Naspers eyes multiple AI investment opportunities

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 29 Nov 2023
Ervin Tu has been appointed Naspers, Prosus interim CEO.
Ervin Tu has been appointed Naspers, Prosus interim CEO.

South African-based global consumer internet giant Naspers is looking to accelerate its investments in artificial intelligence (AI)-based companies.

This is according to Ervin Tu, interim group CEO of Prosus and Naspers, during a conference call with the media this morning.

This, after Naspers announced its interim results for the six months to 30 September.

According to Tu, Naspers has already made three investments in AI firms and it will be making further such deals in the space.

Market analyst firm IDC notes enterprises will invest nearly $16 billion worldwide in generative AI (GenAI) solutions in 2023.

This spending, which includes GenAI software, as well as related infrastructure hardware and IT/business services, is expected to reach $143 billion in 2027, with a compound annual growth rate of 73.3% over the 2023-2027 forecast period, it says.

High evaluations

Said Tu: “AI is an area in which we have real confidence and deep institutional knowledge. Not only are we transforming our existing portfolio of companies to make use of AI, but our AI venture schemes are working closely to evaluate hundreds of opportunities in the AI space.

“While our valuations are high, our discipline, experience and understanding provide us with an advantage. Through our venture scheme, we have made three investments in AI companies so far and expect more to come.”

The majority of tech giants − such as Microsoft, Amazon, Google, Meta and others − are making massive investments in AI.

Meanwhile, in its results, Naspers says consolidated revenue from continuing operations grew 9% to $3 billion (R55 billion). The greatest contributors were classifieds, food delivery, payments and fintech.

E-commerce consolidated trading losses from continuing operations decreased by $232 million (R4.3 billion) to $38 million (R706 million) in 1H24, as cost reductions and improved efficiencies came through.

It explains that trading losses for this segment have reduced from a peak of $270 million (R5 billion) in 1H23 and demonstrate the firm’s accelerated approach to breakeven. Free cash inflow was strong at $597 million (R11 billion).

Core headline earnings were $0.9 billion (R16 million) – an increase of 90% (112%). “This was primarily due to improved profitability of our e-commerce consolidated businesses and equity-accounted investments, particularly Tencent, and higher net interest income during the period,” says the company.

In the face of tough macro-economic conditions in SA, Naspers points out that e-tailer Takealot group’s gross merchandise value (GMV) and revenue grew by 15% and 9%, respectively, in local currency, excluding mergers and acquisitions (M&A).

Rising interest rates and inflation depressed consumer demand, while load-shedding created strain, it adds.

Despite this, Naspers points out Takealot managed to reduce its trading losses by a significant 85% when measured in US dollars, excluding any impacts from M&A. grew GMV by 15% in local currency, excluding M&A. It continues to grow its marketplace seller base, which reached approximately 10 600 sellers in September 2023.

According to the firm, Takealot’s vibrant marketplace empowers small and medium businesses and fuels the South African economy.

Mr D, a food, grocery and convenience delivery service, grew revenue by 11% and GMV by 15% in local currency, excluding M&A. Mr D’s partnership with local grocery retailer Pick n Pay continues to scale.

“We are making substantial progress against our commitment to drive profitable growth,” says Tu in a statement.

“Through active management of our portfolio, we have delivered improved results, as our e-commerce portfolio is now close to breakeven and growing at scale. We’ve simplified our group structure, and the open-ended buyback programme is driving daily NAV [net asset value] per share growth – magnifying returns over the long term.

“With deep institutional knowledge across a number of technology domains, including AI, we are well-positioned to support exceptional technology companies around the world. We remain ambitious in our plans and disciplined in our approach to drive real returns for all of our stakeholders.”

Success anchor

Basil Sgourdos, group CFO, Prosus and Naspers, comments: “The group has delivered strong financial performance, beating industry levels of growth, while significantly accelerating profitability.

“Driven by continued strong execution across our e-commerce portfolio, I expect this trajectory to continue at pace.

“Our classifieds and food delivery segments are both profitable, and PayU is making strong progress towards profitability. Core headline earnings have doubled and the impact of the strong improvements in e-commerce and Tencent are also evident in our free cashflow, which has increased six times.

“Our strong and flexible balance sheet, active portfolio management and disciplined capital allocation will underpin our success.”