Naspers’s 15% half-year revenue growth was more than double its peers and core headline earnings more than doubled, increasing by 112%.
The stronger performance was due to improved e-commerce and higher profits from Naspers’s Amsterdam-listed subsidiary Prosus’s 25% investment in the very large China internet group, Tencent, the results showed yesterday.
Naspers’s directors said yesterday in results for the six months to September 30 that the fundamentals of its e-commerce businesses were improving.
The “meaningful improvement” in profitability had enabled the group to bring forward its Prosus’s e-commerce profitability target by six months to the second half of the 2024 financial year.
Core headline earnings a share, a key indicator of operating performance, rose to 454 US cents (R84.11) for the six months, more than double 214 US cents, a year earlier.
The group’s e-commerce investments include food delivery companies iFood of Brazil, Delivery Hero and India’s Swiggy, online marketplaces such as OLX, educational software firms such as SkillSoft and Stack Overflow, and payments companies such as PayU.
Casparus Treurnicht, the portfolio manager at Gryphon Asset Management, said while the group businesses were starting to move in the right direction, there was a great deal of value destruction to make up for after paying too much for many of the investments, and in this context the group was a long way off from profitability.
“I am sure this is why Bob van Dijk is on his way out. He was behind most of those investment decisions,” said Treurnicht.
Naspers and Prosus said in September that Van Dijk would step down as CEO after 10 years, and chief investment officer Ervin Tu was appointed interim CEO.
Vestact Asset Management portfolio manager Michael Treherne said Naspers should be valued on a sum-of-the-parts basis and was trading at 45% to 50% discount to net asset value, and unless the group spun out the investment in Tencent, for investors, the rest of the group’s operations were largely irrelevant.
Naspers yesterday reported an e-commerce trading loss of $38 million, shrinking 85% from a loss of $270m at the same time a year before. Revenue from continuing operations grew 14% to $3 billion with the biggest contributors being classifieds, food delivery, and payments and fintech.
Cash flow increased eight times year-on-year to $677m. The balance sheet held cash of $15.1bn.
The removal of the crossholding agreement between Prosus and Naspers was completed in September 2023, to simplify the group’s structure.
Tu said: “We are making substantial progress against our commitment to drive profitable growth. Through active management, we have delivered improved results as our e-commerce portfolio is close to breakeven and growing at scale. We’ve simplified our group structure, and the buy-back programme is driving NAV per share growth – magnifying returns over the long term.”
Naspers and Prosus chief financial officer Basil Sgourdos said: “I expect this trajectory to continue at pace. Our Classifieds and Food Delivery segments are both profitable, and PayU is making strong progress towards profitability. Core headline earnings have doubled and the impact of the strong improvements in e-commerce and Tencent are also evident in our free cash flow, which has increased six times.”
”With deep institutional knowledge across a number of technology domains, including AI, we are well positioned to support exceptional technology companies around the world. We remain ambitious in our plans and disciplined in our approach to drive real returns for all of our stakeholders,” said Tu.
At September 30, the share repurchase programme had reduced the Naspers share count by 14% and generated $25bn for shareholders. This was based on narrowing of the discount and an increase in net asset value per share. In the same month, the removal of the crossholding was completed.
Prosus holds 25% of Tencent. For the six months to June 30, Tencent reported revenue of RMB299.2bn, up 11% from last year. Attributable profit increased 31% to RMB70.1bn.