Prosus, the JSE-listed e-commerce firm and its South African parent Naspers on Thursday flagged that OLX Autos was dragging down the profitability of its core classifieds business, OLX Group, and wants to sell the business.
By 4.45pm Prosus’s shares were down by a hefty 4.63% to R1319. 86, while Naspers’s shares slid 4.93% to R3250.76.
Prosus and Naspers are tightening their corporate structures after Naspers announced last year that earnings per share were expected to drop by between a massive 81.4% and 88.4%, while headline earnings per share are expected to drop by between 100.6% and 107.6%.
The announcement comes after the firms said in January they are cutting up to 30% of jobs at their corporate offices.
According to reports in January, Euronext-listed Prosus was seeking to cut costs at the more than 80 companies it had invested in, with different timelines and scales, and the company had already closed some offices and made cuts at others. The aim was to make Prosus profitable by the first half of 2025.
Naspers shut down OLX South Africa in February, 2022.
Prosus and Naspers said on Thursday that OLX Autos, the adjacent car transaction business had, similar to listed peers, been affected by ongoing macroeconomic and market challenges. Higher cost of capital, high inflation and reversal of pandemic trends had led to a significant and persistent slowdown in the second-hand car market.
OLX Group had continued to deliver a strong performance through the financial year, with sustained growth and improving profitability, and was well-placed for further growth and margin expansion.
“Beyond OLX Autos, the core classifieds businesses in OLX are profitable, cash flow positive, and fast growing. The exit of OLX Autos will lead to a significant improvement in the profitability profile of the classifieds segment as a whole,” it said.
However, Prosus said it would explore all options for the OLX Autos business, acknowledging that significant value existed within local markets.
“While OLX Autos has built leading positions across many of its key markets as a result of its strong technology platforms and local focus, pursuing a global growth strategy is no longer the right approach for Prosus and its shareholders,” it said.
Prosus addd that it was committed to working through this process quickly and efficiently in the interests of all stakeholders.