Integrated annual report, IIRC Framework, King IV Report on Corporate Governance

Naspers Limited – Annual report – 31 March 2019

Industry: media

About this report
The Naspers integrated annual report assesses our performance for the financial year ended 31 March 2019, focusing on the value we created for our key stakeholders. The aim is to provide a picture of our progress and impact.



How it all fits together
We measure our performance by evaluating how we create value for our key stakeholders, taking account of the six capitals(1), as well as progress against our strategy, and by regularly measuring returns on invested capital. We understand the risks we take and manage these to minimise their impact on our business and results.

We pursue growth by building leading companies that empower people and enrich communities.

Listing information
Naspers has its primary listing on the JSE Limited’s stock exchange (JSE) (NPN.SJ) and a secondary listing on the A2X Exchange (NPN.AJ) in South Africa, where it forms part of the Top 10 index and where most of its shares trade. It also has a level 1 American Depository Receipt (ADR) programme listing on the London Stock Exchange (LSE) (NPSN) and trades on an over-the-counter (OTC) basis in the United States (US). International investors are therefore able to buy and sell Naspers securities through the OTC market on the LSE or JSE (details on page 02). Naspers’s indirect wholly owned subsidiary, Prosus N.V. (Prosus), formerly Myriad International Holdings N.V., also has three bonds listed on the Irish Stock Exchange (ISE).

Scope and boundary of reporting
Financial and non-financial reporting
This report extends beyond financial reporting. It reflects on non-financial performance, opportunities, risks and outcomes attributable to or associated with key stakeholders who have a significant influence on our ability to create value.

It includes the financial performance of Naspers and its subsidiaries, associates and joint ventures (the group). The scope of reporting on non-financial performance is indicated in this report.

Media24, a South African subsidiary, publishes a separate integrated annual report ( Group reporting standards are continually being developed to make disclosure meaningful and measurable for stakeholders. Given the highly competitive environment in which we operate, this report mostly excludes financial targets or forward-looking statements other than as explained on page 04.

Where relevant, we have adjusted amounts and percentages for the effects of foreign currency as well as acquisitions and disposals. Such adjustments (pro forma financial information) are quoted in brackets after the equivalent metrics reported under International Financial Reporting Standards (IFRS). Refer to page 91 of the summarised consolidated annual financial statements for a reconciliation of these metrics with the equivalent amounts reported under IFRS. Financial commentary and segmental reviews are prepared on an economic-interest basis (which includes consolidated subsidiaries and a proportionate share of associated companies and joint ventures), unless otherwise stated. We presented our Video Entertainment segment as a discontinued operation for financial reporting purposes following the distribution of MultiChoice Group to shareholders in the current year. Unless otherwise stated, all financial information and related commentary relates to continuing operations.

Through our policies and governance structures, we demonstrate our commitment to ethical and sustainable entrepreneurship. We also recognise that our stakeholders are taking a growing interest in the sustainability of our operations and our approach to corporate citizenship. We take our responsibility seriously and are fully aware of the impact of our actions on our social and relationship capital. We are proud to support the United Nations’ Sustainable Development Goals (SDGs) and we are committed to identifying and focusing on the goals our business aligns with. We discuss this
alignment and our activities in support of the SDGs in this report.

The legislation and frameworks that inform our reporting
This integrated annual report was prepared against local and global standards, including:

• Framework of the International Integrated Reporting Council (IIRC): this principles-based approach promotes the concept of the six capitals, which considers material inputs and resources required to create and sustain value in the long term. We describe key components of the Naspers value chain (business model) that creates and sustains value for our stakeholders.
• South African Companies Act No 71 of 2008, as amended (Companies Act).
• King IV Report on Corporate GovernanceTM(2) in South Africa 2016 (King IV).

Materiality and material matters
We apply the principle of materiality in assessing what information to include in our integrated report. This report focuses particularly on those issues, opportunities and challenges that impact materially on the group, as well as its ability to be a sustainable business that consistently delivers value to key stakeholders, including our shareholders.

Forward-looking statements
This report contains forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. Words such as “believe”, “anticipate”, “intend”, “seek”, “will”, “plan”, “could”, “may”, “endeavour” and similar expressions are intended to identify such forward-looking statements but are not the exclusive means of identifying such statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and should be considered in light of various important factors. While these forward-looking statements represent our judgements and future expectations, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations.

The key factors that could cause our actual performance or achievements to differ materially from those in the forward-looking statements include changes to IFRS and associated interpretations, applications and practices as they apply to past, present and future periods; ongoing and future acquisitions; changes to domestic and international business and market conditions such as exchange rate and interest rate movements; changes in domestic and international regulatory and legislative environments; changes to domestic and international operational, social, economic and political conditions; any labour disruptions and industrial action; and the effects of both current and future litigation. We are not under any obligation to (and expressly disclaim any such obligation to) revise or update any forward-looking statements in this report, whether as a result of new information, future events or otherwise. We cannot give any assurance that forward-looking statements will prove correct and investors are cautioned not to place undue reliance on any forward-looking statements in this report.

Financial information contained in this report and that has been extracted from the audited Naspers Limited consolidated annual financial statements for the year ended 31 March 2019 was audited by PricewaterhouseCoopers Inc. (PwC) (refer to page 74 for its report). PwC also performed specific procedures on material non-financial information in this report. South African broad-based black economic empowerment (BBBEE) information was assured by EmpowerLogic (for Naspers and Media24).

The group has a combined assurance model for internal use. This model is designed to cover the key risks through a combination of assurance service providers and functions as appropriate for Naspers.

An overview of combined assurance per key risk is reported for consideration by the joint audit and risk committees.

The scope for our group internal audit and risk support function includes all controlled assets. The head of internal audit and risk support reports to the audit committee and presents for its approval an objective-driven, risk-based internal audit plan. Where required, external parties support the internal audit function, such as forensic specialists and data-analytics experts. Other external assurance providers are enlisted as needed. In our more regulated businesses (like PayU), regulatory inspectors visit on a periodic, ongoing basis.

The audit committee recommends to the shareholders the appointment of the external auditor, reviews the auditor’s independence annually and oversees the external audit. The committee makes recommendations to the board and assists the board in ensuring the integrity of external reports. The chief executive/chief financial officer’s (CFO) annual sign-off process also covers financial reporting.

Statement of the board of directors on the integrated annual report
This report is primarily intended to address the information requirements of long-term investors (our equity shareholders, bondholders and prospective investors). We also present information relevant to the way we create value for other key stakeholders, including our employees, clients, regulators and society.

After being reviewed by the audit committee and board, the board approved the integrated annual report. The summarised consolidated annual financial statements were prepared in accordance with IFRS and the Companies Act, while the integrated annual report was prepared using the IIRC framework and recommendations of King IV. In our opinion, the integrated annual report and annual financial statements fairly reflect the financial position of the group at 31 March 2019 and its operations for this period.

On behalf of the board
Koos Bekker              Bob van Dijk
Chair                           Chief executive

Cape Town
21 June 2019

(1) As identified in the Framework of the International Integrated Reporting Council: financial, human, intellectual, manufacturing, social and relationship, and natural capitals.
(2) The Institute of Directors in Southern Africa NPC (IoDSA) owns all copyright and trademarks for King IV.