Complex arrangement has become a value trap. From Moneyweb.
Prosus shares were up 6% on Tuesday on news that the group intends unwinding its complex shareholding structure with Naspers to unlock value for shareholders.
The unwinding of the cross-shareholding between the two companies will still leave Naspers with a 72% voting interest and 43% economic ownership. Prosus will remain a subsidiary of Naspers.
Both Naspers and Prosus will issue new shares to their existing shareholders, but will waive their rights to participate in the capitalisation issues.
Read: Naspers, Prosus to undo cross-holding to boost share price
Prosus is one of the largest technology investors in the world with more than 80 businesses in over 100 countries. The company was split from Naspers in 2021 to reduce its outsized weighting on the JSE.
Results
In its year-end results, also released on Tuesday, Naspers said it was continuing with a share repurchase programme to narrow the discount between its share price and combined net asset value (NAV). This had added 4.5% to the combined NAV.
For Prosus, consolidated group revenue was up 16% to $4.9 billion (R91 billion) for the year to March 2023.
Trading losses increased 4% to $574 million (R10.6 billion), though there was a 43% reduction in these losses in the second half of the year.
The food delivery and e-commerce divisions reported a combined loss of $507 million (R9.4 billion). Payments and fintech reported good revenue growth of 52%, but a 57% increase in trading losses to $83 million (R1.5 billion). There was a near doubling in the trading loss of the education technology unit to $131 million (R2.4 billion).
Core classified was the one unit to report profits, which were up 40% on the previous year.
Despite the trading losses in most business units, chief financial officer Basil Sgourdos says revenue growth in these businesses surpasses that of its peers, while the focus on the past year was on reducing costs and streamlining operations.
“These actions have taken hold, and we’ve reached a turning point in profitability, with iFood’s restaurant business, our Indian payments business and core classifieds all profitable.
“Our strengthened balance sheet, liquidity and improving free cash flow enable us to continue investing in high growth opportunities and are an advantage in the current environment,” says Sgourdos.
Acquisitions
Some of the major acquisitions over the last two years include enterprise platforms Stack Overflow, GoodHabitz and iFood, an online food delivery business in Latin America, at a combined cost of more than $4 billion.
Stack Overflow is a question-and-answer website for programmers that has become massive among coders, while GoodHabitz provides online training for businesses. Also in the portfolio is AutoTrader, the largest online vehicle retailer in South Africa.
Read: Naspers, Prosus siblings bring cheer to the JSE
The group disposed of its interest in Russian classified advertisements business Avito in October 2022 after that country’s invasion of Ukraine. It also wrote off roughly its 25.9% stake in Russian social media company VK, worth roughly $700 million, after CEO Vladimir Kirienko was put on a US sanctions list.
Its major interest is a 26% share in Tencent, the Chinese-headquartered tech and entertainment behemoth with a market cap of about $420 billion.
Read: Tencent’s sales rebound though concerns persist on China outlook
The group’s investments are concentrated in online classifieds, food delivery, payments and fintech, and education technology sectors in markets such as India and Brazil.
Prosus has a primary listing on Euronext Amsterdam and a secondary listing on the JSE.
