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

Naspers Limited – Annual report – 31 March 2021

Industry: media

About this report

This integrated annual report assesses our performance for the financial year ended 31 March 2021. We aim to provide a picture of our progress and impact on society.

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 pages 161 to 168 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.

This report contains certain non-IFRS financial measures (non-IFRS measures), which are not liquidity or performance measures under IFRS, and which the group considers to be alternative performance measures (APMs). These APMs are prepared in addition to the figures that are prepared in accordance with IFRS. Such measures include trading profit; adjusted EBITDA; headline earnings; core headline earnings; free cash flow; growth in local currency, excluding acquisitions and disposals; and economic-interest information.

The group provides non-IFRS measures and other information because the board believes that they provide investors with additional information to measure its operating performance. The group’s use of non-IFRS measures may vary from the use of other companies in its industry. The measures used should not be considered as an alternative to net income(loss), revenue or any other performance measure derived in accordance with IFRS or to net cash inflow(outflow) from operating activities as a measure of liquidity. The non-IFRS measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the group’s results as reported under IFRS. They may exclude or include amounts that are included or excluded, as applicable, in the calculation of the most directly comparable measures in accordance with IFRS. Their usefulness is therefore subject to limitations, which are described below. In particular, other companies in the industry may define the non-IFRS measures used herein differently than the group does. In those cases, it may be difficult to compare the performance of those entities to the group’s performance based on these similarly named non-IFRS measures. In addition, the exclusion of certain items from non-IFRS measures does not imply that these items are necessarily non-recurring. From time to time, the group may exclude additional items if it believes doing so would result in more transparent and comparable disclosure.

Reporting

In line with best practice for integrated reporting we measure our performance by evaluating how we create value for our key stakeholders by taking account of the six capitals1. We also report on the 11 material issues identified by our stakeholders in our first materiality assessment as well as progress made against our strategy. We regularly measure returns on invested capital. We understand the risks we take and manage these to minimise their impact on our business and results.

This way of telling a comprehensive, connected story fits well with our holistic view of value and our focus on creating sustainable value for long-term good.

Responding to Covid-19

We were quick to respond to the Covid-19 pandemic. From the outset we focused on ensuring we safeguarded our people, maintained our ability to serve our customers and protected our businesses for the long term. Throughout the report we sum up how we have lived up to this commitment, including the many different initiatives undertaken by portfolio companies.

Listing information

Naspers Limited (Naspers) has its primary listing on the JSE Limited’s stock exchange (JSE) (NPN.SJ) and a secondary listing on A2X Markets (NPN.AJ) in South Africa. It is the largest South African company on the JSE. 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). Investors are therefore able to buy and sell Naspers securities on several markets. Naspers’s subsidiary, Prosus N.V. (Prosus), is listed on Euronext Amsterdam with secondary listings on the JSE Limited’s stock exchange (XJSE:PRX) and A2X Markets (PRX.AJ) and also has bonds listed on Euronext Dublin. Prosus also has ADRs that trade on an OTC basis in the US.

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. Our subsidiaries, associates and investees (non-controlled entities) are required to comply with applicable law and regulation. The group also encourages its associates and investees (noncontrolled entities) to adopt appropriate governance standards (for example, codes of business ethics and conduct, and policies relating to anti-bribery and anti-corruption, competition compliance, privacy and sanctions and export controls).

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

Legislation and frameworks that inform our reporting

This integrated annual report was prepared against local and global standards, including:

  • 2013 Framework of the International Integrated Reporting Council (IIRC): this principles-based approach promotes the concept of the six capitals1, 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.
  • We have aligned our climate change approach and our integrated reporting to the framework of the Task Force on Climate-related Financial Disclosures (TCFD), and this year we publish our first TCFD report.
  • To meet the needs of investors and analysts and provide financially material information for all our stakeholders, we align our disclosures with the Sustainability Accounting Standards Board (SASB). This is also the first year we have published an SASB response.
  • We support the United Nations Sustainable Development Goals (UN SDGs) and, like many other businesses, have identified which of those goals our business aligns with. We discuss this alignment and our activities in support of the SDGs in this report.
  • South African Companies Act 71 of 2008, as amended (Companies Act).
  • King IV Report on Corporate Governance for South Africa (King IVTM)2.
  • IFRS.

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 IVTM.

Materiality and material matters

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

Assurance

Financial information in this report extracted from the audited Naspers Limited consolidated annual financial statements for the year ended 31 March 2021 was audited by PricewaterhouseCoopers Inc. (PwC) (refer to page 147 for its report). PwC also performed specific procedures on material non-financial information in this report. In addition, PwC performed limited assurance on our scope 1 and scope 2 carbon footprint (refer to page 88). South African broad-based black economic empowerment (BBBEE) information (for Naspers and Media24) was assured by EmpowerLogic.

The group has a combined assurance model for internal use. This model is designed to cover 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 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, such as forensic specialists or data-analytics experts, support the internal audit function. Other external assurance providers are enlisted as needed. In our more regulated businesses (like PayU), regulatory inspectors visit periodically.

The audit committee recommends the appointment of the external auditor to shareholders, reviews the auditor’s independence annually and oversees the external audit. The audit committee makes recommendations to the board and assists the board in ensuring the integrity of external reports.

Forward-looking statements

This report contains forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995 concerning our financial condition, results of operations and businesses. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and all of which are based on our current beliefs and expectations about future events. Forward-looking statements are typically identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “ill”, “could”, “should”, “intends”, “estimates”, “plans”, “assumes” or “anticipates”, or associated negative, or other variations or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These forward-looking statements and other statements contained in this report on matters that are not historical facts involve predictions.

No assurance can be given that such future results will be achieved. Actual events or results may differ materially as a result of risks and uncertainties implied in such forward-looking statements.

A number of factors could affect our future operations and could cause those results to differ materially from those expressed in the forward-looking statements, including (without limitation): (a) changes to IFRS and associated interpretations, applications and practices as they apply to past, present and future periods; (b) ongoing and future acquisitions, changes to domestic and international business and market conditions such as exchange rate and interest rate movements; (c) changes in domestic and international regulatory and legislative environments; (d) changes to domestic and international operational, social, economic and political conditions; (e) labour disruptions and industrial action; and (f) the effects of both current and future litigation. The forward-looking statements contained in this report apply only as of the date of the report. We are not under any obligation to (and expressly disclaim any such obligation to) revise or update any forward-looking statements to reflect events or circumstances after the date of the report or to reflect the occurrence of unanticipated events. 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.

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, customers, 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 for the year ended 31 March 2021 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 and its operations at 31 March 2021.

On behalf of the board

Koos Bekker                     Bob van Dijk

Chair                                 Chief executive

Cape Town

19 June 2021