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PROSUS N.V - Interim results announcement for the six months ended 30 September 2021

Release Date: 22/11/2021 08:00
Code(s): PRX     PDF:  
Wrap Text
Interim results announcement for the six months ended 30 September 2021

Prosus N.V.
Incorporated in the Netherlands
(Registration number: 34099856)
(Prosus or the group)
Euronext Amsterdam and JSE share code: PRX
ISIN: NL 0013654783



                                                         Six months ended     Year ended   
                                                           30 September         31 March   
                                                          2021     2020             2021    
                                                         US$'m    US$'m            US$'m   
Revenue                                                  3 065    2 173            5 116   
Operating loss                                            (304)    (207)          (1 040)  
Earnings per ordinary share (US cents)                   1 007      186              459   
Headline earnings per ordinary share (US cents)            149      150              360   
Core headline earnings per ordinary share (US cents)       148      139              299   

Over the past six months, the group posted a solid performance. Group revenue, measured on an economic-interest basis,
grew 31% (29%) to US$16.6bn. Our Ecommerce segment revenue accelerated 60% (53%) to US$4.2bn, after strong momentum in
the prior year. 

Group trading profit grew 8% (8%) to US$2.9bn, reflecting continued investment to fund growth by expanding our existing 
platforms, and building deeper relations with customers and partners. Core headline earnings were US$2.3bn, up 4% (2%). 
Additionally, we invested US$5.2bn in new acquisitions to expand our ecosystems, mainly in Edtech and Food Delivery.

These results reflect a diverse Ecommerce portfolio, which has grown significantly in value. Five years ago this portfolio, 
excluding Tencent, was valued by analysts at around US$13.0bn. Today that valuation is approaching US$50.0bn. We aim to 
increase the size of this portfolio over the coming years.

We back local entrepreneurs, invest through the economic cycle and adopt a long-term approach. This is evident in the
growth of our operations and the values of investments now publicly traded. These include Tencent, Delivery Hero,
VK/, (MakeMyTrip and ibibo) and, most recently, Remitly, Skillsoft, Sinch, SimilarWeb and Udemy. 

Over the last six months, we focused on maintaining growth and customer engagement, while leveraging increased scale
to develop opportunities in adjacent products and services. We are building ecosystems with multiple customer touchpoints
to improve both their experience and retention. We align technology and data with key customer needs such as convenience 
and ease of use. Given that long-term engagement with customers requires end-to-end capabilities, in the past six months 
we invested more in building products across our Ecommerce portfolio. 

With momentum across core segments, we have achieved scale in several markets. Classifieds emerged from the pandemic
stronger, with healthy growth at its core. We are amplifying that with a larger role in transactions. For example, OLX
Autos is merging online and offline car buying and finance to build the most trusted one-stop shop for transacting in

Food Delivery's performance remained strong. The scale achieved over the past 18 months has expanded the opportunity
beyond delivering food from restaurants to include convenience and grocery delivery. We participated in further funding
rounds in Swiggy and iFood, stepped up our investment in Delivery Hero, and invested in Flink and Oda, two young European
e-grocery (online grocery orders) businesses.

In Payments and Fintech, we recently announced the acquisition of BillDesk. After regulatory approval, this will create a 
top 10 online payments company globally by total payment volume. We also substantially increased our scale in India, one of 
the fastest-growing consumer internet markets. The combined business creates a platform to pursue additional opportunities 
to expand into digital banking. 

Edtech, our newest segment, grew well. The portfolio expanded with the acquisition of Skillsoft and its simultaneous listing, 
and the acquisitions of Stack Overflow and GoodHabitz. Our Edtech investments currently reach over 500 million users. 

Tencent delivered strong results and remains positioned for continued growth. In April 2021, to improve our financial
flexibility and reinforce our balance sheet, we sold 2% of its issued share capital, generating proceeds of US$14.6bn and 
reducing our holding to 28.9%. We have been investors in Tencent for over 20 years, with the only prior disposal being 2% 
in 2018. In both cases, proceeds were used to fund our strategic ambitions, resulting in meaningful net asset value
appreciation. The interests we acquired with proceeds from the initial sale of Tencent in 2018 include the majority of
our food assets, the Avito step-up investment and the Edtech portfolio. These are growing at an internal rate of return
of over 30%. We remain committed, long-term investors in Tencent and have agreed not to sell any further shares for a
three-year period. 

The listing of Prosus in Europe gave equity and debt investors exposure to fast-growing sectors in China, India and other 
emerging markets. In August 2021, Prosus concluded an exchange offer for 45.8% of Naspers N ordinary shares in issue. This 
transaction creates a capital structure that allows the inherent value of the group to be better reflected in the share 
prices of Naspers and Prosus. Naspers and Prosus are now better positioned on their home exchanges. Prosus rates as a top 
Euro Stoxx 50 company, and its free float had doubled its effective economic interest.

The group continued to crystallise returns and return capital to shareholders. In June, we completed a US$5.0bn share
purchase programme of Naspers and Prosus stock. In conjunction with the exchange offer, we also announced a further
US$5.0bn share repurchase programme of Prosus stock. This is being implemented through on-market acquisitions of Prosus
ordinary shares N. Up to 30 September, we paid US$1.5bn to repurchase Prosus ordinary shares N.

We aim to build on the strong momentum in our businesses. Given the significant potential we have identified, we are
investing to maintain momentum and to expand reach and impact. We will continue to invest in our platforms and create
ecosystems, particularly in autos transactions, credit and digital banking, and food and grocery delivery. At the same
time, we are driving profitability and cash generation in more mature businesses. Our goal is to build a business that 
will deliver sustainable value creation over the long term for all stakeholders.

Given the wide geographical span of our operations, as well as significant mergers and acquisitions (M&A) in Ecommerce, 
reported earnings are 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 these effects. These adjustments (pro forma 
financial information) are quoted in brackets after the equivalent metrics reported under International Financial
Reporting Standards (IFRS) as adopted by the European Union (IFRS-EU). 

The following segmental reviews are prepared on an economic-interest basis (which includes consolidated subsidiaries and 
a proportionate consolidation of associates and joint ventures), unless otherwise stated.

The group delivered good results for the first six months ended 30 September 2021: 

                                                                     Six months ended 30 September 2021
                                    2020           2021           2021          2021        2021      2021         2021        2021   
                                       A              B              C             D           E       F(2)         G(3)        H(4)   
                                                  Group          Group                                                        
                                            composition    composition       Foreign       Local                  Local               
                                  IFRS(1)      disposal    acquisition      currency    currency               currency               
                                Restated*    adjustment     adjustment    adjustment      growth    IFRS(1)      growth        IFRS   
                                   US$'m          US$'m          US$'m         US$'m       US$'m     US$'m     % change    % change   
Ecommerce                          2 608            (73)           240            40       1 356     4 171           53          60   
- Classifieds                        628             (7)            66           (11)        625     1 301         >100        >100   
- Food Delivery                      610             (2)            98            31         524     1 261           86        >100   
- Payments and Fintech               252             (5)             7            (4)        109       359           44          42   
- Etail                              965             (1)             -            27          38     1 029            4           7
- Edtech                              51              6             33             1          29       120           51        >100   
- Other                              102            (64)            36            (4)         31       101           82          (1)  
Social and Internet Platforms     10 082           (688)             -           931       2 138    12 463           23          24   
- Tencent                          9 912           (684)             -           931       2 091    12 250           23          24
- VK (previously            170             (4)             -             -          47       213           28          25
Corporate segment                      -              -              -             -           -         -            -           -  
Group economic interest           12 690           (761)           240           971       3 494    16 634           29          31  
Trading profit 
Ecommerce                           (214)            26            (62)          (11)       (111)     (372)         (59)        (74)
- Classifieds                         29             12              7             3          57       108         >100        >100
- Food Delivery                     (189)            15            (31)          (11)        (96)     (312)         (55)        (65)
- Payments and Fintech               (31)             3             (1)           (2)          -       (31)           -           -  
- Etail                               24              -              -             1         (36)      (11)       >(100)      >(100)
- Edtech                             (13)             1            (19)           (1)        (16)      (48)       >(100)      >(100)  
- Other                              (34)            (5)           (18)           (1)        (20)      (78)         (51)      >(100)  
Social and Internet Platforms      2 983           (205)             -           259         348     3 385           13          13  
- Tencent                          2 968           (205)             -           259         351     3 373           13          14
- VK (previously             15              -              -             -          (3)       12          (20)        (20)
Corporate segment                    (40)             -              -             -         (38)      (78)         (95)        (95)
Group economic interest            2 729           (179)           (62)          248         199     2 935            8           8  
 *  During the 31 March 2021 financial year-end, the way that corporate costs were presented to the chief operating decision-maker 
    (CODM) was changed. Corporate costs, previously allocated and disclosed in the "Other ecommerce" subsegment, are now included 
    in the "Corporate segment". This provides more clarity on the total corporate costs incurred by the group. This change had no 
    impact on the overall group trading (loss)/profit.
(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.

The group delivered encouraging results for the six months ended 30 September 2021. Group revenue, measured on an economic-
interest basis, grew 31% (29%) to US$16.6bn. This was driven by Ecommerce revenues, which rose 60% (53%), representing an 
acceleration of 23 percentage points (ppt) (2ppt). Our Economic-interest share in Tencent's revenue grew 24% (23%), an 
impressive performance given the size of its base. Group trading profit expanded 8% (8%) to US$2.9bn. Tencent's
contribution to the group's trading profit improved 14% (13%). 

Core headline earnings were US$2.3bn - up 4% (2%), driven by a bigger contribution from Tencent, despite our sale of a
2% holding in that group. This was partially offset  by investments to grow our ecommerce ecosystems and platforms. 

On a consolidated basis, total revenue increased by US$892m, or 41%, from US$2.2bn in the prior period to US$3.1bn for
the six months ended 30 September 2021 - primarily due to the Classifieds segment. The operating loss increased from
US$207m to US$304m as a result of investments to expand ecommerce units.

Our equity-accounted results increased with US$1.2bn, or 42%, from US$2.9bn in the prior period to US$4.1bn in the review 
period. The increase is driven primarily by Tencent and Delivery Hero. The equity-accounted results include investment 
disposal gains of US$1.1bn and net fair-value gains on financial instruments of US$993m. This was offset by the trimming 
of our holding in Tencent.

As a result of trimming our holding in Tencent, we recognised a gain of US$12.3bn.

Headline earnings decreased in the current period by US$74m to US$2.4bn. This was due to higher expenses for equity-settled 
share schemes recognised by equity-accounted investments as well as the increase in net finance cost and was offset by the 
increase in fair-value gains contributed by equity-accounted investments. The increase in finance cost is as a result of the 
issuance of new notes together with the market-value premium (ie the difference between the carrying value of the bond at 
amortised cost and the market value of the future contractual payments) of the redemption of the 2025 and 2027 notes.

In July 2021, we raised US$4.0bn in debt from a US dollar and euro offering. Some of the net proceeds were used to settle 
US$1.6bn 2025 and 2027 notes. Lively investor demand for these offerings resulted in attractive pricing, and enabled us to 
increase our debt capacity and reduce our average funding cost. The group has no debt maturities due until 2025.

We ended the period with a strong and liquid balance sheet. We hold net cash of US$3.0bn, comprising US$13.6bn in cash
and cash equivalents (including short-term cash investments), net of US$10.6bn in interest-bearing debt (excluding
capitalised lease liabilities). We also hold an undrawn US$2.5bn revolving credit facility. Overall, we recorded a net
interest expense of US$151m for the six months. 

Consolidated free cash inflow was US$118m, a decrease on the prior year's free cash inflow of US$370m. Tencent remains
a meaningful contributor to our cash flow via a stable and increasing dividend stream. Dividends from Tencent of US$571m 
(FY21: US$458m) offset the increased capital investment in Etail and additional working capital requirements in our Etail 
and Classifieds segments. 

There were no new or amended accounting pronouncements effective 1 April 2021 with a significant impact on the group's
consolidated 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 will be made public on 22 November 2021.

ADR programme
Bank of New York Mellon maintains a GlobalBuyDIRECT(SM) plan for Prosus N.V. For additional information, please visit
Bank of New York Mellon's website at 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 as adopted by IFRS-EU 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 22 November 2021 and the full 
condensed consolidated interim financial statements can be found on the company's website, and can be viewed on 
the JSE link, The condensed consolidated interim financial 
statements for the six months ended 30 September 2021 have been reviewed by PricewaterhouseCoopers Accountants N.V., our 
independent auditor. Their unqualified report is appended to the condensed consolidated interim financial statements available 
on 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

22 November 2021

Directors: JP Bekker (chair), B van Dijk (chief executive), 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, BJ van der Ross, Y Xu

Company secretary: L Bagwandeen

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

Euronext listing and paying agent: ING Bank N.V., Bijlmerplein 888, 1102 MG  Amsterdam, the Netherlands

Sponsor: Investec Bank Limited
Date: 22-11-2021 08:00:00
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