Naspers has expected its headline earnings per share to slump by between 82.1% to 75.1% in the year to March 31, but remains committed to bring its businesses to profitability by the first quarter of 2025.
Its businesses had “scaled meaningfully and each segment showed a clear path to profitability” following years of investment and significant growth, the group said in a trading statement yesterday.
Meanwhile, its listed Europe-based subsidiary Prosus said it expected headline earnings a share would decline between 80.9% and 74% for the year to March 31. The financial results of Prosus almost completely account for Naspers’s results.
Prosus said in a trading statement yesterday that the decrease in earnings per share related to lower contributions from equity-accounted investments of about $4.1 billion (R74.9bn) or 233 US cents per share.
China-based internet group Tencent is the largest equity-accounted associate, and was impacted by Covid 19 lockdowns and regulations in that country.
“Tencent has since reported its first quarter numbers for the year ending December 31, 2024 – delivering earnings growth as it benefits from China re-opening, a stable regulatory environment and cost reductions,” Prosus said.
Other reasons for the lower earnings per share were higher impairment charges mainly relating to equity-accounted investments driven by an increase in market interest rates and revised business outlooks.
Earnings a share was also impacted by lower gains from sale of assets of $4.7bn or 257 US cents per share.
In the prior financial year ended March 31, 2022 the group sold 2% of its Tencent shareholding in an accelerated bookbuild to increase financial flexibility at a time when internet valuations were elevated.
In the current year, the group sold Tencent shares to fund its share repurchase programme. This delivered a lower gain on sale than the prior year, due to the market correction in internet valuations.
The gains from the sell down of Tencent and impairment charges impacting earnings per share were excluded from headline and core headline earnings per share.
Naspers said the financial year to March 31 was characterised by geopolitical and macroeconomic uncertainty.
The consolidated e-commerce portfolio, however, showed good growth and improving profitability.
On the sale of Tencent shares, Naspers said: “This transaction locks in immediate value, while increasing the group’s exposure to Tencent and its e-commerce portfolio on a per-share basis, leading to a 5% accretion in NAV per share,” the group said.
The discount that Naspers traded at had narrowed by about 17 percentage points, and the share repurchase transaction had created some $29bn in value for shareholders, it said.
Naspers’s earnings from its businesses in the second half were stronger than the first half, notwithstanding that the second half had historically seen higher investment due to seasonal effects, and this year also included costs associated with restructuring initiatives.
Cash flow from operations were expected to improve due to actions to improve profitability.
Proceeds from the exit of the Russian classifieds business Avito, in October 2022 had been received and Avito’s results, would be treated as discontinued operations for the 2023 period.
The exit of the OLX Autos (Autos) was being completed, and the Autos business would also be treated as discontinued operations.
Naspers’s core headline earnings per share were expected to be between 31.4% and 24.3% per share lower.
BUSINESS REPORT