Naspers’ hidden R23 billion loss

If one strips out Tencent’s contribution to Naspers’ financial results, it exposes the company facing serious challenges.

On 24 June 2024, Naspers released its annual financial results for the year ending 31 March 2024.

Naspers said it was a standout year for the group. It simplified its structure, delivered improvements across all core performance metrics, and achieved eCommerce profitability.

“Operating businesses have performed well, accelerating profitable growth, while the open-ended buyback programme continues delivering value to shareholders,” it said.

“Naspers has a strong balance sheet and is well-positioned to generate improved returns through smart and disciplined capital allocation.”

Consolidated revenue grew 8% to US$6.4 billion, driven by strong performances at OLX and iFood.

eCommerce consolidated trading profit improved by US$460 million to US$24 million as growth, scale and cost reductions positively impacted results.

New Naspers and Prosus CEO Fabricio Bloisi said the results illustrate the “amazing progress we’ve made, as well as our future potential”.

“I’m excited about the potential to further leverage our ecosystem and keep improving our results,” he said.

“I’m confident in our ability to innovate, collaborate, and lead within existing and new sectors, as well as grow our businesses’ profitability.”

Naspers CFO Basil Sgourdos said their peer-leading growth accelerated, and profitable growth is set to continue.

Core headline earnings almost doubled, and our strong eCommerce results and performance at Tencent have driven a threefold increase in free cash flow,” he said.

“Our strong and flexible balance sheet, active portfolio management and disciplined capital allocation put us in a strong position to deliver against our long-term strategy.”

These statements sound like a company on the move which has seen strong revenue and profit growth.

However, delving deeper into the Naspers’ numbers shows that it remains its shareholding in Tencent, through Prosus, which is driving all profits.

Naspers’ profit for the year declined from US$9.954 billion to US$6.565 billion. This decline is purely related to Tencent dividends and share sales.

Its Tencent income over the last year was US$7.863 billion. It included US$5.053 billion in gains on Tencent share disposals and US$2.810 billion in shares of equity-accounted investments.

That means that Naspers’ US$6.565 billion profit for the year was US$1.298 less than what it received from Tencent.

Simply put, without Tencent, Naspers will be a struggling company with a loss of US$1.298 (R23 billion) for the year.

The table below summarises Naspers’ performance with and without Tencent.