Core headline earnings were down by nearly half as Tencent counts the cost of Covid-19 lockdowns and new regulations in China. From Moneyweb.
Naspers says its e-commerce businesses are on a “clear path to profitability” by the first half of 2025 after announcing a near halving in core headline earnings to $1.1 billion (R20.3 billion) for the year to March 2023.
The fall in profits from multimedia giant Tencent and associate companies was the result of Covid-19 lockdowns and new regulations in China.
Read: Naspers, Prosus to undo cross-holding to boost share price
Naspers reported an 8% increase in revenue from continuing operations to $6.8 billion (R126 billion), with the biggest contributors being food delivery, payments and fintech.
There are signs trading losses are being staunched, with a 21% reduction in consolidated losses in the second half of the year.
Naspers, valued at about R1.3 trillion on the JSE, owns a majority interest in Prosus, which in turn holds slightly more than a quarter of Tencent.
In April 2023, Tencent announced a 50% increase in its dividend per share, which resulted in a dividend of $758 million (R14 billion) received in June 2023.
Complex cross-holding
Naspers owns roughly 60% of Prosus, which in turn holds roughly 49% of Naspers. This complex cross-holding has been criticised by shareholders for widening the discount to the combined net asset value (NAV). This prompted Naspers to launch an open-ended programme to repurchase Prosus shares funded by the sale of Tencent shares, which reduced the combined holding-company discount of Naspers and Prosus by 17%.
The 2021 split between Naspers and Prosus was aimed at reducing the mammoth weighting of Naspers on the JSE.
The repurchase programme cost $10.5 billion (R194 billion), adding 4.5% to NAV. The narrowing of the discount and the increase in NAV per share added roughly $29 billion (R536 billion) in shareholder value.
Read: Tencent resumes slim growth as China’s internet sector stirs
Naspers says it has received the required approvals from the South African Reserve Bank for the buy-back programme, which will remove the complexity of the cross-holding without impacting the effective economic interests of both Naspers and Prosus.
Path to profitability
To accelerate the path to profitability, management says it will focus only on existing business, alongside tighter management of costs at the corporate and operating levels. Corporate level workforce costs were reduced by 30% during the year.
Naspers’s SA-based e-commerce companies include Takealot, Mr D Food, Autotrader, Property24 and Media24.
Food delivery’s performance was impressive, with revenue growing well ahead of peers and profitability improving.
iFood, considered a key part of the group’s future growth, continued to benefit from sustained momentum in the restaurant food-delivery businesses. Naspers acquired the remaining 33.3% stake of iFood in November 2022 for €1.5 billion, plus a contingent consideration of up to €300 million.
Classifieds
The classifieds business performed well in its core European market, while the auto, real-estate and pay-and-ship initiatives added to revenue growth.
Naspers says the OLX Autos business faced significant challenges, leading to the decision to exit this business.
“The exit of OLX Autos will lead to a sizeable improvement in Classifieds and e-commerce profitability,” says the group’s results announcement.
The payments and fintech business benefitted from growth in India, with trading margins improving on the back of diversification of revenue.
Edtech, which has majority stakes in enterprise platforms Stack Overflow and GoodHabitz, reported growth but was forced to make investments which weighed on profitability.
In October 2022, the group exited its Russian classifieds business Avito for $2.4 billion (R44.4 billion).
Read: SA investment conference: Ramaphosa woos business
Naspers shares jumped over 8% on Tuesday as news of reduced trading losses and the prospect of achieving profits by 2025 reached the market.
