Strong growth at Naspers, Prosus
ANALYSTS: WOULD BUFFETT INVEST IN EITHER FIRM?
It would be interesting to speculate how many people who – after reading the Prosus and Naspers results – are thinking the same thing: would Warren Buffett invest in them?
Adriaan Kruger
It would be interesting to speculate how many people who – after reading the Prosus and Naspers results for the year to March and listening to CEO Bob van Dijk and CFO Basil Sgourdos address shareholders and analysts in a global webcast – are thinking the same thing: would Warren Buffett invest in either company?
The question is pure speculation, but nevertheless relevant.
During the so-called internet and dot com boom of the late ’90s, Buffett admitted that he found it difficult to understand the companies, their business plans, their products and their prospects.
Most of all, he said that the valuations of the companies were illogical as investors suddenly ignored traditional valuation methods and figures. He even, once or twice, doubted his own judgment.
The result was that Berkshire Hathaway lagged its peers by far for a year or two. Eventually his reluctance to invest in these new-economy companies proved right and investors in his investment fund prospered again.
While a lot of these small computer, internet and IT companies grew into some of the largest corporations the world has ever seen, most failed miserably.
Those that survived, and newer ones that started later, are now regarded as huge successes and credited with reshaping the world.
Where do Prosus and Naspers – with their businesses focused on e-commerce, etail, online payments, fintech, online gaming and email services – fit into this world? Are they overvalued groups of confusing businesses, or futuristic disrupters with promising prospects?
Prosus management sells the second line, obviously.
Van Dijk and Sgourdos mention that Prosus ended its financial year in a position of strength, pointing to accelerating revenue in the group’s businesses and improved profitability “at the core” of these businesses.
A review of the different divisions in the group – running to eight pages – tells a story of strong growth in all segments, from online classified advertising and payments to food delivery and online payments.
In the webcast to stakeholders late on Monday afternoon, Van Dijk and Sgourdos both mentioned the strong growth in food delivery volumes and revenues.
“Our food delivery segment almost doubled revenues and is now one of the fastest-growing food delivery businesses globally,” they said, adding that it is “reflecting our ability to build scale and strong positions in high-growth markets”.
The announcement highlights that food delivery orders grew by 102% during the last year, increasing revenue by 105% to around $800 million (R13.8 billion).
Unfortunately, the figures show that there aren’t enough customers or enough dollars yet.
“Trading losses in ecommerce rose to $918 million, reflecting our investment in food delivery to grow markets and sustain our leading positions.”
Management says that excluding the higher investments in food delivery, payments and fintech (as well as acquisitions and disposals) ecommerce trading losses reduced by 28%.
Food delivery segment nearly doubled revenues