With less than two years to go before Naspers’ portfolio — without China’s Tencent — is expected to start making money, loss is still the order of the day. The group’s determination to achieve consolidated e-commerce profitability by the first half of the 2025 financial year remains unfazed.
The annual profit of global internet and media company Naspers almost halved because of lower contributions from Tencent, which was hit by Covid-19 lockdowns in China and geopolitical and macroeconomic uncertainty.
The company, valued at about R1.3-trillion on the JSE, said in its results for the year to end-March that its profit fell 46.3% to $9.96bn (R184.7bn) and its core headline earnings, the company’s preferred performance metric, 48.2% to $1.1bn (R19.6bn).
Trading profit of $5.1bn from Tencent in the past year masked the trading loss from continuing operations of the rest of its e-commerce portfolio, which widened more than quarter to $1.5bn.
Naspers was also helped by Tencent, which owns popular messaging platform WeChat, announcing a 50% increase in its dividend in April 2023, resulting in a payout of $758m in June.
Started in 1915 as a media company, Naspers has grown into a global company with interests in media, e-commerce, fintech, payments and edtech.
With so much riding on the success of Tencent, the group has been working for a number of years to try to reduce its reliance on earnings from the Chinese operator. A big part of this mission is getting its businesses, outside Tencent, to make profits.
At the same time, the group hopes profitability in these businesses will help with reducing the wide gap between its market capitalisation and the value of its underlying assets.
Over the years, investors have placed little to no value on Naspers’ businesses out of Tencent, as reflected in the share price. The rationale is that reaching profitability will help with getting investors to place a value on these units, which the group valued at about $30bn at last count.
That, in combination with a suite of other transactions, major acquisitions, and the largest share buyback in JSE history is hoped to close the gap over time.
Revenue grew 7.7% to $6.8bn (R125.9bn) excluding M&As, with food delivery and payments and fintech being the biggest contributors. Its operating loss widened by 40.5% to $1.4bn (R25.7bn).
“The group will continue to drive profitability in its e-commerce portfolio, build scale and take action to manage expenses and free cash flow while maintaining its leading value proposition to its customers,” the company said. “The ambition is for our consolidated e-commerce portfolio to reach profitability during the first half of the 2025 financial year.”
PayU, the group’s payments and fintech company, experienced a 52% increase in consolidated revenue, with its Indian payments service provider (PSP) business and credit business witnessing strong growth.
“This highlights the potential of the fintech industry, particularly in emerging markets like India,” notes Shaun Murison of IG Markets.
But efforts to grow India’s payments market have not been without their difficulty.
In late 2022, Prosus cancelled a deal to buy India’s BillDesk in what would have been its largest acquisition on record and would have substantially bulked up its presence in Asia’s second-most populous country.
The $4.7bn deal, which would have combined Prosus’s microlending platform, PayU Payments, and BillDesk, a payment gateway, was announced in August 2021.
Naspers and its global internet arm, Prosus, announced that it would simplify its complex cross-holding structure which was implemented a few years ago.
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