Naspers Soars: Achieving Profitability Milestones and Shareholder Success

  • Strong Financial Performance: Naspers reports a 9% revenue growth, achieving milestones in Ecommerce profitability and successful strategic initiatives.
  • Strategic Achievements: Share repurchase program reduces net share count by 14%, generating US$25 billion for shareholders.
  • Business Segment Highlights: Food Delivery excels, Payments and Fintech records growth, and strategic decisions lead to enhanced profitability.
By Lethabo Ntsoane

In a recent interim results announcement for the six months ending on September 30, 2023, Naspers Limited showcased robust financial performance, marked by significant progress and strategic achievements. The South African-based multinational conglomerate, listed on the Johannesburg Stock Exchange (JSE), reported encouraging figures, highlighting growth in revenue, improved profitability, and successful strategic initiatives.

Salient Features of Interim Results

Consolidated Revenue and Earnings

Naspers reported consolidated revenue from continuing operations of US$3 billion, reflecting a 9% growth compared to the same period last year. The earnings per ordinary share stood at 812 US cents, representing a substantial increase from 501 US cents in the corresponding period. The headline earnings per ordinary share and core headline earnings per ordinary share were also noteworthy, demonstrating the company’s commitment to delivering value to its shareholders.

Financial Metric1H23 (US$’m)1H24 (US$’m)Change (%)
Consolidated Revenue2,7593,007+9
Earnings per Ordinary Share (US cents)501812+62
Headline Earnings per Ordinary Share (US cents)28311+1003
Core Headline Earnings per Ordinary Share (US cents)214454+112

Key Business Segments

Naspers highlighted the strong performance of its key business segments:

1. Ecommerce

Consolidated trading losses from continuing operations in the Ecommerce segment decreased by US$232 million to US$38 million in 1H24, showcasing a significant stride towards breakeven. The company reported a robust free cash inflow of US$597 million.

2. Food Delivery

The Food Delivery segment exhibited robust performance, with revenue growing ahead of peers and meaningful improvements in profitability. iFood, a significant player in this segment, sustained momentum in core restaurant food delivery businesses.

3. Payments and Fintech

Payments and Fintech recorded meaningful growth in the core payment service provider (PSP) business, driven by activities in India and Turkey. The consolidated trading loss narrowed, and PayU announced the sale of Global Payments Organisations (GPO) for US$610 million, expected to close in the first half of 2024.

4. Edtech

In the Edtech segment, Stack Overflow’s monetization initiatives faced challenges, leading to a further impairment. However, actions have been taken to improve its operating profile, including the introduction of generative AI capabilities. GoodHabitz benefited from investments in product enhancements and a measured international rollout.

Strategic Achievements

1. Prosus Ecommerce Profitability Ahead of Schedule

Naspers celebrated the fourth anniversary of listing Prosus on the Euronext Amsterdam, Europe’s largest consumer internet company. The Group achieved its commitment to deliver consolidated Prosus Ecommerce profitability earlier than planned, now targeting profitability for 2H24 instead of 1H25.

2. Share Repurchase Program

As of September 30, 2023, Naspers had successfully reduced its net share count by 14%, generating US$25 billion for shareholders through the ongoing open-ended share repurchase program. This program, launched in June 2022, has proven effective in creating value for shareholders while increasing exposure to key assets.

3. Crossholding Removal

The Group completed the removal of the crossholding, a move that received overwhelming shareholder support. This strategic step ensures a simplified structure while maintaining the economic ownership of Prosus by Naspers, allowing the continuation of the open-ended share repurchase program.

Business Segment Performance

1. Food Delivery’s Strong Performance

Food Delivery emerged as a standout performer, with revenue growth surpassing industry peers. iFood, a major player in this segment, sustained momentum in core restaurant food delivery while adopting a measured approach to grocery growth extensions.

2. OLX Europe’s Classifieds Business

OLX Europe’s classifieds business reported growth and enhanced profitability, driven by improved operational metrics and a strong performance in the pay-and-ship offering. The strategic decision to exit OLX Autos resulted in progress in finalizing deals across various markets.

3. Payments and Fintech Growth

Payments and Fintech recorded meaningful growth in the core payment service provider (PSP) business, with India payments, Turkey (Iyzico), and India credit driving positive results. The consolidated trading loss narrowed, and the sale of GPO for US$610 million was announced.

4. Edtech Challenges and Interventions

In the Edtech segment, challenges were faced, particularly with Stack Overflow’s monetization initiatives. Further impairment was recorded, but the Group intervened to improve business performance, with a critical assessment planned for the impact of these interventions.

Financial Review

1. Revenue Growth and Trading Profit

Consolidated Group revenue from continuing operations increased by 9% (14%), reaching US$3 billion. Trading profit for continuing operations exhibited significant growth, driven by improved profitability in various segments, including Ecommerce and Food Delivery.

Business SegmentTrading Profit (1H23 – US$’m)Trading Profit (1H24 – US$’m)Change (%)
Ecommerce(820)66>100
Food Delivery(381)(155)60
Payments and Fintech(97)(34)69
Edtech(178)(64)28
Social and Internet Platforms2,4972,87515

2. Impairment and Profit from Equity-Accounted Results

Operating losses increased due to impairment losses on goodwill and equity-accounted investments. Despite this, profit from equity-accounted results showed a positive trend, increasing by 9% to US$1.2 billion.

3. Cash Flow and Net Debt Position

Free cash inflow improved significantly, reaching US$597 million, attributed to better profitability and working capital management. Naspers maintained a strong balance sheet with central cash of US$15.1 billion, resulting in a net debt position of US$88 million.

4. Share Repurchase Program Impact

The ongoing open-ended share repurchase program, funded by the sale of Tencent shares, has reduced the combined holding company discount of Naspers and Prosus by around 17 percentage points. This strategic move has created approximately US$25 billion of value for shareholders.

Conclusion and Future Outlook

Naspers Limited’s interim results for the six months ended September 30, 2023, showcase a company in stride, achieving key milestones, and building momentum. With a strong focus on profitability, strategic initiatives, and shareholder value creation, the company is poised for continued success. As it targets Prosus consolidated Ecommerce profitability in 2H24 and continues its open-ended share repurchase program, Naspers remains a significant player in the global consumer internet space.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo