Wednesday, January 26

Naspers and Prosus increase their income

While the interim results for Naspers and Prosus should be viewed as a combined entity in many respects, with the companies publishing separate and nearly identical press releases when it comes to operations, it is a tale of two cities. Actually three, because we must remember the capital city Tencent.

Naspers provisional results in Sens
Provisional results of Prosus in Sens

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Bob van Dijk, CEO of Prosus and Naspers, comments on both entities: “In the first half of the year, our Internet businesses posted strong growth on top of strong performance over the same period last year. Our progress is reflected in the increasing value placed on our e-commerce portfolio and, to seize the significant opportunity ahead, we are stepping up investment in our core food delivery, edtech, payments and fintech and classified segments. Prosus companies (alternatively Naspers) now serve more than two billion customers and we continue to create innovative products that make a difference in people’s lives. ”

CFO Basil Sgourdos says in his overview of the two companies’ results for the six months to September 2021 that they have made good progress on several fronts.

“The e-commerce portfolio continues to grow at the same pace and we are focused on investing behind that growth to build momentum and capture the significant opportunity we see in the future. In this regard, and as an indication of how we are scaling our businesses, we achieved 44% growth in our established and consolidated profitable businesses, resulting in increased cash generation for the center.

“As we invest for growth, we continued to crystallize returns for shareholders during the period through a $ 5 billion share buyback program,” says Sgourdos.

Prosus announced that revenue increased 29% to $ 16.6 billion and top earnings by 2% to $ 2.3 billion.

Naspers results show the same growth rate in revenue, but reported that top earnings were down 4% compared to the first six months of 2020.

Both Naspers and Prosus reported a sharp rise in revenue from all underlying divisions, with growing losses in e-commerce and food delivery businesses, as well as educational startups. The payments and fintech segment held firm, while classifieds reported an increase of more than 130% in business profits.

Two bigs

The two major divisions, food delivery and online classified advertising, continued to increase business volumes and revenues, if not profits.

Management reported that performance in the global food business remained strong. iFood, Swiggy and Delivery Hero are operating at a significant scale and innovating beyond their core food delivery businesses in complementary adjacencies such as convenience and grocery delivery, according to management.

Food delivery businesses are operating in more than 60 countries around the world.

Figures from Prosus show that the gross value of merchandise for the food delivery division increased 73% from the previous year and the number of food orders grew 70%. This boosted revenue by 86% to $ 1.3 billion.

Within the classifieds division, OLX had strong growth. Management noted that it accelerated new developments in its more established markets (Russia, Poland and Brazil), such as payment and shipping services, increasing trust and security in its platforms, and expanding its sales transaction businesses. vehicular.

Revenue more than doubled to $ 1.3 billion on the Prosus books and business profit increased significantly, growing 139% to $ 108 million.

However, detailed financial statements from Naspers and Prosus show that Tencent is still the goose that brings home the bacon.


The income statement shows that revenue increased 43% to nearly $ 3.58 billion, but investments to expand e-commerce units resulted in operating losses increasing from $ 274 million to $ 315 million.

The net interest charge increased dramatically from $ 41 million in the first six months of the prior financial year to $ 150 million, while other finance costs increased to $ 175 million ($ 2 million positive in 2020).

Adding it all up brings us to a loss of $ 640 million, compared to a loss of $ 313 million a year ago.

It was the huge increase in gains accounted for in equity, which rose from $ 2.88 billion to just under $ 4.1 billion, that made the difference.

While this figure includes interests other than Tencent, the massive Chinese Internet group makes up the largest share. The income statement also shows revenue of $ 12.4 billion as income from the sale of Tencent shares.

The effect of the sale of shares was eliminated when calculating overall earnings per share. Title eps decreased from $ 4.04 to $ 3.68.


Prosus’s formal income statement shows that revenue improved from $ 2.17 billion to nearly $ 3.07 billion and operating losses increased from $ 207 million to $ 304 million. It also reflects a large increase in interest paid and other financial costs, as well as income from associates and income from the sale of Tencent shares.

Earnings for the six months through September are estimated at $ 15.89 billion compared to $ 3 billion a year ago.

Overall earnings for the new N shares are reported at $ 1.44 per share compared to $ 1.47 per share during the first half of the prior financial year.

Management notes in its comment to the results that Tencent delivered strong results and remains positioned for continued growth.

“In April 2021, to improve our financial flexibility and strengthen our balance sheet, we sold 2% of its issued share capital, generating profits of $ 14.6 billion and reducing our stake to 28.9%. We have been investors in Tencent for more than 20 years, and the only pre-provision was 2% in 2018, ”he says, arguing that in both cases the proceeds were used to fund strategic ambitions that resulted in a significant increase in NAV.

Discount to NAV

Unfortunately, both Naspers and Prosus still trade heavily discounted to their underlying NAV.

Management is not ashamed to distribute these figures, using the valuations of the analysis in different brokers and asset managers to control the value of the unlisted interests.

Prosus calculated its NAV at $ 218.7 billion at the end of September 2021, of which Tencent was $ 164 billion.

The total NAV was equal to R3 301 billion (yes, R3.3 trillion) at the exchange rate at that time.

Tencent accounted for $ 164 billion of this then. The net asset value per share of 290 R2 compared to the share price of just over 200 Rand at the end of September.

The same goes for Naspers. The company calculated its NAV at $ 91.2 billion (R1 377 billion). The stock was trading at around R490 at the time, compared to its net asset value of R326 per share.

Evolution of the price of the shares of Prosus and Naspers during two years

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