so the balance sheet still remains in good shape.

So that's the financial summary. I will now hand you over to Mark, who will deal with some aspects of the Internet segment.

Thanks, Steve. First, if I could just ask you to turn to Slide 20.

Over the years, we've evolved our focus on to eCommerce, as you may know. If you look at this area, for us, we see it as a huge market size and great growth potential.

If you look on the left-hand side of the slide, at the U.K., for instance, this is a market where online retail now accounts for around 11% of the total size of the retail market. And this has been done in the short space of less than 10 years.

Now given the relatively low levels of online retail penetration in the markets in which we operate, anything between 1% and, say, 4%, we see great upside potential to ride this wave into what we believe will be sizable opportunities.

Moving from left to right on that slide, first, we're looking at the classifieds. With its strong and attractive network effect, we believe we can build solid businesses in this segment in several markets across the world.

Secondly, looking at e-Tail, here, we are focused on building integrated first- and third-party online retail platforms. And then, thirdly, we're focusing on payments.

While this is still in a nascent stage for us, it holds plenty of promise, as it underpins transaction activity across all of our online platforms.

With that, I'd like to hand you over to Basil in Hong Kong, who will share with you more info on the eCommerce financials.

Thanks, Mark. If you could please turn to Slide 22.

I'm going to take you through the progress we've made and take you through some of the operating metrics around our eCommerce business, and then I'll hand it over to Charles, who'll take you through Tencent and Mail.

And you'll see on this slide that we highlight the financial performance of the eCommerce segment in aggregate. The combination of the organic growth, obviously, driven by the high development spend that both Steve and Koos referred to earlier, as well as M&A, means that we've delivered really strong top line revenue growth.

Currency, as mentioned earlier, has also had some impact there [ph], as we're reporting these numbers in revenue and the rand -- sorry, in rand, and the rand has weakened, versus the currencies in which we transact in.

The first is that our first businesses are in that functional area. The first business we acquired, that being Allegro, then followed by BuscaPé.

And in addition, we've added quite a few B2C businesses and they're classified in the e-Tail segment. Now remember, those businesses sell directly to consumers.

So they book the sale of the item as revenue, and they also book a related cost of sale. The third reason is, on our classifieds side, monetization hasn't yet begun.

And I'll talk a little bit more about this when we get to the classifieds slide.

In the year ahead, we have to continue to invest in driving growth. As part of this, we're also going to invest quite heavily and continue in building out our mobile platforms, [indiscernible] smartphones and tablets, as well as the increased availability of wireless bandwidth means the consumers are rapidly migrating their Internet experience from a desktop one to primarily a mobile one.

In fact, you will see research that shows that in India now, mobile traffic exceeds their desktop traffic on the Internet.

Some of our businesses are profitable, but in the aggregate, we post a loss of ZAR 2.1 billion for eCommerce, and that's largely driven by the ZAR 3.2 billion development spend that we've incurred in the year. And that's highlighted in more detail on Slide 23.

So last year, we told you that [indiscernible], on the same call, that we would increase our development spend. And that's, in fact, what we've done.

You can see that development spends increased by 88%, from ZAR 1.7 billion last year to ZAR 3.2 billion this year.

The operating metrics that we see and the revenue performance over the past year gives us confidence that this strategy is the right one, and as such, we're going to continue with this train of thought, and we will continue to invest building on our successes and also building out additional opportunities and markets. The investment primarily goes into marketing, into people, into products and engineers on the software, and then, obviously, mobile development, which I mentioned in the previous slide.

We don't always win out, and in the cases where we don't, we want to move fast, and we'll close businesses and divert the capital to better opportunities. We're going to exit or shutdown a couple of businesses, and we're [indiscernible] meeting our expectations.

So if you could please go to Slide 24, I give you a high-level helicopter view of what's happening in the classified businesses. We've significantly strengthened our classified team, and it's now led by very able [ph] Martin Scheepbouwer.

As mentioned in the previous slide, in continuation of that theme, we've invested in product and marketing, and we've built leading positions in almost all our markets.

We began to pull away from our competitors, but we face very, very strong competition in almost all the markets we're in. And as such, we need to accelerate that investment in the year ahead to give ourselves the best chance of winning out.

If you look at the chart on the top left, which shows you the daily number of visits as of March 2013, you will see that's increased by 65% when compared to the daily average for March last year, and we now stand at 10.2 million visits. In terms of daily page views, in fact, the rate of growth has been far greater at 127%.

We now do roughly 136 million daily page views. That's 110,000 page views per minute and which is a substantial number.

The higher growth in daily page views also then -- when you compare it to the daily visits, suggests much higher engagement. And that's really driven by the significant improvements we've made in products, and the engagement is also very good.

And we're currently focused on 23 countries and we've added, in the current year, we've added markets like Indonesia, Thailand and Africa. And we've also consolidated our position in Portugal through the acquisition of Fixeads.

In Russia, we merged Slando Russia with Avito, to build the leading and, well, the undisputed market leader in Russia.

In the year ahead, we'll continue to add markets and look for additional opportunities. The Slando-Avito merger now allows Avito to focus on monetizing, and we should start to see some revenue driven out of that market in the year ahead.

That said though, many of our markets are not in positions yet where we want to start monetizing, and thus, we don't expect significant revenue growth in this segment for at least a couple of years.

If you could please turn to Slide 25, and now I'll talk about e-Tail, which is a significant -- the biggest segment right now of our eCommerce portfolio. If you look at the top right graph, we show you that the items bought or sold per day now stands at 802,000, which is 21% increase, so this is a daily number, which is a 21% increase from the same period last year.

In the operating metrics, we do include the prior-year numbers for the businesses that we've acquired. But obviously, for financial reporting, and when you look at the revenue visual on the left, we only pick up revenue from the moments we acquired the businesses.

As such, the revenue growth is much higher in the left, originally, 130%, and that totals ZAR 9.6 billion. 21% of the growth was organic and the rest was acquisitive, and primarily as a result of us expanding our B2C portfolio.

We've seen good growth in all our markets, and we continue to maintain leading positions in all our investments. You will see, on the bottom right, that Eastern Europe still is the biggest part of the e-Tail segment.

And that, again, is for a similar reason to the one mentioned earlier. And our first investment was Allegro in 2008 in the e-Commerce space.

But in addition, this year, we've added a number of B2C businesses that have added further scale to the Eastern Europe platform, and those include Netretail and eMag. Steve reported to you earlier on the M&A, and the bulk of that M&A in e-Commerce is around the B2C space.

These businesses, as I mentioned earlier, take -- sell directly to consumers. So we take our inventory, we manage our own performance, and in some cases, the businesses also invest in their own logistics and distribution.

When we look at margins, we're comfortable and they remain stable. Again, in this sector, in the year ahead, we'll invest in improving the product, building out mobile, and we'll expand our product categories and the number and types of goods that we offer consumers.

We'll sharpen our performance so that we can get things to the consumer faster. And coupled with that, we'll improve our delivery options and methods.

I think this will enable us to scale our businesses over the medium term and then drive the unit economics. And obviously, over the longer term, build operating margins.

When I look at the working capital, it remains relatively low, and I'm comfortable that it's well-managed. We've also strengthened our team in this area.

But together with the acquisitions that we've made, they now bring on systems and expertise that we can leverage across some of our other markets.

I will now hand you over to Charles, who will take you through Tencent and Mail.ru.

Thank you very much, Basil. If I may ask you to turn to Slide 26.

Tencent produced another really good set of results over the last financial year. Revenue was ZAR 43.8 billion for 2012, which represents an increase of 54% year-on-year.

Operating profit was ZAR 15.4 billion for the year.

At the bottom of the Slide 26, at the left, you can see that value-added services comprises the lion's share of the revenue mix at some 81%, with online games being the major components of this category. Tencent is also starting to make some progress in eCommerce, particularly in B2C, with eCommerce accounting for approximately 10% of total revenues at the end of 2012.

eCommerce does, however, have the effect of reducing margins on the overall business. As of course, it has a much lower margin profile than the other lines of business in which it is active.

At the platform level, the operating performance of Tencent continues to be solid. We show you, at the top right, some selected operating statistics for the first quarter of 2013, where you can see that Tencent recorded some 825 million monthly active instant messaging accounts at the end of the first quarter.

And this represents an increase of 10% year-on-year. Equally, the gaming and social network activity has also performed consistently over the period.

Weixin or WeChat, as the international version of this mobile communication product is known, has enjoyed a really exceptional growth over the past year, 194 million monthly active users were recorded at the end of the first quarter of 2013, and this is up from some 59 million a year ago. There's also some early evidence of growth starting to pick up in respect of WeChat in some international markets, but whilst this product is quite exciting in terms of what it holds in the future, it has to be noted that Tencent faces some very intense competition, particularly international in relation to this product.

But overall, it was an excellent performance by Tencent in a year that I would characterize as such as being ongoing investments in brand, innovation, technology and in its people.

If we can turn to Slide 27. Mail.ru also had a very good year, as it continues to build its position as the leading online communication and entertainment destination in Russia.

It remains to be the leading portal destination and had approximately 35 million monthly users at the end of March of this year. Odnoklassniki, its social network service, reached over 24 million daily active users at the end of March.

From a financial perspective, revenue was approximately RUB 21.1 billion for 2012, which represents an increase of 39% year-on-year, and earnings before interest and depreciation was RUB 11.5 billion.

Community value-added services has become a key contributor to revenue growth and delivered strong growth of approximately 78% year-on-year. The main driver from this growth has been product improvement, particularly in mobile services, but also an increase in the paying number of users for its virtual gifts and related digital services.

Content advertising continues to grow in line with the market, although we note a slowdown in display revenue was experienced, particularly in the second half of 2012, and this is largely due as a result of the ban on alcohol advertising in Russia that came into effect at that time.

Mail has also continued to execute on its online game strategy. The first-person shooter game, Warface, has become an important component of this and is seeing increasing traction in both users and revenue and is, in fact, later [ph] to become one of the leading online games in Russia.

And then finally, at a corporate level, Mail has continued to sell down its full minority interest in non-core assets, including its interest in Facebook, and has been distributing excess cash to shareholders via special dividends. The full shareholding in Facebook was some 14.2 million shares still remain.

And that concludes the Internet feedback. I'll now hand you over to Eben, who'll take you through Pay-TV.

Thanks, Charles. Guys, I'm going to start on Slides 29 and 30, where I'll give you sort of a brief overview of the key focus areas on the business, Pay-TV business.

And then the slides after that sort of deal with our results in a bit more detail.

So on Slide 29, on the left-hand side there, you will see sort of one of the first focus areas, which is to drive penetration rates in TV homes across the continent. In the last year, we've achieved a good net subscriber growth of 1.1 million homes and we now reach 6.7 million households across 48 countries in Africa.

Secondly, on the right-hand side, you will see our focus on local content development. In the last year, we've spent more than ZAR 1 billion on local content.

That equates to more than 6,000 hours of local content produced in South Africa and Nigeria and Kenya, making us now one of the biggest producers of local content worldwide.

digital TV, digital terrestrial television, online and mobile services.

One of our main focus areas in the Sub-Saharan Africa business outside of South Africa for the last 2 years was the rollout of digital terrestrial television, and we're rolling that under the brand name GOtv. This service is now active in 8 countries covering some 25 cities.

In the year ahead, we will significantly expand the number of cities and countries that we cover with this digital [ph] service.

On the online and mobile front, we've got various initiatives that are back in place. The popular BoxOffice service, which is video-on-demand service that allows subscribers to view the latest blockbuster movies instantaneously on their TV, also personal video recorders, was recently made available online to users on personal computers.

And the CatchUp service has also been recently expanded to add that streaming service and will likely on the year be available for downloads. We'll continue to develop this and expand this service to Android tablets and other platforms later in the year.

On the mobile front, we continue to develop our own devices. This includes the launch of the iDrifter for the Apple devices in the last year and the new larger 7-inch mobile TV called the Walka.

And if you move to Slide 31, you will see our subscriber growth rate for the last couple of years. You will see that we have achieved a growth rate of 20% in the last year, and we now average an annual growth rate for the last 5 years of more than 21%.

And we're happy to see that the business is continuing to show good growth.

On Slide 32, we summarize a couple of our main operating dynamics in the Pay-TV segment. Starting on the top left-hand side there, you will see our average revenue per subscriber or ARPUs in the business.

In the last year, we've -- that's increased marginally, but we do expect those ARPUs to decline over time as we change the mix in our subscriber base. And that will happen because of our focus on penetrating the lower market segments.

On the top right-hand side, you will notice our programming costs in the last year increased by 15% on a year-on-year basis. That's mainly related to the increase in variable programming costs on the back of the good subscriber growth, our investment in local content as we've covered earlier and also some additional sports rights costs.

On the bottom left, you can see how our development spend is trending. The increase spend in the last year is directly related to our strategy, as explained earlier.

That includes investment in DTT services and making our service available online in our mobile TV services. We expect this development spend to continue to increase in the next financial year as we accelerate our investments in DTT.

These new technologies also require investment in CapEx. On the bottom right-hand side, you will notice a significant increase in capital expenditure for Pay-TV in the last year by some ZAR 840 million.

This is mainly due to the rollout of DTT services. Our DTT CapEx in this last year alone amounted to some $109 million [ph].

The rest of the CapEx relate to broadcast projects, network infrastructure costs with bandwidth [ph] and some costs related to new properties that we acquired. We also expect to see this CapEx spend increase in the New Year.

If you turn to Slide 33. It will give you a summary of our results for the Pay-TV segment.

As mentioned before, the business delivered good growth of over 1.1 million subscribers in the last year. Growth in the lower-priced Compact [ph] remained strong, and we're pleased to say that our DTT services is now starting to contribute as well.

The personal video recorder base reported good growth of some 200,000 subscribers on just under 1 million homes.

Revenues for the year increased by 20%, and it's now sitting at just over ZAR 50 billion. This increase was mainly driven by the subscriber growth and also the price increase that we process around 1 April every year.

Trading profit is up 18% to just under ZAR 7.6 billion, and our trading margin has remained favorable at around 25%. In our business in South Africa, the trading margin increased slightly from 33% to 34%, mainly due to scale.

And in the rest of Africa, the trading margin declined marginally from 10% to 9% due to our high investment in DTT.

And I'll end up with some comments on competition. We continue to see an increase in competition across the continent, from both traditional broadcasters and also new online players.

Existing players in the broadcasting space are aggressively growing their businesses, and we also see new players launching or planning to launch services. Online delivery of content is also now starting to become a reality on the continent.

New startups are launching video-on-demand services, and international players, such as Apple with their iTunes Store, now delivering online video-on-demand services in our markets.

We're sure that this trend will definitely increase in the future when broadband becomes mainstream on the continent and our own online developments are key in order for us to be prepared for this onslaught in the future.

That covers the Pay-TV segment, and I will hand you back to Koos.

Thank you, Eben. Folks, in conclusion, please turn to Slide 35, I would like to end with 3 categories of observations.

The first is on ecommerce. I think you'll note we're one of the fastest ecommerce groups anywhere in the world.

We have 3 pillars. The 2 main ones are classified and B2C e-tailing, and then we have a new developing pillar of payment method.

We'll expect that we'll be able to increase our market positions in the year ahead. There will be some acquisitions, but mainly organic growth, because we now have businesses that are in attractive markets and that we can actually grow.

The next set of comments on Pay-Television. Eben outlined it to you.

We'll have accelerating subscriber growth, especially digital terrestrial services, addressing the bottom end of the market outside of South Africa. I think we'll have less growth inside South Africa.

We want to extend the online services, and this is both pure Internet services and sort of pseudo-Internet through the personal video recorder. We expect both intensified competition and more regulations.

Some of the regulation may stifle innovation. That's just the way the world develops.

On the financial side, there may be some acquisitions, but we'll grow mostly organically, and our focus is on recruiting the best engineers and entrepreneurs, focus on innovation, move across from the PC to the mobile world. Financially, you'll see I think a lively top line and less growth on the profit lines, simply because we're developing more organically and looking at the future.

There may be some currency volatility. Sometimes it's good for us and sometimes bad.

You can't predict the future.

So folks, that's an outline of our performance over the past year and some tentative indications of the future. I'd like to hand you back to the moderator for questions.

I have 2 questions, please. The first one just relates to sort of longer-term margins within the eCommerce business.

If you strip out development spend, then you're clearly seeing a margin dilution to around sort of 10%, 11%, partly a function of mix. But also, I was wondering whether or not, if you exclude the mix effect of having more e-tail and development spend, that is there an underlying decline in profitability from either competition or pricing or marketing, and whether or not you would say that sort of migrating towards, I suppose, a 10% or below 10% margin, is there sort of reasonable long-term where thinking about things.

And the second question relates to India. There's been -- you haven't mentioned India really.

I think today there has been a lot of activity there. It's clearly going to be a very interesting market for you.

I was wondering if you could just outline your ambition in India and what's -- I just want to really get a sense of what you're trying to achieve in that market and whether or not it could be subject to sort of a significant degree of investment over the next couple of years?

Edward, Koos here. I'll take the margins question, and Mark will respond on India.

Margins are a mixed investment [ph], in fact, the end result of so many influences. You just think about it.

There's currency. For instance, we buy a movie in dollars, collect the subscription in IRA [ph].

Secondly, competitive forces, sometimes regulatory forces. Sometimes your phase of development.

When you're early, you tend to be high on the development costs. Then there's a phase where you cruise, where you have little competition and you can milk, and then competition enters and you need to spend a bit more defensively.

So margin is actually end result of great many forces. If you look at our group, I think Pay-TV is generally stable in margin, and what will change that is a strong development of digital terrestrial in some markets, where firstly, because you serve the bottom end of the market, there's some movement in revenues and margins, and secondly, because of the development spend, you start hitting the income line.

But basically, Pay-TV is more stable. On the Internet, if you look at the 3 pillars, payments tend to be relatively stable.

You take a certain percentage, 2% or whatever of the turnover. Classifieds has no margin, because the model there is to be -- develop it 5, 6 years up until you have a really strong position before you're charging anything.

So the first phase is simply lose money. E-tailing is typically a high-volume, low-margin business.

If you sell a tablet computer like an iPad, you have quite a firm revenue line, but quite a thin margin, and that's typical of eCommerce, in fact, commerce retail globally and eCommerce also in particular. Okay.

So when you look at our group as a whole, you get the collection of all these margins put together. And you can look back at our margins historically and draw some conclusion about the future.

But it will be influenced by many, many factors, some pulling and some pushing. Mark, on India?

Yes, look, India for us is a great market. It's a large market, firstly.

I think the benefit of the market for Internet is in the fact that it's quite fragmented and it's got a high mobile engagement, so there are some very strong drivers. Now our play in India is to create an integrated travel platform, and the reason why we look at it that way is because if you think about how you buy travel, you first of all, go into the Internet.

You look for an air flight to a destination and then perhaps a hotel. How to get from the airport to the hotel, you might need to take transport.

And so it's an integrated sale. And so by packaging that together, you get the benefit of being able to drive down your traffic acquisition costs on the one side.

And on the other side, because you're able to offer integrated packages, you're able to increase your conversion of traffic into transactions. And so India for us is really focused on creating an integrated travel platform.

Two questions, please, on eCommerce. Firstly, in Russia, you've mentioned you merged for scale, and then in Southeast Asia you closed Multiply, which is a potentially very exciting market -- Southeast Asia.

Can you provide some color on what factors you consider before you switch off the tap, particularly in the latter, or provide some color on what forces you into a merging-for-scale type of scenario? And then secondly and separately, your disclosure provides a very broad overview about the progress of eCommerce.

Can you give us an example or a case study of where you've had success in monetizing and indeed potentially recovering investments in the eCommerce space, even if it's regionally or potentially in a vertical?

Okay, JP, I'll tell you where we screw up, and Mark can tell you where we make money. Something like Multiply, it was a simply a mistake.

It was a social network run from the U.S. by a team, and they started noticing that people trade on it.

So we had the brilliant idea of converting a social network where the users spontaneously started trading into a true trading platform, simultaneously moving the base from New York to Jakarta, and it failed in execution. So the result is bad management by us.

And then we smile and we close it down. And we take the hit, and we clarified this hit [ph] as we can in the income statement.

You will always, in a high-risk environment, have failures. So if a company like us doesn't fail, it simply means you're not trying hard enough, because you assume a certain risk.

A risk means that sometimes the dice will fall against you. What you're trying to achieve in the long-term is to have more successes than failures.

So I think the best judgment of a company in our position is to look at the track record and, say, okay, over the past 20 years, whatever track you can find, how did this particular team do in terms of winning or losing, all right? But you'll always have write-downs because we often go into markets very young.

We take a risk. We try to build it.

And I think where we as a group are very good is we're not scared of admitting mistakes and fixing it. So we sit down with every unit twice a year.

We look at it top down. And in our last review, we had a look at Multiply, and we said, "Guys, you tried very hard.

You're not succeeding. We're killing the business.

We're closing the business." And we did it immediately.

And then when you have a success conversely, we step on the gas. So if something starts taking off, instead of sitting around and waiting for the next budget cycle to address the board, we try to immediately respond to it.

And you have to do it because we move in a very volatile, liquid market. And I think the best response of management is to be alert to trends and to respond quickly when you see them.

Mark, you can now tell them where we sometimes succeed, highly occasionally, but sometimes.

Okay. I think, unlike e-retail, as we mentioned to you, where scale is the name of the game, the name of the game in classified is network effects, where you can build a strong, liquid market quickly.

And we had assets in Slando and OLX, which had secondary market positions. They had several markets, but those were not their primary markets.

And by merging our assets with those of Avito, we were able to create a combined vehicle that had complete liquidity, which allows for a reduction of any wasted marketing expenses and for early monetization. And that's what you've seen now happen in Russia with a very, very strong position.

Two questions, please. The first is just sort of a follow-up on classified and the idea that monetization is still some way off.

I guess, I sort of understand your need to invest and strengthen your market position. But if we take Avito as an example, it's maybe a good example of a business that has achieved market leadership, that's monetized effectively and they've been able to do that despite sort of historically you being a high-spending competitor.

So I guess the question is, it's not just about sort of outspending the competitor, but also having a more of a balance towards driving revenue per user, your thoughts there, please? And then secondly, on PayU, maybe you could give a little bit more color there on what differentiates that product from other e-wallets?

Which market is it gaining traction in, and to what extent is it being used off of your existing -- your own owned eCommerce platforms? That's it.

David, on classifieds, as we discussed, the typical approach is to invest for 5 or more years to build a liquid, big platform and then to start charging for elements of it. An example is what Mark alluded to in Russia, which is very well-publicized, and that's that Avito, given its market leadership, has been able to start monetizing.

If you want somewhat more mature examples, you could look at some of the Ships Days [ph] properties, Blockit [ph], for example, in Sweden or Fin [ph] in Norway. Or in fact, you can look at the position in France, which is fairly well-developed.

There's a certain rhythm to it, but it depends upon, first, becoming big and useful to society before you start charging, and then introducing the fees one by one. The second on PayU, what typically happens is people trade in our platforms, and they use all sorts of ways of settling their bills.

And it differs from country to country. you might find, let's say in countries with a high degree of trust, Poland, people will purchase something on the Web and actually transfer the money from their bank account to the seller without ever having met this guy.

And they just trust that the people are so honest that the item will deliver -- be received in good order on your doorstep. In some other societies like Russia, that's patently absent, and people do not transfer money blindly.

And they tend to meet personally and exchange cash. So in our different markets, we try to take these cultural factors into account and to build a system that works for that market.

Some markets tend to be credit card, some debit cards, some bank accounts, some purses [ph], some you have in Brazil, there's the odd phenomenon that people buy everything on installments. You wouldn't buy a couch for a cash payment as you would in America.

You actually will have paid installments for the couch. And then you need -- we need to provide credit.

We do it by a deal with a bank. So we do a back to back with the bank and say, "If we do the deal, you provide the credit, and we offer the consumer something nice."

So the typical progression is we start with our own platforms and offer a payment method on our platforms, not exclusively, but as an alternative to the user. And whilst we do that well, we operate through third-party people.

So both ourselves and Tencent have lots of external clients who do not use our platforms, but still use our payment method. Now the typical margin on payments is quite low.

It's 2% or something. But if you do it for large enough volumes, it starts becoming a good business.

Okay. That's great.

Can you comment on which countries PayU specifically has gained some good traction in?

I think Poland is a good example. We are probably the biggest eCommerce entity in Poland.

And because we've been there for a while, people trust you. And then when you -- payment involves an element of trust.

So before I give you my credit card details, I want to know that you've been around a while and wouldn't cheat it and go sell it to some shady outfit. So a brand name that's well-respected in a market, like Allegro is in Poland, is quite an invaluable asset in that regard.

And people start trusting you, and once you've done one transaction, I have your credit details. And with you next time, I have to consider, well, should I use my credit card or rather PayU.

You say, well, these guys have my details. Based on your other reviews [ph] that trusted me [ph].

So the sequence is, first establish a brand that's respected in a market and help people to trade successfully on the Web, offer them next to other payment methods, also your payment method. And once they've used it, they might decide to become regular clients.

I have 3 questions, if I may. First is on the development spend.

And in Internet, it was quite consistent at around -- it's up 30% of Internet sales over the last 2 years. Is that pretty much what you intend to commit in terms of development spend going forward?

Or should we think differently about that? Second is on Avito transaction, which is probably a great example of a consolidation on the market.

I guess -- well, you're in 28 countries and in all of them, your positioning may be slightly different. Can you probably outline your approach to the behavior, if you are, for example, a market leader, if you have a not-so-distant competitor or equal competitor and if you have a not second tier, but not the dominant position, so like, how you would compete in this market?

And lastly, on the B2C eCommerce in Eastern Europe, where you already have quite sizable market positions in some of the countries, do you see, as a goal, further market share gain or you would be rather growing in line with the market in B2C?

Let's do it this way. Steve can comment on the development spend, Mark can talk about Avito, but just define your third question.

I'm not sure we got it completely.

On the eCommerce properties which you have in eastern Europe, including eMag, Netretail, all these companies have quite different market shares in their respective categories. Do you think you may grow this market share even -- like, even further?

Or you think you will be growing pretty much in line with the market?

Okay. The latter I can perhaps answer before I hand to Steve.

I think definitely the latter, we expect our market share to increase. The reason is lots of our businesses are quite young.

You have something like eMag and Netretail are sort of, in a sense, leading in categories of the market, but all of them are developing new ways of trading. If you take a country like Poland, it started off as a, basically, an auction engine [indiscernible] and then people started selling by way of fixed line, fixed-price sales, and then different things developed.

And today, you have payment methods and price comparison engines and classifieds, all these things. So typically, in one of those east European markets, there is a market entry, someone starts doing something successfully, and then they move sideways and they do different things.

And some of them, hopefully, will succeed. So overall, I think, at least, we hope, our share of the market will increase, which means we must grow faster than the market.

And I'll be surprised and not charmed if we actually grow only on the market level. Mark, you want to talk about -- Steve, sorry, Steve, development spend?

Yes. I think on development spend, we don't look at it the way you've intimated, in other words, as a percentage of revenue.

We don't look at development that way at all. The way we look at it is what opportunities present themselves?

Can we attack those opportunities? And how do we attack those opportunities?

Do we do it by way of acquisition, or do we do it by way of development within the business itself? One, of course, goes to the income statement, the other one goes to the capital account.

We, presently, on a group basis, have development spend of approximately 8.5% of sales. That just happens to be a consequence of the opportunities that we have on the table today.

If you went back 5 years ago, you'd probably find it's approximately 5% of sales. But we don't sit down with our budgets and say, "It can be no more than x percent or y percent."

We'd rather look at what opportunities present themselves, and how best we take those opportunities. And then your last question was on the Avito.

Yes, on Avito. I think go back to the Avito position, and I think that's the way we approach classifieds in all the markets, is to look at picking the market where we think we've got the best opportunity, and building great product which is locally focused, making sure that we recruit the best talent in that market and build the engagement and liquidity.

And I think that's the key focus for us, and that's why you will see that our focus is really organic build.

So you think it's probably too early to talk about, like, any consolidation like imminent consolidation in the next few years and you would rather think about organic buildup of your presence in these 28 countries?

Yes, indeed, indeed.

Two questions. The first one is, about a year ago, you talked about acquisitions and saying things had looked quite expensive and you were expecting to conclude less acquisitions in the coming year, and we did just over $600 million.

If you can maybe just sort of take us through a little bit about what changed. Was it a valuation?

Was it things coming up? And then also how that's factored into your outlook right now.

Is this -- is there something where you look for opportunities and as opportunities present themselves, you execute? And then the second thing is Naspers [ph], I guess, probably invented this term of a J-curve cycle.

You've been investing in eCommerce businesses for a number of years. Can you maybe just take us through, given your portfolio, how long it takes from the time that you enter into the markets the way you're doing right now to the time that you start to turn a normal profit margin and again, just sort of adjusted for the portfolio of businesses or maybe it's further across from B2C to classifieds?

Sure, Kevin. The M&A, I think, in the last year is mainly a result of Mark's lack of "restraint."

So how do you defend yourself?

Kevin, we completely focus, as we've said many times before, on building integrated platforms. So we believe that a shopper is not too concerned about what format we call it but is interested in getting the best price, convenience and selection when he gets there.

And so the acquisitions that we looked -- that we have made in the last year have been bolt-on acquisitions into the existing platforms that we have, mainly in central and eastern Europe. On the valuation, the benefit that you get out of doing a bolt-on acquisition, by way of example, is that if I've already got a core site and I bolt on a new site, I can drive traffic to that new site overnight at no incremental cost or very low incremental cost, on the one side.

And on the other side, because you are adding more formats, you're providing more selection, your probability of converting the traffic into a transaction is higher, which leads to revenue, so you get it on both sides. Valuation for us, obviously, means that the value to us in being able to do that is -- exceeds the cost that we look to pay for the asset.

And then, on the outlook, we can't really -- we don't -- you can't forecast acquisitions. Our view is we want to build integrated platforms, and we will then choose, at that point in time, for that particular market, whether it's a build or a buy.

Yes. Given -- on the so-called J-curve, the shape of it depends greatly.

Mark alluded to bolt-ons. We've had some situations where you can actually profit in the first year.

You strip out the costs, you both do things together, and you actually have a profit, but that's rare. Business plans tend to breakeven in 3 years, and I think there's an interesting article to be written for Harvard Business Review on why.

It's basically the psychology of the board. The reality is quite different.

I mean, some J-curves, if the business doesn't turn successful, it just goes down forever. It never lifts up.

If you are successful, it turns up, and the period that you allow is a factor of many things, one of which is sort of the level of capital intensity. The more capital-intensive something is, the longer the cycle, like mining or even Pay-TV is a notoriously long business.

Our businesses in eCommerce aren't typically that long. I think if a business doesn't turn in, let's say B2C, in 2 or 3 years, you probably have a problem.

Classifieds is somewhat different. I think that will require 5 or 6 years per country once you enter because of the reasons we explained.

You need real penetration and liquidity before you can start charging. But I would tell, J-curve is different from 1 year to 5.

And then occasionally, you'll never get it turned, so it's not a very satisfactory answer, but that's the reality.

Just looking at your dividend declaration for this year. It looks a bit stingy relative to your earnings growth and relative to the fact that you generated ZAR 4.9 billion of net cash this year.

And you're saying that you're not expecting to be particularly acquisitive into FY '14. Could you just help us understand what prevented you from being a bit more generous with the dividend this year?

It's only Steve, Craig, that stands between you and a more decent dividend, so what do you...

Craig, at the other extreme end [ph], the management team believes not first you pay a dividend because you guys in the capital internally. If you look at the history of the business, it generates a better return for shareholders.

But that's -- yes, at the end of the day, there's no -- we don't think it's stingy, obviously, that's why we've proposed it that way. At the end of the day, the board looks down, once a year, at the audited results and looks at the projections or the budgets going forward, the opportunities that present themselves, the need for capital in the business, and you have to get to a conclusion, and the conclusion is, we're paying a dividend of 15%.

It's slightly below the earnings growth for this year. As you know, our core earnings per share grew 20%.

But we think it's a fair, reasonable dividend. If you look at the -- our dividend, as we showed in the slides early on, our growth over the last 10 years, as a compounded growth, is over 30%, so I don't think it's not [ph] stingy about that.

So that's the other places [ph] in which we propose it and hopefully shows we're happy with it. At the end of the day, Craig, and one, this has to be said, at the end of the day, you don't buy Naspers shares for dividend yield, you buy it for capital growth, and that's how we manage the business.

Okay, point taken. And is net debt-to-EBITDA ratio a constraint given that your EBITDA's -- reported EBITDA is flatlining but your net debt, I think, is flat to slightly up year-on-year?

No, it's not a constraint at the moment. Although in the year ahead, my colleagues may make it a constraint.

[indiscernible]

A couple of quick ones for me. Just first on DTT, obviously, you're in 8 countries now.

Can give a quick update on how many countries you'd like to be in ultimately? And also, just a time horizon for the DTT investments, when are you expecting those to peak?

And then as a follow-on on the e-tail story, obviously, you mentioned mobile. I'm curious, [indiscernible] investments when you're investing in the platforms for that, that you can make centrally and roll out across your portfolio of general e-tail sites and businesses?

Or are they all developing those independently?

Eben, on DTT?

Okay. Chris, first on sort of where we want to be, I think the short answer is, basically, in all the markets that we can launch, where we get frequencies and licenses, we roll out the DTT services.

The second one is a bit more difficult to answer, where the peak investment will be. You would have seen, over the last couple of years, every year, when we come back to the market, we sort of increase the amount that we're spending on DTT.

But as opportunities come along, we relook at our budgets and if the investment makes sense, we increase our spend on DTT.

Eben, what would be useful to explain is just explain your CapEx, your cost method, cost on its own and then the once off on your -- subsidy of decoders when the sale goes through.

So if you look at where we're spending our money, it's roughly -- you can almost say 50-50 in terms of CapEx and OpEx. On the CapEx side, the cost is on average about $1.5 million per site that we roll out on the continent.

So I mean every -- and some cities require 1 or 2 or 3 sites. Others, if it's a flat environment or topography, then you only need 1 [indiscernible] to cover the area.

So that's where the big investment goes on the CapEx side. On the OpEx side, at the moment, there's really 2 big investments on the cost side.

The one is our subsidy on our decoders. You put the decoder into a market at a price that's relatively the same price as your competitor's.

Because we've launched the latest technology, which is a technology accepted by most of African governments, our initial cost of the decoder is higher, but that's coming down quite quickly. So in the short term, you'll see a decoder subsidy going in.

But then also you need to spend marketing money to grow your brand, and so we invest quite a bit upfront in terms of marketing and the services when we launch new cities or new countries. But we probably expect in the normal -- like Koos said, in the normal J-curve, that we have 3 to 4 years out before we will start to see a return on the EBITDA line.

Yes. Basil, the second question related to how mobile is developed centrally or in each region.

Do you care to answer that one?

Thanks, Koos. So again, if you look at how we've developed on the Internet side, we've developed specific solutions to deal with the demands of the country, so we don't develop on the desktop side centrally.

And we won't do the same -- and we won't do it on mobile either. Our advantage is driven by being close to the market, having developers and entrepreneurs in that market who understand the dynamics and the needs for that particular market.

That said, we do see things -- there are things that can be shared across -- and where those opportunities present themselves, we'll encourage the guys to do so. And we've done that in the past on the desktop side as well.

So I would say, in short, mostly developed locally in-country.

Just 2 quick questions, please. The first question is on Allegro.

I'm just wondering, what is the economics that Poland makes up Allegro in total? Because since March 2011, I think Poland was 85% of the economics, and in H1 this year, it made up only 50%.

So post the acquisitions of Netretail, eMag, what's sort of -- what is the level of economics at Allegro that is explained by Poland? And then, the second question is just on GMV and revenue growth dynamics in Allegro Poland's legacy marketplace, how is that proceeding?

Have we seen a slowdown there? Or what sort of growth figures are you seeing in the legacy C2C marketplace?

Okay, Ziyad. I will try the latter and Meloy can work out the former quickly here.

The mature markets -- all mature markets like Poland, the marketplace seems to be your slowest-growing sector. The reason is, if you look at the U.S., in the U.S., if I start doing auctions and they move to fixed price B2C-type stuff and then more likely started developing a third-party marketplace, where other people can sell using some infrastructure and using PayPal and so on.

The same is true of -- I'm sorry, in the U.S., you can see that the initial auction site has slowed down, and the rest is still growing quite well. In Poland, we experienced the same, so the initial sort of auctions business is low growth.

The B2C fixed price on a marketplace is still quite lively, and some of the other businesses are growing quite quickly. So over time, the blend changes.

Meloy, could you work out Poland?

Yes, sir. In the past year, Poland accounted for 40% of Allegro's revenues.

Okay. That's post acquisition, say?

Yes, yes.

I've got 2, if that's okay. The first one is to go back to the interesting sort of strategic decisions and choices that you've made regarding Slando and Avito and the way that you see in your Russian businesses -- the way forward you've seen for those, comparing that with your decision in Multiply.

Just interesting to know how you look at BuscaPé. Admittedly, it's a very superficial analysis, which I don't have privy to, obviously, to things like some of the revenue numbers.

But certainly, on a traffic basis, the business seems to be a little disappointing maybe, and let's put it that way. I will leave you to correct me.

But you, obviously, are still quite committed to it and see it as a business with prospects. So I'm just wondering if you can maybe compare and contrast, if you like, how you look at the BuscaPé business with how you look both -- at Slando for instance and at Multiply.

And just sort of help us maybe understand why it is that you are more optimistic about BuscaPé going forward. That was the first question.

And then secondly, it's a lot simpler, and that is, can you just say anything about how the economics of DTT as compared to DTH look in a sort of -- in a mature business? Can you generate similar levels of margins and returns on that or not?

Okay. Eben will take the latter first.

So on that, I think it's quite significantly different if you look at the economics because on DTT, you're looking at a very much low margin -- or not margin, low ARPU product, so we're addressing the mass market. So you're looking more for volume in terms of subscribers at a low ARPU.

But again, obviously, if you...

The churn will also be higher.

Yes, and because you're addressing a lower segment of the market, you definitely become more susceptible to churn on this market. But then, in order to make sure that you get a return on that product for DTT, you try and achieve a greater, what we call, a gross profit margin.

If you clearly take your subscription rate and your programming costs, you try and achieve a higher percentage margin on that side. So on DTH, it's slightly different, where we charge higher prices, but your programming cost is significantly higher for DTH business.

And then, Richard, your question is quite interesting in terms of decision-making. You have -- and that's why I like the business.

There's constant calls to be made, and sometimes one calls it wrongly. For instance, in the group, we had a huge debate about the value of Facebook.

Your friend, Mark, on the call today, was always a strong proponent, and our late Internet head, Antonie Roux, who passed away last year, was a strong detractor from Facebook. And in the end, Mark was sort of right on the listing and then he was less right on the price.

And even today, the debate is out. I mean, what is Facebook worth?

It's very hard to call. So let me just tell you the process we follow.

So take Multiply, we had high hopes, bought in, saw the management team wasn't working, replaced the management team with a new one, gave them a new brief, tried where we could, saw we got nowhere, killed it, right? And that's the process of something that doesn't work, and we had it before.

We had a social network engine in Poland called Gadu-Gadu, which got clobbered by Facebook, and so it goes. You take a risk, and sometimes you lose.

The situation in the case of Slando, which Mark described, is we had a good position, but as #2. And then, the tradeoff is, do you beat #1 about the head until it falls down, and what it will cost?

Or do you actually merge and get a slice of the combined entity? In Russia, Avito is a very well-run company.

We greatly respect the management, so we decided to rather join them than fight them. But in general, we don't often do deals like that.

We mostly fight things organically and build it. Now BuscaPé is actually a very attractive company.

I think it's not particularly well understood, especially in South Africa, because we lack a similar model. It started as a price-comparison engine.

So you say, "Where can I buy the best iPhone 5? And I'm in São Paulo, and I'm in the street in São Paulo.

And I'm only wanting to buy from merchants who have a 5-star or better rate -- or 5-star rating, let's say." And BuscaPé will bring you the best state of merchant rank in the way that you want, and you then walk off to the merchant and actually go buy it or buy it electronically as you wish.

That then evolved. They said, "Okay, what else could we do?

Well, as it happens, we can actually make the sale. So how about this, we find you the best or the cheapest or the most reliable item and then you click here and we actually help you make the sale," which turns it into a marketplace of sorts.

And then they said, "Okay, merchants need details, they want information on the customers. How good is this customer?"

And the customer wants details on the merchant. This is interesting.

And then the merchant wants to advertise in some way so they need an affiliate engine, and they created Lomadee. And so they expand sideways until they have about 7, 8 businesses today that encompass a very wide track of the eCommerce business all the way to actually payments.

They have PayU in virtually all the countries in Lat Am now. So it's a composite business, and we became -- we surpassed the, up to then, market leader, called MercadoLibre, in terms of GMV in Brazil very recently.

So it's now bigger in Brazil, but not yet in the whole of Latin America. So I think BuscaPé is a very good company and under excellent management.

Of course, Brazil recently had these surprising riots, after 10 years of excellent growth and social peace. There's quite a lot of social turbulence like in Turkey, but I think it will pass.

The World Cup next year will be a period of, I guess, peace and optimism and maybe BuscaPé can benefit from that.

No. We just want to thank you very much for participating in this call and asking questions.

We enjoyed answering them, and we hope we can deliver for you over the next year.