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Interim results announcement for the six months ended 30 September 2020
Naspers Limited
(Registration number: 1925/001431/06)
(Naspers or the group)
JSE share code: NPN ISIN: ZAE000015889
LSE code: NPSN ISIN: US6315122092
Interim results announcement
for the six months ended 30 September 2020
COMMENTARY
September 2020 marked the first anniversary of the listing of Prosus on the Euronext Amsterdam stock exchange.
This created Europe's largest consumer internet company and a new investment opportunity on the global technology
stage, improving the group's access to international internet investors. A year on, ownership of Prosus continues
to expand and diversify. The group's recent inclusion in Europe's leading index, the Euro Stoxx 50, is expected to
attract additional European investor interest over time.
Given the wide geographical span of our operations and significant mergers and acquisitions (M&A) activity in
ecommerce, reported earnings are materially impacted by foreign exchange movements and the effects of acquisitions and
disposals. Where relevant in this report, we have adjusted for these effects. These adjustments (pro forma financial
information) are quoted in brackets after the equivalent metrics reported under International Financial Reporting
Standards (IFRS).
The earnings for the period ended 30 September 2020 compared to 30 September 2019 are impacted by the contribution
from the Prosus group post its listing and creation of the free float resulting in a significant non-controlling
interest of the group. As at 30 September 2019 we recognised 100% of the earnings compared to 72.66% in the
current period.
The following segmental reviews are prepared on an economic-interest basis (which include consolidated subsidiaries
and a proportionate consolidation of associates and joint ventures), unless otherwise stated.
SALIENT FEATURES
Six months ended Year ended
30 September 31 March
2020 2019 2019
US$'m US$'m US$'m
Revenue 2 497 1 730 4 001
Operating loss (274) (282) (720)
Earnings per ordinary share (US cents) 500 517 709
Headline earnings per ordinary share (US cents) 404 324 496
Core headline earnings per ordinary share (US cents) 363 379 646
SEGMENTAL REVIEW
The group's financial highlights for the period ended 30 September 2020 are outlined below:
Six months ended 30 September 2020
2019 2020 2020 2020 2020 2020 2020 2020
A B C D E F(2) G(3) H(4)
Group Group
composition composition Foreign Local Local
disposal acquisition currency currency currency
IFRS(1) adjustment adjustment adjustment growth IFRS(1) growth IFRS
US$'m US$'m US$'m US$'m US$'m US$'m % change % change
Revenue
Ecommerce 2 089 (229) 262 (238) 970 2 854 52 37
- Classifieds 596 (38) 140 (43) (20) 635 (4) 7
- Payments and Fintech 199 (8) 24 (18) 55 252 29 27
- Food Delivery 306 (7) 2 (112) 421 610 >100 99
- Etail 695 (6) 81 (39) 472 1 203 69 73
- Travel 146 (146) - - - - - (100)
- Other 147 (24) 15 (26) 42 154 34 5
Social and internet
platforms 8 017 (82) - (55) 2 202 10 082 28 26
- Tencent 7 800 (25) - (33) 2 170 9 912 28 27
- Mail.ru 217 (57) - (22) 32 170 20 (22)
Media 139 - 2 (15) (42) 84 (30) (40)
Corporate segment (2) - - 2 - - - 100
Intersegmental - - - (1) - (1) - -
Group economic interest 10 243 (311) 264 (307) 3 130 13 019 32 27
Trading profit
Ecommerce (433) 46 (35) (3) 86 (339) 22 22
- Classifieds 42 16 (21) (12) (10) 15 (17) (64)
- Payments and Fintech (38) 3 (2) (1) - (38) - -
- Food Delivery (283) 3 (1) 3 91 (187) 33 34
- Etail (37) 3 (1) 3 42 10 >100 >100
- Travel (21) 21 - - - - - 100
- Other (96) - (10) 4 (37) (139) (39) (45)
Social and internet
platforms 2 334 (63) - (18) 730 2 983 32 28
- Tencent 2 264 (7) - (16) 727 2 968 32 31
- Mail.ru 70 (56) - (2) 3 15 21 (79)
Media 4 - - 4 (24) (16) >(100) >(100)
Corporate segment (9) - (1) 4 (3) (9) (33) -
Group economic interest 1 896 (17) (36) (13) 789 2 619 42 38
(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.
FINANCIAL REVIEW
The group delivered good results for the first six months ended 30 September 2020, despite Covid-19. Group revenue,
measured on an economic-interest basis, was US$13.0bn, reflecting growth of 27% (32%), a meaningful acceleration of 16pp
(12pp) over the same period last year. Ecommerce revenues grew 37% (52%) year on year. Tencent grew revenues by a healthy
27% (28%). Group trading profit grew 38% (42%) to US$2.6bn. Tencent's contribution to the group's trading profit
improved 31% (32%).
Core headline earnings were US$1.6bn - down 6% (5%). Core headline earnings are largely impacted by reduced earnings
contributions in the current year from the Prosus group, post its listing in September 2019 and the creation of the free
float resulting in a significant non-controlling interest of the group. As at 30 September 2019 we recognised 100% of
the Prosus earnings compared to 72.66% in the current period. The non-controlling interest share in the core headline
earnings for the period is US$591m. We refer shareholders to the separate Prosus condensed consolidated interim financial
statements which are free of the impacts outlined in this paragraph and outline the good increases in headline earnings
and core headline earnings delivered by the group's operations. We remind shareholders that Prosus represents most of
the group's operations. Overall, core headline earnings reflect strong performance of the group, driven by improved
profitability from our Ecommerce units and the growing contribution from Tencent.
We ended the period with a strong and liquid balance sheet. We had a net cash position of US$4.6bn, comprising
US$10.3bn in cash and cash equivalents (including short-term cash investments), net of US$5.7bn in interest-bearing debt
(excluding capitalised lease liabilities). We hold an undrawn US$2.5bn revolving credit facility. Overall, we recorded
net interest expense for the period of US$41m.
In July 2020, Prosus, Naspers's 72.66%-owned subsidiary, successfully raised more than US$2bn in debt, comprising its
longest-dated US dollar offering to date and its debut euro notes offering. The offerings drew strong investor demand,
resulting in attractive pricing that reduced the group's average funding cost while extending the blended maturity
profile of its outstanding notes to almost 12 years. The proceeds will be used for general corporate purposes, including
future M&A activity, and to further augment the company's liquidity. Issuances consisted of 2050 US$1bn 4.027% notes,
2028 Euro500m 1.593% notes and 2032 Euro500m 2.031% notes. The group has no debt maturities due until 2025.
Consolidated free cash inflow was US$292m, a significant improvement on the prior year's free cash inflow of US$19m.
This reflects growth in our Ecommerce unit's profitability, dividends received from Tencent of US$458m (2019: US$377m)
and improved working capital management.
There were no new or amended accounting pronouncements effective from 1 April 2020 with a significant impact on the
group's condensed consolidated interim financial statements.
Effective 1 April 2020, the group made a voluntary change to its accounting policy on the subsequent measurement of
written put option arrangements with non-controlling shareholders. Subsequent changes in the carrying value of put option
liabilities previously recognised in the income statement in "Other finance income/(costs) - net" are now recognised
through equity. We believe the change in accounting policy will provide more relevant information about the effects of
underlying transactions with non-controlling shareholders. Written put option arrangements are considered equity
transactions because the settlement with non-controlling shareholders does not result in losing control over a subsidiary.
Furthermore, on initial recognition of the written put option liability, the group simultaneously recognises the
non-controlling interest because the risks and rewards of ownership are not deemed to have transferred to the group
until the written put option liability is settled.
The group has adopted this change in accounting policy retrospectively, however, the impact is insignificant to the
consolidated statement of financial position as all previous remeasurements recognised through the income statement
are already accumulated in equity as at the effective date of the change. The previous remeasurements accumulated in
retained earnings have been reclassified to the "existing control business combination reserve". Consequently, comparative
figures on the statement of financial position have been restated for the reclassification between retained earnings and
other reserves. The carrying value of the written put option liabilities and the total equity of the group in the comparative
periods remain unchanged. The condensed consolidated income statement and finance income/costs note have been restated
for the remeasurement of written put option liabilities as these are now recognised directly in equity.
The company's external auditor has not reviewed or reported on forecasts included in this interim results
announcement.
We continue to explore growth opportunities to advance our strategy, expand our ecosystem and position the business
for sustainable growth. In our Classifieds segment, we merged letgo and OfferUp, resulting in a business with national
reach across the United States (US), well positioned for growth in a highly competitive market. The merger included a new
US$120m investment round led by Prosus. Furthermore, we injected our Middle Eastern Classifieds assets into Emerging
Markets Property Group (EMPG) and participated in a US$150m financing round that valued the business at over US$1bn. OLX
Brazil has subsequently completed the US$520m (BRL2.9bn) acquisition of leading real estate vertical Grupo ZAP, announced
in March 2020. In our Payments and Fintech segment, we made an additional investment of US$53m in Remitly to expand its
footprint in the US, United Kingdom (UK) and Canada. We participated in Mail.ru's capital raise to fund growth
initiatives, investing US$25m. Finally, we are focused on increasing our exposure to edtech (educational technology) by
investing US$60m in Eruditus, a global professional higher-education online platform. In November we announced a total
investment of US$500m in Churchill Capital Corp II's planned acquisition of Software Luxembourg Holding S.A. (Skillsoft)
and Global Knowledge Training LLC (Global Knowledge). The transaction will create the world's leading digital learning
company with a comprehensive suite of on-demand and live virtual content.
COVID-19
We started the financial year in April 2020 responding to the onset of the Covid-19 pandemic, which has proven to be
a global challenge. Despite the social and economic impact across the world, Naspers remained resilient and performed
well in the first half of the current financial year - accelerating revenue growth, improving profitability and cash
flow generation, and growing customer numbers as consumers moved online. Ecommerce revenues grew 37% (52%) year on
year. Group trading profit grew 38% (42%).
Like most companies, Naspers faced challenges, particularly in countries where government lockdown regulations were
extensive and protracted, reducing economic activity. We quickly implemented our contingency plans and we saw a sharp
recovery in all of our businesses as lockdown regulations began easing.
Throughout the crisis, we prioritised the health and wellbeing of our employees, safeguarded jobs as far as possible,
and protected and positioned our business for the long term. When necessary, we extended support to our partners to
ensure the supply chain remained strong, and donated to government Covid-19 response programmes.
After the easing of lockdowns and curfews in many countries in the second quarter, almost all business activities have
resumed year-on-year growth. In addition, Tencent remained resilient throughout the pandemic and is performing well.
Unfortunately, a second Covid-19 wave is impacting some markets in which we operate, however, we remain confident that
the plans we have put in place and our firm financial position will ensure that we manage the potential impacts going
forward. Longer term, we believe we will benefit from the acceleration of the underlying trends to online platforms
which propel the growth of the consumer internet market, and we will ensure our businesses are positioned to emerge
well from the crisis.
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 2020.
ADR programme
Bank of New York Mellon maintains a GlobalBuyDIRECT(SM) plan for Naspers Limited. 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 - 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 concerning our financial condition, results of operations and businesses. These forward-looking statements
are subject to a number of risks and uncertainties, many of which are beyond our control and all of which are based on our
current beliefs and expectations about future events. Forward-looking statements are typically identified by the use of
forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "intends", "estimates",
"plans", "assumes" or "anticipates", or the negative thereof, or other variations thereon or comparable terminology, or
by discussions of strategy that involve risks and uncertainties. These forward-looking statements and other statements
contained in this report regarding matters that are not historical facts involve predictions. No assurance can be given
that such future results will be achieved. Actual events or results may differ materially as a result of risks and
uncertainties facing us and our subsidiaries. Such risks and uncertainties could cause actual results to vary materially
from the future results indicated, expressed or implied in such forward-looking statements. There are a number of factors
that could affect our future operations and could cause those results to differ materially from those expressed in the
forward-looking statements, including (without limitation): (a) changes to IFRS and associated interpretations, applications
and practices as they apply to past, present and future periods; (b) ongoing and future acquisitions, changes to domestic
and international business and market conditions such as exchange rate and interest rate movements; (c) changes in
domestic and international regulatory and legislative environments; (d) changes to domestic and international operational,
social, economic and political conditions; (e) labour disruptions and industrial action; and (f) the effects of both
current and future litigation. The forward-looking statements contained in the report speak only as of the date of the
report. We are not under any obligation to (and expressly disclaim any such obligation to) revise or update any
forward-looking statements to reflect events or circumstances after the date of the report or to reflect the occurrence
of unanticipated events. We cannot give any assurance that forward-looking statements will prove correct and investors
are cautioned not to place undue reliance on any forward-looking statements.
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 was released on 23 November 2020
and the full condensed consolidated interim financial statements can be found on the company's website, www.naspers.com
and can be viewed on the JSE link, https://senspdf.jse.co.za/documents/2020/JSE/ISSE/NPN/Interims.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. The condensed consolidated interim financial statements for the six months ended 30 September 2020 have
been reviewed by PricewaterhouseCoopers Inc., our independent auditor. Their unqualified report is appended to these
condensed consolidated interim financial statements available on www.naspers.com. Any investment decision should be based
on the full condensed consolidated interim report published on SENS and 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
Cape Town
23 November 2020
Directors: J P Bekker (chair), B van Dijk (chief executive), E M Choi, H J du Toit, C L Enenstein, D G Eriksson,
M Girotra, R C C Jafta, F L N Letele, D Meyer, R Oliveira de Lima, S J Z Pacak, V Sgourdos, M R Sorour,
J D T Stofberg, B J van der Ross, Y Xu
Company secretary: L Bagwandeen
Registered office: 40 Heerengracht, Cape Town 8001 (PO Box 2271, Cape Town 8000, South Africa)
Transfer secretaries: Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie House,
19 Ameshoff Street, Braamfontein 2001 (PO Box 10462, Johannesburg 2000, South Africa)
Sponsor: Investec Bank Limited
www.naspers.com
Date: 23-11-2020 07:45:00
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