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Strong e-commerce revenues boosts Naspers/Prosus despite operating losses for the company

Naspers/Prosus chief executive Bob van Dijk. Photo: Reuters

Naspers/Prosus chief executive Bob van Dijk. Photo: Reuters

Published Nov 23, 2021


JSE HEAVYWEIGHTS Naspers/Prosus yesterday reported strong e-commerce revenues during the half year ended September 2021, despite widening trading losses.

Prosus said e-commerce revenue growth jumped 53 percent to $4.2 billion (R66bn), while parent company Naspers said e-commerce revenues was up 52 percent to $4.6bn, outpacing revenue growth at Tencent, the Chinese internet gaming and social media group, in which Prosus owns a minority stake.

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Growth in e-commerce was driven by Classifieds, Food Delivery, Edtech, Payments and fintech. However, its operating loss increased from $274 million to $315m as a result of investments to expand e-commerce units.

The value of the e-commerce portfolio had been on a steady growth path and excluding Tencent and VK/mail. ru is now approaching $50bn, up from $13bn five years ago, according to analysts.

Naspers/Prosus said last week that $5.2bn had been invested into accelerating growth since April to further accelerate growth.

Naspers/Prosus chief executive Bob van Dijk said Naspers companies now served more than 2 billion customers. In the first half of the year, the internet businesses delivered solid growth compounding a strong performance for the same period last year, he said.

“Our progress is reflected in the increasing value attributed to our e-commerce portfolio and, to capture the significant opportunity ahead, we stepped up investment in our core segments of Food Delivery, Edtech, Payments and Fintech, and Classifieds,” said Van Dijk.

Naspers said its economic-interest share in Tencent's revenue grew 24 percent, up from 23 percent in the previous period an “impressive performance given the size of its base”.

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Trading profit expanded 8 percent down from 9 percent a year earlier to $2.9bn, reflecting continued investment to fund growth by expanding the existing platforms, and building deeper relations with customers and partners.

Naspers/Prosus said on an economic interest basis revenue was 32 percent higher compared to a year ago at $17.2bn and on a consolidated basis which includes subsidiaries, total revenue increased by 43 percent to $3.6bn from $2.5bn.

Commenting on the results, Mike Gresty, an investment analyst at Anchor Capital, said he was disappointed in the results as Prosus was not able to translate such strong revenue growth into better profit metrics and e-commerce trading losses increased from $276m to $372m, while the margin deteriorated by 100 basis points.

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“The rather underwhelming share price reaction to this result may well be related to this,” said Gresty.

Gresty was of the view that bulls expect that, as the e-commerce division scaled, it would result in Prosus sustainably outpacing the growth of Tencent and thus be seen as more than just a discounted proxy for investing directly in Tencent.

Naspers shares closed 2.32 percent lower at R2 652.96 on the JSE, while Prosus shares closed 1.53 percent lower at R1 351.62 yesterday.

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