Naspers’s earnings drop as trading losses widen
Global media and technology giant Naspers says it believes the worst of its trading losses in its unprofitable businesses are behind it after some hefty spending, reporting yesterday that its preferred measure of profits slumped almost three quarters in its half-year to endSeptember.
Naspers, whose interests span food delivery, e-commerce, payments and media, reported a US$1.1 billion (R19 billion) fall in core headline earnings to US$372 million to end-September, with most of this relating to a lower contribution from Tencent, although new initiatives contributed US$484 million of a US$557 million trading loss.
Trading losses in the group’s classified business, which includes vehicle trader OLX, almost quadrupled, while losses in payments and fintech nearly tripled, with Naspers saying it was pursuing initiatives such as building its delivery footprint or investing in new products.
E-commerce revenue, however, climbed 38% to $5.6 billion, with group CFO Basil Sgourdos saying in a statement that the firm’s e-commerce businesses are all profitable or breakeven “at the core,” and the group had picked up efforts to drive profitable growth.
“We expect half-year 2023 to mark our peak investment spend, with profitability and cash flow generation in half-year 2025,” he said.
The firm’s stake in Chinese media giant Tencent, however, continues to dominate the results, and Tencent had contributed US$2.1 billion of the firm’s US$1.4 billion in core headline earnings from continuing operations in its 2022 year, amid losses elsewhere.
Prosus, the group’s Amsterdam-listed consumer internet arm, holds the valuable Tencent stake in the group, which it has been selling in part in order to fund an ongoing share buyback programme, announced in June. The stake in Tencent had fallen to 27.86% at the end of September from 28.81%, yielding US$3.86 billion in proceeds.
“The group’s open-ended buyback of Prosus and Naspers shares is unlocking real value,” group CEO Bob van Dijk said on Wednesday. “We expect the benefits of the programme to compound over time. Looking ahead, we will work towards simplifying the group’s structure and to crystallise value from our portfolio.”
As part of the repurchase programme, from 28 June to the end of September, Prosus purchased just over 4 million Naspers shares for US$624.5 million and repurchased almost 54 million Prosus shares for US$3.49 billion.
The group has been looking to narrow the discount at which its shares trade, while also focusing on its wide-ranging interests. These include Takealot, Mr D Food, Superbalist, Autotrader, Property24 and PayU, in addition to Media24. Prosus has built a food delivery portfolio that includes Swiggy in India and multinational operator Delivery Hero, while the group said on Wednesday it had also completed the acquisition of a remaining stake one third stake it doesn’t own in Brazil’s iFood, which has cost it about R25 billion in cash.
Naspers had also warned of its profit slump after markets closed on Monday, while its shares had fallen 3.5% on Tuesday. Shares of Naspers, however, have still surged 40% over the past month, with some analysts citing both new investors stepping in as others reconsidered the risks posed by China, as well as easing of strict pandemic rules, which helped the Hang Seng jump more than a quarter in the first two weeks of November.