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E-commerce boosts Naspers revenue

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 30 Nov 2015
E-commerce remains a key focus for Naspers as it plans to raise R36 billion for future acquisitions.
E-commerce remains a key focus for Naspers as it plans to raise R36 billion for future acquisitions.

Naspers is considering raising $2.5 billion (R36 billion) worth of capital for future acquisitions, especially in the e-commerce space.

It continues its focus on the online shopping space which helped drive interim revenue, on an economic interest basis, to grow by 24% to R74.3 billion.

The South African-based global Internet and media company says currency had a material impact on its half-year results, and in US dollar terms, revenue grew by just 5% to $5.9 billion. Businesses outside South Africa now contribute 75% of Naspers revenue, an increase from 71% a year ago.

Naspers chairman Koos Bekker says the results for the six months to 30 September were in line with the board's expectations and the company "continues to build consumer platforms in growth markets".

Core headline earnings increased 45% to R8.8 billion, with Tencent and the South African video-entertainment business being the main contributors. These earnings were partly offset by an increase in development spend of R735 million. Headline earnings per share (HEPS) increased 27% while core HEPS rose almost 40%.

Expansion in e-commerce, combined with strong Tencent performance, resulted in revenue expansion in the Internet segment reaching 28% year-on-year on an organic basis to R47.7 billion. The segment now accounts for 64% of group turnover. Consolidated revenue grew 10% to R37.8 billion, boosted by strong e-commerce growth.

"Our changing revenue mix reflects investments globally in areas with strong customer engagement," says CEO Bob van Dijk.

E-commerce revenue was 27% higher on an organic basis to R15.3 billion, while investment to grow the business yielded a trading loss of R3.8 billion.

The group's share of the results of equity-accounted investments, mainly Tencent in China and Mail.ru Group in Russia, was R8 billion for the period. This included a R1.5 billion one-off gain by Tencent relating to changes in its shareholding of underlying associates.

Pay-TV headwinds

The DStv owner's direct-to-home television business in Sub-Saharan Africa "faced headwinds from a challenging economic environment, especially declining currencies".

However, the company believes its digital terrestrial television (DTT) business and the South African video-entertainment group "continue to deliver customer growth and improved financials".

The video entertainment segment saw revenue up 12% to R22.6 billion but television customer numbers remained fairly flat at 10.2 million. The company has 2.4 million DTT subscribers across Africa.

Naspers says economies in Sub-Saharan Africa have been severely impacted by currency devaluations and a weaker macro-economic climate, which has hurt subscription numbers for Sub-Saharan Africa's biggest pay-TV service. However, DStv's PVR penetration increased to 19.8% of South African customers and 9.7% of customers in the rest of Africa.

"We'll have to navigate the economic challenges in Africa over the next years," according to CFO Basil Sgourdos.

Naspers launched video-on-demand (VOD) service, ShowMax, in August as it prepares to take on global VOD giant Netflix's imminent arrival in South Africa. Trading profit remained fairly flat for the video entertainment segment due to the investment in ShowMax, along with sizeable foreign input costs in Sub-Saharan Africa and weakening economies and currencies.

Acquisition drive

"The classifieds business made progress. Naspers strengthened its position by acquiring a controlling stake in Avito in Russia. The retail, marketplace and travel businesses are widening the gap in operating metrics relative to competitors," says Van Dijk.

Last month, the media giant announced it would increase its stake in the Russian online classified platform from 17.4% to 67.9% in a deal worth R16 billion ($1.2 billion). Naspers says its plans to raise R36 billion will help "enhance financial flexibility over the next few years" and help in paying for the Avito acquisition as well as investments in other "attractive growth opportunities".

The company has appointed Citigroup and Morgan Stanley to advise in this regard.

Naspers continued its investment and acquisition drive during the half year under review, including increasing its investment in e-commerce site Takealot and investing in a joint venture with Konga Online Shopping. The firm has also invested R815 million to up its stake in Ambatana Holdings, an entity operating a hyperlocal classifieds marketplace app under the Letgo brand, to 67.5%.

The company made a number of other investments during the period, as well as disposing of its interests in the Beijing Media Corporation and Ricardo.ch AG.

Pressure for print

"Media24 continues to face sectoral headwinds in its traditional offline print and media business, but is addressing costs," according to the company.

Revenue of R4 billion was marginally up year-on-year, as the decline in the offline businesses was offset by growth in online services, e-commerce and Novus, the commercial print business listed on the Johannesburg Stock Exchange (JSE).

The segment is building new online and e-commerce initiatives. Reduced costs for the print segment resulted in a return to modest trading profit of R202 million, while development spend to build online initiatives was R142 million.

Naspers' share price on the JSE has rocketed over 470% over the past five years and is up around 53% in the last year. The company's market cap is worth around R913 billion, and as of mid-morning, the stock was up over 2% and trading at around R2 193 per share.

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