Naspers adds R80bn to market cap

The market cap of the Naspers stable grew by close to R80bn as the technology investment firm made good on its pledge to realise profits from ventures other than Tencent in China.

While the group’s education and online retail units continued to record trading losses, $147m combined, it was the classifieds and food delivery businesses that pushed the e-commerce portfolio into the black, the group reported on Monday. 

With a trading profit of $24m, Naspers has successfully achieved consolidated e-commerce profitability in the second half of the year. As former iFood boss Fabricio Bloisi prepares to lead the company, the group has demonstrated profitability for the full-year ending in March, surpassing its initial goal of achieving consolidated e-commerce profitability by the first half of the 2025 financial year. 

After gaining as much as 3.49% and 3.35% by lunchtime, shares in Naspers and Prosus pulled back a bit by the end of the day. Naspers closed 2.68% higher at R3,684.48 and Prosus added 2.7% to R670. The pair are up about 18% and 20% so far this year.

Over the years, management has been trying to unlock value from its vast portfolio of businesses in food delivery, classifieds, fintech and education, which are estimated to be worth $30bn but are not fully reflected in the Prosus share price.

The value of units such as PayU, Brazil’s iFood, Germany’s Delivery Hero and India’s Swiggy are dwarfed by the group’s $100bn stake in Tencent, the Chinese-based technology and entertainment conglomerate.

As a result, the group set itself the challenge of generating profits in its ventures outside Tencent. This not only highlights the group’s ability to find, invest in and grow e-commerce operations, but also dispels the notion of the “curse of success”, which suggests Naspers is merely a means for investors to access Tencent at a cheaper price.

But that success has been hard won. The group’s more than $3bn worth of education investments are now worth much less. 

“Historically, the group had achieved some investing success over a sustained period of time. But in the last two years, our internal rate of return has been far below target,” the group said.

“Steps have been taken to learn from our errors and address this underperformance, including by more actively engaging with our major operating companies and investments, flattening our overall organisation to get closer to our businesses and redesigning the investment team, investment process and incentives.”

Core headline earnings per share (HEPS) for the year to end-March rose to 1,148 US cents from 546c a year ago, the group said. HEPS rose to 759c from 119c before. Headline earnings from continuing operations rose $1.2bn to $1.4bn.

Revenue increased 8% to $6.4bn, driven by strong performances at OLX and iFood. Core headline earnings, the group’s measure of after-tax operating performance, were $2.1bn — an increase of 88%, it said.

Operating losses decreased by $511m to $562m, due to greater profitability from the group’s consolidated businesses and lower impairment losses recognised in the current year.

iFood delivered a strong performance with its core restaurant food delivery businesses generating an increase in trading profit of $166m. Progress has been made in developing growth extensions and potential is expected in iFood’s lending, grocery and meal vouchers business.

The classifieds businesses accelerated profitability, driven by strong revenue growth and effective cost-control measures, particularly in OLX Europe. During the year, Naspers concluded deals or closed most of OLX Autos, the vehicle transaction business.

PayU grew in its core payment service provider business. Improved operating leverage and effective cost control drove strong revenue growth and improved profitability, despite regulatory hurdles in India.

The sale of GPO, announced in August 2023, is progressing and is expected to close in the second half of calendar year 2024.

In the edtech segment the broad adoption of generative artificial intelligence (AI) tools and challenging macroeconomic conditions have affected the businesses, particularly Stack Overflow.

Prosus, the group’s Amsterdam-listed subsidiary, reported core HEPS of 193c from 99c a year ago. Revenue rose to $5.47bn from $4.95bn.