REG - Prosus NV Naspers Limited - Half-year Report

Prosus NVAnnouncement

02/12/2024 07:00

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RNS Number : 2970O  Prosus NV  02 December 2024

Prosus N.V.

(Incorporated in the Netherlands)

(Legal Entity Identifier: 635400Z5LQ5F9OLVT688)

AEX and JSE Share Code: PRX ISIN: NL0013654783

(Prosus)

Interim results announcement for the six months ended 30 September 2024

Improving everyday life for billions of people through technology

Salient features

                                                                             Period ended      Year ended 31 March

30 September
                                                                             2024     2023     2024
                                                                             US$'m    US$'m    US$'m
 Revenue                                                                     2 963    2 556    5 467
 Earnings per ordinary share from continuing operations (US cents)           191      137      265
 Headline earnings per ordinary share from continuing operations (US cents)  107      54       132
 Core headline earnings per ordinary share from continuing operations (US    144      76       193
 cents)
 Earnings per ordinary share from total operations (US cents)                187      129      255
 Headline earnings per ordinary share from total operations (US cents)       106      49       127
 Core headline earnings per ordinary share from total operations (US cents)  143      72       189

Commentary

Since his appointment as group chief executive of Naspers and Prosus, Fabricio
Bloisi and his team have focused on how we can grow faster, be more
profitable, and improve how our ecosystems and people work together. The
strong financial improvements in 1H25, provide shareholders a glimpse of the
significant opportunity within Prosus and Naspers.

Unless otherwise stated, growth rates discussed in this report compare the
first half of the financial year ending 2025 (1H25) to the first half of the
financial year ending 2024 (1H24). The percentages in brackets represent local
currency growth, excluding the impact of acquisitions and disposals (M&A),
and provide a clearer view of our businesses' underlying operating
performance. Financial results are presented on a continuing operations basis.

For the six months to 30 September 2024, the group continued its profitable
growth in its core Ecommerce businesses. Ecommerce consolidated revenue grew
16% (26%) to US$3.0bn. IFRS operating profits totalled US$132m compared to an
operating loss of US$415m recorded in the prior period. The adjusted earnings
before interest and taxes (aEBIT) for the Ecommerce portfolio, previously
known as trading profit, improved by US$217m (US$244m) to a profit of US$181m,
as increased growth, innovation and focus positively impacted results.
Consolidated aEBIT for the group rose by US$170m (US$197m) to US$60m,
underlining our accelerating profitability path. Our intent is to deliver
revenue of US$6.2bn (maintaining organic growth above 20%) and US$400m in
aEBIT from our Ecommerce operations for the full year ending 31 March 2025, a
large improvement on the US$38m reported in the prior financial year.

Earnings from continuing operations increased to US$4.7bn from US$3.6bn in the
prior period. Core headline earnings, our measure of after-tax operating
performance, was US$3.5bn, an increase of 76% (88%). Strong improvements in
Ecommerce and Tencent underpin this strong performance.

With these results, the group has demonstrated its continued commitment to
deliver profitable growth. Consolidated Ecommerce profitability in 1H25
significantly exceeded that of the prior 12 months. We expect to continue this
growth path by accelerating our pace of innovation and honing execution,
investing with an AI-first mindset and leveraging the potential of the Prosus
technology ecosystem.

We also continue to create value for our shareholders through the open-ended
share-repurchase programme. Since its inception in June 2022, this programme
has reduced the free-float share count by 23% and generated US$39bn of value
for shareholders. From the programme's launch to 30 September 2024, the
combined holding company discount of Naspers and Prosus has reduced by some 20
percentage points. Over the same period, Prosus has repurchased 683 928 802
Prosus ordinary shares, with a total value of US$20.4bn, leading to 8.9%
accretion in net asset value (NAV) per share. Naspers funds its open-ended
share-repurchase programme with regular sales of Prosus shares. By 30
September 2024, Naspers had sold 261 778 817 Prosus ordinary shares N and
bought back 45 983 041 Naspers N ordinary shares to the value of US$7.1bn.

Our disciplined and more active approach to management of our portfolio led to
the sale of our stakes in Trip.com and Tazz. After the reporting date, as part
of the initial public offering (IPO) of Swiggy, we sold 109 096 540 shares in
Swiggy for approximately US$500m (gross). The internal rate of return (IRR) of
our stake in Swiggy, based on the IPO price and the net proceeds of the stake
we sold, was 18%. External investment, through M&A, in long-term growth
opportunities was US$290m, meaningfully below the US$6.2bn peak in 2022. If we
can have the required conviction in opportunities, our ambition would be to
increase capital deployment to enhance our ecosystems, growth, profitability
and value creation. Our focus has increased meaningfully over recent months.
We believe the combination of stronger-performing operating businesses, better
investments and our open-ended share-repurchase programme will drive long-term
value creation and shareholder returns. The combination of strong financial
performance, value-creating M&A and further discount reduction underpin
Fabricio's ambition to create a group that is valued at US$100bn, excluding
its investment in Tencent.

-    iFood is one of the best performing food delivery businesses globally.
In 1H25, it reported order growth of 29% and over 100 million orders in the
month of August, underlining its continued growth momentum. iFood's core
restaurant food delivery businesses led the performance with a substantial
increase in aEBIT of US$76m, a growth of 85% year on year in local currency,
excluding M&A. Revenue from business growth extensions grew strongly, 51%
(30%), driven by the groceries marketplace and credit business, while
meaningfully reducing losses. Investing in iFood's ecosystem continues to
extend the growth and profit potential of the business.

-    The OLX classifieds business is focused on generating good revenue
growth and expanding profitability. Classifieds revenue grew by 16% to US$399m
in local currency, excluding M&A, led by OLX Europe 21% which helped
offset slower growth in OLX South Africa 9% in local currency, excluding
M&A.

-    Our Payments and Fintech units demonstrated a strong overall
performance in its core payment service provider (PSP) and credit operations
which accelerated revenue growth and improved margins, driven by operating
leverage and effective cost optimisation. The PayU India business is adapting
quickly to an increasingly competitive landscape in which shifts in payment
mix are placing pressure on take rates. This in turn has weighed on its
performance since the embargo on onboarding new merchants was only lifted in
April 2024 and some lead time is needed to activate new merchants and improve
financial performance. PayU India PSP business grew revenue by 12% (14%) and
has shown a sustained acceleration in growth in recent months. Our credit
business in India continues to expand, generating 91% (93%) higher revenue.

-    eMAG continued to improve its sales trajectory, led by strong growth
in Romania of 25% (26%), that more than offset challenges in Hungary and
slower growth in Bulgaria. During the period, it announced the sale of its
food delivery business Tazz. As a result of eMAG centralising all its
commercial support activities for Hungary into the operations of its regional
marketplace in Romania, coupled with continuous focus on strengthening its
core enablers and business-to-consumer (B2C) verticals, we now expect eMAG to
achieve overall profitability for FY25.

·      - The Edtech businesses continue to work on improving financial
performance amid the disruptive impact of the broad   adoption of generative
artificial intelligence (GenAI) on its revenue pool. They grew revenue well
and significantly reduced losses. Stack Overflow's application programming
interface (API) offering, developed with the group's inhouse AI team, has
primarily been responsible for segment revenue growth in the first half.

The group's balance sheet remains strong, with US$18.3bn gross cash on hand
(including short-term investments and proceeds from the sale of our Trip.com
interest) and net cash (including interest-bearing loans and capitalised lease
liabilities) of US$1.7bn. We remain committed to managing our balance sheet
within its investment-grade rating; as such, not all the cash on the balance
sheet is available to the group. On 30 September 2024, we estimate that some
US$10bn was available for new investment.

Financial review

Consolidated revenue from continuing operations increased by US$407m
(US$645m), or 16% (26%), from US$2.6bn in the prior period to US$3.0bn. This
was primarily due to strong revenue growth in Payments and Fintech, Etail and
Food Delivery.

Operating profits

IFRS operating profits totalled US$132m compared to an operating loss of
US$415m recorded in the prior period. This is due to greater profitability
from the group's consolidated businesses and almost no impairment losses from
continuing operations in the current period. In the prior period we recognised
impairment losses on goodwill and other assets of US$341m, primarily related
to Stack Overflow in the Edtech segment. Ecommerce consolidated aEBIT from
continuing operations improved by US$217m (US$244m) to US$181m in 1H25 as
growth, scale and cost reduction boosted profitability. The group recorded
aEBIT of US$60m compared to the loss of US$110m in 1H24.

Net finance income/expense

The group increased its net interest income by US$38m from US$159m to US$197m.
Interest income increased by US$32m or 7% from US$438m in the prior period to
US$470m in 1H25 due to higher interest rates and cash balances on hand.
Interest expense marginally decreased by 2% to US$273m in 1H25.

Other finance cost decreased from an income of US$223m in 1H24 to a cost of
US$149m in 1H25. This relates primarily to a loss on foreign exchange
differences related to the translation of assets and liabilities.

Share of equity-accounted results

Profit from equity-accounted results increased by US$1.3bn, from US$1.2bn in
the prior period to US$2.5bn. This is driven primarily by Tencent's increased
profitability as well as increased contributions by its associates of US$404m,
offset by an increase in impairment losses of US$146m.

Trimming the group's Tencent position by 0.8% to fund the Prosus
share-repurchase programme resulted in a gain of US$2.4bn during the period
(1H24: US$2.9bn).

In addition, we recognised impairment losses on equity-accounted investments
of US$89m related to unlisted equity-accounted investments.

Income tax expense

Income tax expense rose to US$100m from US$79m in the prior period, primarily
due to increased profitability from our Ecommerce operations.

Earnings, headline and core headline earnings

Earnings from continuing operations increased to US$4.7bn from US$3.6bn in the
prior period. This was primarily due to

increased consolidated aEBIT and improved profitability in our
equity-accounted results, primarily Tencent, offset by a

lower gain on partial disposal of the investment in Tencent.

Core headline earnings from continuing operations were US$3.5bn - an increase
of 76% (88%) or US$1.5bn. This was mainly driven by the improved profitability
of our Ecommerce consolidated businesses and equity-accounted investments,
particularly Tencent.

Headline earnings from continuing operations rose US$1.2bn to US$2.6bn, given
the same factors noted for core headline earnings.

Loss from discontinued operations

In March 2023, the group announced its exit from the OLX Autos business unit.
All the operations of this business  are presented as discontinued operations
as they have been disposed of, classified as held for sale or closed by  30
September 2024.

Losses from discontinued operations during the period were US$106m related to
the Autos business unit. This includes impairment losses of US$84m relating to
our US operation classified as held for sale.

Cash balances and free cash flow

The group remains well positioned to navigate a difficult macroeconomic
environment due to its strong balance sheet. At corporate level, Prosus has a
net cash position of US$1.6bn, comprising US$17.0bn in central cash and cash
equivalents (including short-term cash investments), net of US$15.4bn in
central interest-bearing debt (excluding capitalised lease liabilities). In
addition, we have an undrawn US$2.5bn revolving credit facility.

The group's free cash inflow was US$897m, a significant improvement from the
prior period free cash inflow of US$469m. This was due to increased
profitability in Food Delivery and Classifieds as well as better working
capital management in the Payments and Fintech segment. Tencent remains a
meaningful contributor to our free cash flow via an increased dividend of
US$1.0bn.

The company's external auditor has not reviewed or reported on forecasts
included in these full condensed consolidated interim financial statements.

A reconciliation of alternative performance measures to the equivalent
International Financial Reporting Standards (IFRS) metrics is provided in
'Other information - financial alternative performance measures' of the
condensed consolidated interim financial statements.

Preparation of the short-form results announcement

The preparation of the short-form results announcement was supervised by the
group's financial director, Basil Sgourdos CA(SA).  These results will be
made public on 2 December 2024.

ADR programme

Bank of New York Mellon maintains a GlobalBuyDIRECT(SM) plan for Naspers
Limited. For additional information, visit Bank of New York Mellon's website
at www.globalbuydirect.com or call Shareholder Relations at 1-888-BNY-ADRS or
1-800-345-1612 or write to: Bank of New York Mellon, Shareholder Relations
Department - GlobalBuyDIRECT(SM), Church Street Station, PO Box 11258, New
York, NY 10286-1258, USA.

Important information

This report contains forward-looking statements as defined in the United
States Private Securities Litigation Reform Act of 1995. Words such as
'believe', 'anticipate', 'intend', 'seek', 'will', 'plan', 'could', 'may',
'endeavour' and similar expressions are intended to identify such
forward-looking statements, but are not the exclusive means of identifying
such statements. By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances and should
be considered in light of various important factors. While these
forward-looking statements represent our judgements and future expectations, a
number of risks, uncertainties and other important factors could cause actual
developments and results to differ materially from our expectations. The key
factors that could cause our actual results performance, or achievements to
differ materially from those in the forward-looking statements include, among
others, changes to IFRS and the interpretations, applications and practices
subject thereto as they apply to past, present and future periods; ongoing and
future acquisitions; changes to domestic and international business and market
conditions such as exchange rate and interest rate movements; changes in the
domestic and international regulatory and legislative environments; changes to
domestic and international operational, social, economic and political
conditions; the occurrence of labour disruptions; and industrial action; and
the effects of both current and future litigation.  We are not under any
obligation to (and expressly disclaim any such obligation to) revise or update
any forward-looking statements contained in this report, whether as a result
of new information, future events or otherwise. We cannot give any assurance
that forward-looking statements will prove to be correct and investors are
cautioned not to place undue reliance on any forward-looking statements
contained herein.

Further information

This short-form results announcement is the responsibility of the directors
and is only a summary of the information in the full condensed consolidated
interim report. The full condensed consolidated interim report will be
released on SENS on 2 December 2024 and can be found at
www.prosus.com/investors/results-reports-events/latest-financial-results
(http://www.prosus.com/investors/results-reports-events/latest-financial-results)
and https://senspdf.jse.co.za/documents/2024/jse/isse/PRXE/1H25.pdf
(https://senspdf.jse.co.za/documents/2024/jse/isse/PRXE/1H25.pdf) . Copies of
the full condensed consolidated interim report may also be requested from the
company's registered office, at no charge, during office hours. Any investment
 decision should be based on the full condensed consolidated interim report
published on SENS and on the company's website.

The information in this short-form results announcement has been extracted
from the reviewed information published on SENS, but the short-form results
announcement itself was not reviewed. The condensed consolidated interim
financial statements for the six months ended 30 September 2024 have been
reviewed by Deloitte, the independent auditor, whose unmodified report is
included in the full announcement.

On behalf of the board

Koos
Bekker
Fabricio Bloisi

Chair
Chief executive

Amsterdam, the Netherlands

29 November 2024

Directors: JP Bekker (chair), F Bloisi (chief executive), S Dubey, HJ du Toit,
CL Enenstein, M Girotra, RCC Jafta, AGZ Kemna,  FLN Letele, D Meyer, R
Oliveira de Lima, SJZ Pacak, V Sgourdos, MR Sorour, JDT Stofberg, Y Xu

Company secretary: L Bagwandeen

Registered office: Symphony Offices, Gustav Mahlerlaan 5, 1082 MS Amsterdam,
the Netherlands

Euronext paying agent: ABN AMRO Bank N.V., Corporate Broking and Issuer
Services, HQ 7212, Gustav Mahlerlaan 10,

1082 PP Amsterdam, the Netherlands

JSE sponsor to Prosus

Investec Bank Limited

 

Enquiries

 Investor Enquiries                           +1 347-210-4305

 Eoin Ryan, Head of Investor Relations
 Media Enquiries                              +31 6 15494359

 Charlie Pemberton, Communications Director

 

About Prosus

Prosus is a global consumer internet group and one of the largest technology
investors in the world. Each month, over two billion customers across the
globe use the products and services of companies that Prosus has invested in,
acquired or built. Prosus builds leading consumer internet companies that
empower people and enrich communities. The group is focused on online
classifieds, food delivery, payments and fintech. The team actively backs
exceptional entrepreneurs using technology to improve people's everyday lives.

Prosus has a primary listing on Euronext Amsterdam (AEX:PRX) and secondary
listings on the Johannesburg Stock Exchange (XJSE:PRX) and A2X Markets
(PRX.AJ). Prosus is majority-owned by Naspers.

For more information, please visit www.prosus.com (http://www.prosus.com) .

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