Africa’s largest listed investment group, Naspers, says it expects to report a drop in earnings of up to 15% due to continued investment in its portfolio of e-commerce businesses and reduced takings from China’s Tencent. This comes in a period where the group’s stock has been battered by regulators in Asia and it has had to exit operations in Russia.
Naspers said in a year “marked with continued global turmoil and uncertainty, which has made for a turbulent operating environment”, the period “was a year of progress”.
“We remained focused on executing our long-term strategy and delivering strong operational growth across our core segments.”
While the group expects to report a tripling in earnings per share, the group considers core headline earnings “an appropriate indicator of the operating performance”, as it adjusts for non-operational items. Core headline earnings per share for the year is expected to decrease by between 122c and 65c a share, or a drop of up to 15%, for the year to end-March.
“This is primarily due to continued investment in growth adjacencies in our e-commerce businesses, a decreased contribution from Tencent due to the 2% divestment earlier this year, and increased net finance cost,” said the group.
David Shapiro, chief global equity strategist at Sasfin Securities, said the announcement of lowered earnings was not a shock considering Tencent’s recent numbers.
“With Tencent making up around 110% of profit and the other businesses contributing about 10%, I don’t think it’s a big surprise,” said Shapiro.
The financial results of Naspers’ international unit, Prosus, almost completely account for its results.
Core headline earnings per share for Prosus is expected to decrease by 63c-42c a share, or between 21% and 14%.
Naspers has until recently focused mainly on food delivery, fintech and classifieds, but is now investing more in education technology (edtech), driven by increased online demand in the wake of Covid-19.
The group invested $6.2bn in new acquisitions during the period and in its existing businesses, mainly in edtech and food delivery.
In August 2021, the group made its largest acquisition to date, buying out Indian digital payments provider BillDesk for $4.7bn, about R68bn at the time. Two months prior, in June, Prosus said it would acquire Stack Overflow, a knowledge-sharing platform for developers and technologists, for $1.8bn.
In addition to mergers & acquisitions, the group also used its immense cash pile to complete a $5bn share buyback, the largest yet on the JSE; and a complex share deal between Naspers and its subsidiary, concluded late in 2021.
Naspers and its Amsterdam listed subsidiary have been battered over the past year due to a crackdown on technology companies by Chinese authorities. Prosus lost almost a fifth in 2021, wiping off more than R400bn as investors continued to worry about the safety of their capital in the Asian country.
With loosening by Chinese regulators in June, the group’s stock has been staging a recovery, up 15.3% over the past month.
With Michelle Gumede
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