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Naspers Full-Year Earnings to Be Hurt by Higher Spending

Naspers Ltd. (NPN), South Africa’s biggest company by market value, said higher investment will hurt profit this year and next as the media group seeks to expand its digital TV business and online classifieds unit.

Naspers will invest more than 7 billion rand ($691 million) in the year through March 2014, compared with 4.3 billion rand last year, the Cape Town-based company said in a statement today. The plan will affect earnings and cash flow this year, it said. The stock fell 4.1 percent, the biggest decline since Oct. 9, to 931.93 rand at the close in Johannesburg.

“It will probably last into the next financial year,” Chief Executive Officer Koos Bekker said in a phone interview from Cape Town. “Top-line growth was quite lively. The total engine will turn faster and continue to do so but, because of the spend, the earnings line will be hit.”

Naspers will use the additional investment to develop its network of digital TV transmitters in east and west Africa, subsidize set-top boxes to stimulate demand, and advertise its online classifieds venture, Bekker said.

The company’s net income declined to 3.1 billion rand in the six months through September from 4.15 billion rand a year earlier. Revenue rose 28 percent to 28.8 billion rand.

Africa’s largest media company, which owns stakes in Russian social networking and gaming site Mail.ru Group Ltd. (MAIL) and Shenzhen-based Tencent Holdings Ltd. (700), is expanding its Internet business across the world and increasing its pay-TV subscriber base in Africa. The company said it’s seeking new ventures as consumers shift from computers to smartphones.

Impairment Charge

Naspers had a 1.1 billion rand impairment charge in the half-year period mainly due to some fashion businesses in its e-commerce division, according to the statement. Subscribers to the group’s pay-TV service in Africa increased by 560,000 to 7.3 million across 48 countries, the company said.

“There’s been quite a shift in our business,” Bekker said. “We used to be a predominantly South African group. Now we’re more offshore, more international with a smaller South African base. Half the business used to be pay-TV and that paid all the bills. Now the Internet business is the mother ship.”

Sales from the company’s Internet unit rose 76 percent to 24.9 billion rand, while revenue from its e-commerce segment almost doubled to 7.9 billion rand. Pay-TV sales rose 18 percent to 17.1 billion rand.

Decoder Writedown

Naspers will take a writedown on the cost of subsidizing digital decoders in east and west Africa and expects earnings from pay-TV to be affected by the investment plan for at least a year, while e-commerce will be hurt for a shorter period, Bekker said.

Multichoice, a broadcast unit of Naspers, has held talks with Vodacom Group Ltd. (VOD) about providing access to its television content, a person familiar with the matter said earlier this month.

Naspers Chief Financial Officer Steve Pacak will retire on June 30, 2014, and will be replaced by Basil Sgourdos, who is now the CFO of Naspers unit MIH Holdings. Pacak will remain as a non-executive board member.

Naspers has gained 72 percent this year, making it the third best-performing stock on the FTSE/JSE Africa Top 40 Index.

To contact the reporter on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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