Naspers Delivers Strong Ecommerce Revenue Growth and Operating Performance
Naspers Limited (JSE: NPN) (LSE:NPSN) has announced a solid set of results for the first half of the year. Despite a turbulent period during which industry growth expectations and valuations came under significant pressure, we have increased ecommerce revenues and continued organic investment into those segments where we see the highest growth potential. This investment is focused on building and extending our offering within core products to meet local market needs, notably within autos at OLX, convenience delivery in Food and credit at PayU. Organic investment levels peaked during the period, and together with increased scale and actively managing our cost base, our business is well positioned for improvements in profitability and cash flow generation. It is our ambition for our consolidated ecommerce portfolio to become profitable in H1 of FY2025. Our buyback programme will continue for the foreseeable future, as it meaningfully improves net asset value (NAV) per share, creating permanent value that will compound over time.
Bob van Dijk, Group CEO, Prosus and Naspers, commented:
"We have shown strong execution and operational growth through a volatile and challenging time. To further scale our ecommerce businesses, we have made significant organic investment in OLX Autos, credit, convenience delivery and edtech, which will drive sustainable long-term value creation for the Group. The Group's open-ended buyback of Prosus and Naspers shares is unlocking real value. We expect the benefits of the programme to compound over time. Looking ahead, we will work towards simplifying the Group's structure and to crystallise value from our portfolio."
Group performance1 2
Basil Sgourdos, Group CFO, Prosus and Naspers, commented:
"Revenue grew strongly across our segments, despite the significant foreign currency headwinds in emerging markets and a lower contribution from Tencent. Our ecommerce businesses are all profitable or breakeven at the core and we have accelerated efforts to drive profitable growth. We expect HY23 to mark our peak investment spend, with profitability and cash flow generation improving from here on, with our ambition to be profitable on aggregate in H1 FY2025. Our strong balance sheet and significant liquidity is a key advantage in the current climate; we will remain disciplined on M&A and committed to maintaining our investment grade rating."
Strong growth and execution in ecommerce
Profitability was impacted by continued investment in adjacent growth opportunities: autos transactions in Classifieds, a broader on-demand grocery delivery ecosystem in iFood, credit in Payments and Fintech, and the expansion of our Edtech segment.
Our core Classifieds business, as well as iFood's restaurant delivery business in Brazil, remain profitable.
We expect HY23 to represent the high water mark in terms of trading losses, with profitability improving materially from this point on, as the benefits of our investment programme and cost reduction initiatives take hold.
A detailed breakdown of the Net Asset Value of the Prosus portfolio, based on market consensus estimates, is on the Prosus website here.
Classifieds - OLX Group3
Operational metrics across the core classifieds business remained stable, with 89m active listings, 80m monthly active app users and 2.1m paying listers.
OLX has focused efforts on improving productivity, efficiencies and on cutting costs to ensure a sustainable long-term business. Excluding OLX Ukraine, this has resulted in an 9 percentage point improvement in trading profit margin in core classifieds to 27%.
OLX Autos revenues grew by 84%, to US$1.0bn, as demand and prices for used cars remained high across several markets. Trading losses increased to US$206m driven by investment to expand our direct-to-consumer business. OLX Autos sold a record c.114,000 cars, up 60% on the prior period.
The segment delivered strong growth, with a focus on improving profitability in the core restaurant businesses, coupled with controlled investment in growth extensions, such as quick commerce and groceries. On an economic interest basis, GMV grew 26%, increasing revenues by 52% to US$1.9bn. Investment into adjacencies increased trading losses by US$69m, to US$381m.
iFood had an outstanding 6 months, as it continues to scale, and is on a defined path to profitable growth. In the core restaurant business in Brazil, orders increased by 2% and GMV by 13%, driving revenue growth of 29%, to US$606m. Trading profit was US$45m, with a trading margin of 7%, an improvement of 8 percentage points from the prior period. Overall, iFood trading losses improved to US$59m, reflecting continued investment in quick commerce and fintech initiatives.
Within quick commerce and grocery delivery, iFood operates a hybrid model, through partnerships with existing grocery retailers, while also investing in dark stores. Orders from these new initiatives grew 152% and GMV 102%.
Delivery Hero continued to deliver strong growth for its half year ended 30 June 2022, with GMV increasing 50% to €20.0bn and an improved adjusted EBITDA margin (as percentage of GMV) of -1.6% (prior period: -2.6%).
Swiggy's core restaurant food delivery business grew GMV by 40%, while its quick commerce GMV increased 15x during the first six months of the year. Our share of Swiggy's revenue grew 118% to US$150m.
Payments & Fintech - PayU
Total number of transactions grew 17% year-on-year, driving total payment volume (TPV) growth of 49% to US$46bn. Economic interest revenue increased 55% to US$480m, with a trading loss of US$97m. Consolidated revenue grew 57% to US$412m, on the back of growth in payments in India, Turkey and Poland, as well as scaling of the credit business in India. Consolidated trading losses expanded to US$80m, as we continued to invest in growing our credit operations in India.
In India, our largest payments market, TPV grew 59% to US$28bn, and revenue increased 48% to US$183m, following increased digitalisation in ecommerce, financial services and bill payments, and a rebound in post pandemic travel.
The Global Payments Operations, focused mainly in Europe and Latin America, delivered strong growth. TPV grew 38% and revenues were up 45% to US$181m.
Within PayU's fintech investment portfolio, our share of Remitly's revenue grew 46% to US$67m.
Wholly-owned Stack Overflow, a leading knowledge-sharing platform, delivered solid progress, with total bookings increasing by 53% in the period. Revenue grew organically by 33% to US$45m, driven by Stack Overflow for Teams, which enables organisatons to build their own internal communities on top of the open platform. By the end of the period, Stack Overflow for Teams had 1,262 paying teams, generating an annual recurring revenue of US$50m.
Our Edtech portfolio consists of 11 investments, covering the full span of learning from kindergarten through to grade 12 (K?12), and beyond, into third- and enterprise-level education.
South African businesses
In May 2022, Naspers Foundry invested R40m in Nile, a b2b marketplace connecting farmers to buyers of fresh produce and helping to make quality food accessible to people across Southern Africa. Naspers Foundry also built its growing fintech portfolio in the period, investing R40m in LifeCheq, a fintech platform driving financial inclusion by democratising access to financial advice.
Phuthi Mahanyele-Dabengwa, South Africa CEO, Naspers, commented:
In line with our commitment towards a decarbonised world, Naspers has recently signed 'The Climate Pledge', a commitment to reach net zero carbon emissions by 2040 - 10 years ahead of the goal set out in the United Nations' Paris Climate Agreement. Prosus has also joined the Partnership for Carbon Accounting Financials (PCAF), a global collaboration between investors and financial institutions to help standardise frameworks for climate accounting and target setting.
Earlier this year, we committed US$10m to support humanitarian aid efforts in Ukraine. Since then, we have deployed around US$8m of the total, to projects providing specialised medical equipment, mobile medical centres and modular houses.
Through technology investments, we are able to encourage entrepreneurs focused on solutions to help others. Now in its third year, the Prosus Social Impact Challenge for Accessibility (SICA) provides an annual grant and mentorship to Indian start-ups with the most innovative and promising solutions in the assistive technology space. The top five startups, to be announced in December, will have access to a pool of mentors and financing opportunities through SICA partners including Invest India and Social Alpha, as well as the World Health Organization.
For full details of the Group's results, please visit www.naspers.com.
Established in 1915, Naspers has transformed itself to become a global consumer internet company and one of the largest technology investors in the world. Through Prosus, the group operates and invests globally in markets with long-term growth potential, building leading consumer internet companies that empower people and enrich communities. Prosus has its primary listing on Euronext Amsterdam, and a secondary listing on the Johannesburg Stock Exchange and Naspers is the majority owner of Prosus.
In South Africa, Naspers is one of the foremost investors in the technology sector and is committed to building its internet and ecommerce companies. These include Takealot, Mr D Food, Superbalist, Autotrader, Property24 and PayU, in addition to Media24, South Africa's leading print and digital media business.
Naspers has a primary listing on the Johannesburg Stock Exchange (NPN.SJ) and a secondary listing on the A2X Exchange (NPN.AJ) in South Africa and has an ADR listing on the London Stock Exchange (LSE: NPSN).
For more information, please visit www.naspers.com.
Naspers is also focused on stimulating South Africa's local tech sector through Naspers Foundry. This is a R1.4 billion investment vehicle that invests in early-stage technology companies that seek to address big societal needs.
In 2019, Naspers Labs, a youth development programme designed to transform and launch South Africa's unemployed youth into economic activity, was launched. Naspers Labs focuses on digital skills and training, enabling young people to pursue tech careers.
Naspers for Good
Naspers employees is equally committed to giving back. Naspers for Good is a corporate philanthropy fund administered by a committee of employees in South Africa. Through the fund, Naspers forms partnerships with organisations that have a proven track record of delivering solutions for the most pressing challenges affecting our communities. Email [email protected] for more information.
1 Group results shown on economic-interest basis from continuing operations (i.e., including a proportionate consolidation of the contribution from associates and joint ventures), unless stated otherwise. All growth percentages shown in this media release are shown in local currency terms, adjusted for acquisitions and disposals.
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