Naspers, the global internet giant, and its Netherland subsidiary Prosus’s share prices surged yesterday after they said a cross-holding structure between them would be removed, and in spite of Naspers reporting a widening loss for the year to March 31.
Naspers, which also owns Takealot.com and Media24 in South Africa, yesterday reported a 48% decline in core headline earnings to $1.1 billion (R20.3bn), primarily due to lower contributions from the group's associates ($1.3bn), of which $1.1bn related to Tencent.
Naspers’ biggest investment, the China-based internet giant Tencent was hit by Covid-19 lockdowns and geopolitical and macroeconomic uncertainty. Naspers and Prosus’ e-commerce businesses also widened their losses.
Naspers’ share price surged 9.27% to R3276.16 and the Prosus share price had gained 8.49% to R1394.69 by early Tuesday afternoon on the JSE.
The trading profit of trading profit Naspers, led by CEO Bob van Dijk, declined by 32% to $3.3bn.
Prosus’s operating loss widened to $1.34bn from $950m. Prosus holds Naspers’ former international investments with stakes in Tencent, Trip.com, Delivery Hero and financial technology company PayU, among a host of other companies.
Naspers’s revenue increased to $6.8bn from $6.3bn. However operating losses increased to $1.4bn from $985m. Core headline earnings per share fell 27.9% to 507 US cents from 703 US cents
“E-commerce consolidated trading losses from continuing operations of $639m reflected incremental investment in the group’s e-commerce growth extensions as we continued to invest in high-conviction growth areas,” Naspers directors said.
To counter the deterioration, costs were cut, including a 30% reduction in workforce costs. The directors added that the profitability of the e-commerce businesses had improved in the second half.
The group has previously said it would bring its e-commerce businesses to profitability in the first half of the 2025 financial year.
“E-commerce consolidated trading losses from continuing operations of $639m reflected incremental investment in the group’s e-commerce growth extensions as we continued to invest in high-conviction growth areas,” Naspers directors said.
“Market conditions deteriorated significantly for this business in the second half of the year and the group is completing an exit of OLX Autos,” they said.
“After years of investment and significant growth, our businesses have scaled meaningfully and each segment now demonstrates a clear path to profitability,” directors said.
Naspers and Prosus said their share buybacks had unlocked $29bn of value by March 31, and had resulted in a 18% reduction in the discount to net asset value (NAV) for Naspers and 16% for Prosus.
Meanwhile, the groups said yesterday the aim of eliminating the cross-holding structure was to allow the share repurchases by Naspers to continue, and to remove the complexity of the group structures, while keeping their respective free-float shareholdings the same.
At the listing of Prosus in 2019, many analysts, asset managers and shareholders had warned Naspers’ management that the cross-holding structure was too complex, the structure was not favoured by international investors and was contributing to the discount to NAV that the group was trading at.
Naspers directors admitted yesterday that its shareholders did not favour the complex cross-holding structure.
Looking towards the new financial year, Naspers directors said it would take “meaningful steps towards delivering on its target of consolidated e-commerce profitability”, continue the open-ended share repurchase programme and to crystallise value for investors in the group's portfolio of assets as conditions present themselves.
Naspers has a net debt position of $0.4bn, comprising $15.1bn in central cash and cash equivalent, net of $15.5bn in interest-bearing debt. There is also an undrawn $2.7bn revolving credit facility.
Tencent remained a meaningful contributor to cash flow via a dividend of $565m.
BUSINESS REPORT