Naspers profit slows on internet strategy

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Bloomberg

Naspers reported the slowest full-year profit growth in six years yesterday as the media provider invests in Chinese internet and African television businesses.

“China as an internet market is clearly the largest in the world by far and the growth rate outstrips mature markets,” chief executive Bob Van Dijk said. The industry “is still in early days despite its enormous size, so exposure is something that I’m very bullish about.”

Adjusted net income at Africa’s largest firm by market value rose 1 percent to R8.6 billion in the year to March. The group also announced a R1.6bn impairment charge after e-commerce units including Markafoni of Turkey missed targets.

Naspers, which owns stakes in Hong Kong’s Tencent and Russian internet firm Mail.ru, is reporting its first earnings under Van Dijk, who replaced billionaire Koos Bekker as chief last month. The company planned to spend R7bn to expand digital TV access in Africa and to boost e-commerce unit.

“We [see] opportunities that require investment,” Van Dijk said. “Over time what is sure is that we will see long-term returns that are encouraging. We are very excited about our holding in Tencent and have no intentions of changing it.”

Dwayne Dippenaar, an analyst at Old Mutual Investments, said the flat headline earnings were disappointing relative to market expectations, but the Naspers story, excluding Tencent, was about investing in the e-commerce business through increasing development spend, with a focus on the online classified business to build future revenue opportunities.

“We can expect muted earnings growth in the short term as the company invests in [its] e-commerce portfolio with a view to monetise these businesses in the medium to long term,” he said.

He believed the company was following the right strategy to create shareholder value for the long term. Media24 and Abril were small assets in the bigger Naspers picture and the lower profit of Media24 and the write-off of Abril were not a key focus area of the market.

There were no plans to relocate Naspers’s Cape Town base or its listing on the JSE.

Naspers shares declined as much as 6.3 percent yesterday, the most since April 11, and closed 4.96 percent lower at R1 206.93 in Johannesburg.

Bekker, who will become chairman next year, did not receive a cash salary or bonus and was paid entirely in company stock. That helped him build a personal fortune of $1.8bn (R19bn).

Van Dijk’s compensation would differ from Bekker’s but would retain a bias towards company performance.

Subscribers to Naspers’ pay-TV grew 1.3 million to 8 million homes. Revenue rose 26 percent to R62.7bn as internet sales added 65 percent.

E-commerce units, including FashionDays, Brandsclub and Markafoni, missed targets, the company said. Naspers also wrote down its investment in Brazilian publisher Abril.

Van Dijk, who left US online trading firm eBay last year to join Naspers as head of e-commerce, said: “We’ll keep looking at merger and acquisition opportunities and we’ll be scrubbing them carefully.”


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