Wrap Text
Interim Results announcement for the six months ended 30 September 2022
Prosus N.V.
Incorporated in the Netherlands
(Registration number: 34099856)
(Prosus or the group)
Euronext Amsterdam and JSE share code: PRX
ISIN: NL 0013654783
Interim results announcement for the six months ended 30 September 2022
Salient features
Year
Six months ended ended
30 September 31 March
2022 2021 2022
US$'m US$'m US$'m
Continuing operations
Revenue 3 240 2 753 6 237
Operating loss (287) (425) (1 061)
Earnings per ordinary share (US cents) 167 1 001 1 233
Headline earnings per ordinary share (US cents) - 143 194
Core headline earnings per ordinary share (US cents) 64 140 235
Total operations
Revenue 3 780 3 065 6 866
Operating loss (70) (304) (859)
Earnings per ordinary share (US cents) 181 1 007 1 243
Headline earnings per ordinary share (US cents) 14 149 204
Core headline earnings per ordinary share (US cents) 77 148 247
Commentary
Our businesses continued to deliver strong growth while navigating a challenging and fast-changing environment. Growth
expectations and valuations came under pressure as consumers adapted to new realities of higher inflation and interest
rates, plus the effect of these on their daily lives and spending power. We are reducing our cost base sharply to meet
these challenges and will take further action to deliver long-term value to our shareholders.
On an economic-interest basis, group revenue from continuing operations grew 1% (9%) to US$16.5bn. This was driven by
a healthy 35% (41%) increase in Ecommerce revenues. Trading profit declined to US$1.4bn, reflecting a lower share of
profits from Tencent and investment in new Ecommerce extensions (new initiatives), including autos, credit, quick
commerce and grocery delivery. For similar reasons, core headline earnings decreased by US$1.3bn. Percentages in
brackets represent growth in local currency, excluding mergers and acquisitions (M&A).
Our Ecommerce businesses maintained strong topline momentum. Growth came from core businesses and expansion into adjacent
opportunities. Consolidated revenue from continuing operations grew 18% (33%) to US$3.2bn, with meaningful contributions
from all main segments (Classifieds, Food Delivery, Payments and Fintech, and Edtech). Given a sharp rise in the cost of
capital, M&A investment of US$230m was considerably lower than in recent periods. We preserved capital and prioritised
organic investment in high-potential units in our Ecommerce portfolio. Our businesses are scaling and the focus is to
accelerate their path to aggregate profitability. While addressing cost, we still invested in growth, and consolidated
trading losses increased by US$209m to US$449m, driven by earlier-stage Ecommerce extensions.
We are cutting costs as we expect the operating environment to remain challenging for the foreseeable future. At the
same time, however, we want to accelerate various paths to profitability. Direct incremental investment went into those
areas where we identified the most opportunities to create future value, profitability and cash flow generation. New
initiatives accounted for US$483m of the consolidated trading loss, increasing by US$190m in local currency, excluding
M&A. As we invest, we are also driving efficiencies in our core consolidated businesses. We closed operations where we
believe profitable growth cannot be sustained. This will improve operating leverage and improve profitability for the
group in the medium term while creating a more efficient operating structure in the long term. We also continued cost-saving
initiatives, reducing our corporate footprint. Prudent management of our balance sheet remains a priority, ensuring a robust
liquidity position to navigate the rough environment and maintain our investment-grade rating. We hold net cash of US$619m,
which includes US$15.8bn in cash and cash equivalents which will be further bolstered by the conclusion of the sale of Avito.
The period under review represented the peak of investment. Moving into the second half of the year, we expect trading losses
to reduce as we realise the benefits and cost reductions take hold.
Classifieds revenue grew strongly, despite the impacts of a tough global economy and Russia's invasion of Ukraine, which
significantly affected OLX Europe. Investment to expand our direct-to-consumer business contributed to growth in OLX Autos,
which has achieved scale in a short period, while the core Classifieds' margin improved.
Our Food Delivery performance remained robust, driven by growth in quick commerce which leverages the scale achieved in the
restaurant delivery business. iFood grew in scale and improved its consolidated trading margins in both core food delivery
and quick commerce. Given this strength, we committed €1.5bn, plus a contingent consideration of up to €300m to acquire the
remaining 33.3% stake of iFood from Just Eat Takeaway. The transaction was approved by Just Eat Takeaway shareholders in
November 2022.
In Payments and Fintech, the core payments business made progress in growing volumes while pursuing additional opportunities
in credit. In India, progress was strong as margins improved in our core payments business and in credit, where we experienced
growth and financial improvement. A once-off provision in Brazil, as well as pressure on take rates and gross margins, drove
a lower margin in Global Payments Organisation (GPO).
In India, PayU eventually secured competition commission approval for the acquisition of BillDesk. However, certain conditions
precedent were not fulfilled by the 30 September 2022 long-stop date, and the agreement terminated automatically. Accordingly,
the proposed transaction will not be implemented. Prosus remains committed to the Indian market and to growing its existing
businesses in the region.
Edtech recorded strong revenue growth. Our enterprise platforms, Stack Overflow and GoodHabitz, invested in product
enhancement and footprint expansion, which drove a higher trading loss. Such investments were necessary to scale the platforms
and improve product offerings as these businesses are poised to benefit from corporations upskilling and reskilling their
workforce in the fast-changing technology-driven world.
In June 2022, the group launched an open-ended multi-year share repurchase programme funded by a limited, pre-set trim
of Tencent shares. We are taking advantage of the group's valuation discount to permanently enhance shareholders' per
share exposure to the net asset value (NAV) of our investments in Tencent and the Ecommerce portfolio. By 30 September
2022, Prosus had repurchased 53 991 368 Prosus shares and 4 152 285 Naspers shares, with a total value of US$4.1bn. This
has already led to a 2% increase in the NAV exposure. We expect this to create value for shareholders as we execute the
programme for as long as a discount to the value of the underlying portfolio of assets remains elevated.
As part of this programme, Naspers received approval from the South African Reserve Bank to continue funding its buyback
with regular sales of Prosus shares. By 30 September 2022, Naspers had sold 3 610 774 Prosus shares and bought back
1 510 321 of its own shares to the value of US$210m. Over time, we intend to execute the programme in a manner that will
keep the respective Prosus and Naspers free float shareholder groups' relative economic interest in the underlying assets
aligned with their position at the start of the programme.
In May 2022, the group announced an intention to exit its Russian classifieds business, Avito. We have completed the
disposal and received the proceeds of RUB151bn (US$2.4bn) in October 2022. Avito is now treated as a discontinued
operation in the financial results and thus excluded from continuing operations.
Given the wide geographical span of our operations and significant M&A activity in Ecommerce, reported earnings were
materially impacted by foreign exchange movements and the effects of acquisitions and disposals. Where relevant in this
short-form results announcement, we have adjusted for effects of foreign currency movements and impacts of acquisitions
and disposals. These adjustments (alternative performance measures) are quoted in brackets after the equivalent metrics
reported under International Financial Reporting Standards (IFRS). Growth rates represent a comparison between the period
ended 30 September 2022 and the comparative period ended 30 September 2021, unless otherwise stated. Percentages in
brackets represent growth in local currency, excluding M&A.
A reconciliation of the alternative performance measures to the equivalent IFRS metrics is provided in 'Other information -
Non-IFRS financial measures and alternative performance measures' of the condensed consolidated interim financial statements.
Financial review
The reviewed group's financial highlights for the six months ended 30 September 2022 are outlined below:
Six months ended 30 September
2021 2022 2022 2022 2022 2022 2022 2022
A B C D E F(2) G(3) H(4)
Group Group
composition composition Foreign Local Local
disposal acquisition currency currency currency
IFRS(1) adjustment adjustment adjustment growth IFRS(1) growth IFRS
US$'m US$'m US$'m US$'m US$'m US$'m % change % change
Continuing operations
Revenue
Ecommerce 3 858 (39) 416 (566) 1 548 5 217 41 35
Classifieds 988 (30) 1 (191) 571 1 339 60 36
Food Delivery 1 261 (13) 158 (145) 650 1 911 52 52
Payments and Fintech 359 (3) - (73) 197 480 55 34
Edtech 120 (2) 176 (5) 45 334 38 >100
Etail 1 029 - 11 (144) (44) 852 (4) (17)
Other 101 9 70 (8) 129 301 >100 >100
Social and Internet Platforms 12 463 (389) - (589) (176) 11 309 (1) (9)
Tencent 12 250 (176) - (589) (176) 11 309 (1) (8)
VK 213 (213) - - - - - (100)
Corporate segment - - - - - - - -
Economic interest from
continuing operations 16 321 (428) 416 (1 155) 1 372 16 526 9 1
Discontinued operations(5) 312 - 1 78 149 540 48 73
Group economic interest 16 633 (428) 417 (1 077) 1 521 17 066 9 3
Continuing operations
Trading profit
Ecommerce (522) 5 (198) 37 (320) (998) (62) (91)
Classifieds (42) (1) - 4 (120) (159) >(100) >(100)
Food Delivery (312) 5 (70) 26 (30) (381) (10) (22)
Payments and Fintech (31) - (1) (5) (60) (97) >(100) >(100)
Edtech (48) - (94) 3 (39) (178) (81) >(100)
Etail (11) (1) (3) 4 (27) (38) >(100) >(100)
Other (78) 2 (30) 5 (44) (145) (58) (86)
Social and Internet Platforms 3 385 (59) - (130) (699) 2 497 (21) (26)
Tencent 3 373 (47) - (130) (699) 2 497 (21) (26)
VK 12 (12) - - - - - (100)
Corporate segment (78) - - - (3) (81) (4) (4)
Economic interest from
continuing operations 2 785 (54) (198) (93) (1 022) 1 418 (37) (49)
Discontinued operations(5) 151 - 23 28 8 210 5 39
Group economic interest 2 936 (54) (175) (65) (1 014) 1 628 (35) (45)
(1) Figures presented on an economic-interest basis as per the segmental review.
(2) A + B + C + D + E.
(3) [E/(A + B)] x 100.
(4) [(F/A) - 1] x 100.
(5) From 1 April 2022, following the separation from OLX Group, the CODM reviewed the financial results of Avito separately.
Subsequent to the group's decision to exit this Russian business, Avito was presented as a discontinued operation. The
change has no impact on the overall group revenue, adjusted EBITDA and trading (loss)/profit in prior periods.
Group revenue, measured on an economic-interest basis, grew 1% (9%) to US$16.5bn. Revenue, in nominal terms, was impacted
by a broad devaluation of emerging-market and European currencies on translation to US dollars, representing a negative
foreign currency translation impact of US$1.2bn. Ecommerce continued a lively growth trajectory, with revenue growing 35%
(41%) in a challenging environment. Our economic-interest share in Tencent's revenue declined by 8% (1%).
Group trading profit declined by 49% (37%) to US$1.4bn, reflecting Tencent's 26% (21%) lower contribution to the group's
trading profit and losses in our consolidated ecommerce business of US$449m, plus our share of losses from ecommerce
associates (US$549m).
On a consolidated basis, total revenue increased by US$487m, or 18% (33%), from US$2.8bn in the prior period to US$3.2bn.
This was primarily due to strong revenue growth in OLX Autos and iFood. The operating loss increased by US$213m to US$531m,
representing increased organic investments to scale Ecommerce extensions.
Our equity-accounted results decreased by US$3bn, or 74%, from US$4.1bn in the prior period to US$1.1bn. The decrease is
driven primarily by our share of fair-value losses on financial instruments of US$371.5m compared to fair-value gains of
US$1bn in the prior period and additional impairment losses of US$185.3m in Tencent. This was in addition to reduced
profitability in Tencent of US$876m and lower profitability from Delivery Hero of US$530m due to a once-off gain in the
prior year. These were offset by an increase in our share of gains on disposals (US$747.2m) in Tencent. The sale of Tencent
shares to fund the buyback delivered a US$2.8bn gain in the current year. Our trim of our Tencent position resulted in a
gain of US$12.4bn during the prior period.
As a result of challenging macroeconomic conditions and the decline in growth expectations and valuations, the group
recognised impairment losses on equity-accounted investments of US$1.5bn. Impairments for our listed equity-accounted
investments relate primarily to Delivery Hero (US$1bn) and Skillsoft (US$204m), given a decline in market capitalisation
and the increase in discount rates and country risk premiums for these. Impairments for our unlisted equity-accounted
investments relate primarily to OfferUp (US$190m) due to the increase in market interest rates and a revised business
outlook. We remain confident in long-term potential and strategic value-add despite the short-term macroeconomic challenges
that drove the impairment.
Headline earnings decreased by US$2.3bn to a loss of US$6m. This was due to lower profitability across our associates,
including fair-value losses of US$371.5m in Tencent. This was partially offset by reduced share-based compensation expenses
related to remeasurement of the group's cash-settled scheme and no grants to executive directors, as well as lower net
finance costs due to a revaluation gain on our euro bonds.
Core headline earnings were US$897m - a decrease of 60% or US$1.3bn, primarily due to lower contributions from our associates
(US$1.1bn); US$879m of this relates to Tencent.
Following the announcement in May 2022 of the group's intention to exit its Russian classifieds businesses (the Avito group),
this disposal was classified as held for sale. In addition, the Avito group represents a separate major operation in a
geographical area and is reflected as a discontinued operation.
We remain well positioned to navigate the difficult macro environment due to our liquid balance sheet. We hold net cash of
US$619m, comprising US$15.8bn in cash and cash equivalents (including short-term cash investments), net of US$15.2bn in
interest-bearing debt (excluding capitalised lease liabilities). In addition, we have an undrawn US$2.5bn revolving
credit facility. During the period, we recorded a net interest expense of US$138m.
The group's free cash outflow (excluding Avito) was US$132m, a year-on-year decrease of US$129m. This was due to reduced
profitability (-US$126m) in our Ecommerce portfolio as we continue to invest in extensions across the portfolio. In
addition, working capital requirements have risen due to increased investment in credit businesses. Tencent remains a
meaningful contributor to our cash flow via a stable dividend of US$565m.
There were no new or amended accounting pronouncements effective 1 April 2022 with a significant impact on the group's
condensed consolidated interim financial statements.
The company's external auditor has not reviewed or reported on forecasts included in this short-form results announcement.
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 were made public on 23 November 2022.
ADR programme
Bank of New York Mellon maintains a GlobalBuyDIRECTSM plan for Prosus N.V. For additional information, please 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 - GlobalBuyDIRECTSM, Church Street
Station, PO Box 11258, New York, NY 10286-1258, USA.
Important information
This short-form results announcement 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 short-form results announcement, 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. This short-form results announcement will be released on 23 November 2022
and the full condensed consolidated interim financial statements can be found on the company's website, www.prosus.com
and can be viewed on the JSE link, https://senspdf.jse.co.za/documents/2022/JSE/ISSE/PRXE/Interims.pdf.
The condensed consolidated interim financial statements for the six months ended 30 September 2022 have been reviewed
by PricewaterhouseCoopers Inc., our independent auditor. Their unqualified report is appended to the condensed
consolidated interim financial statements available on www.prosus.com. 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.
On behalf of the board
Koos Bekker Bob van Dijk
Chair Chief executive
Amsterdam
22 November 2022
Directors: JP Bekker (chair), B van Dijk (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 Mahlerplein 5, 1082 MS Amsterdam, the Netherlands
Euronext listing agent: ING Bank N.V., Bijlmerplein 888, 1102 MG 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: Investec Bank Limited
www.prosus.com
Date: 23-11-2022 07:30:00
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