Netherlands-based internet and e-commerce group Prosus’s trading profit fell sharply in the first half of its 2023 financial year despite an increase in overall revenue.
The Amsterdam and JSE-listed subsidiary of Naspers said yesterday that trading profit for the six months to September 30 fell 37% to $1.4 billion (R24bn), reflecting also the impact of e-commerce technology extensions and currency headwinds in emerging markets.
Prosus’s share price gained 2.64% on the JSE to R1021.82 on the JSE in early trade yesterday.
Revenue climbed 9% to $16.5bn due mainly to a 41% increase in e-commerce revenue across all core segments.
Core headline earnings were down 60% to $897 million, the results showed. Revenue was boosted with “meaningful contributions” from all main operating segments, classified food delivery, payments, fintech and edtech.
Merger and acquisition investment of $230m was lower than in previous periods due to the high cost of capital, and after capital was preserved and organic growth prioritised in high-potential units in the e-commerce portfolio.
“Our businesses are scaling and the focus is to accelerate their path to aggregate profitability. While addressing cost, we still invested in growth, and consolidated trading losses increased by $209m to $449m, driven by earlier-stage e-commerce extensions,” CEO Bob van Dijk said in the results.
“The period under review represented the peak of investment. Moving into the second half of the year, we expect trading losses to reduce as we realise the benefits and cost reductions take hold,” he said.
He said expectations and valuations had come under pressure as consumers adapted to new realities of higher inflation and interest rates.
“We are reducing our cost base sharply to meet these challenges and will take further action to deliver long-term value to our shareholders,” he said.
The free cash outflow was $132m, a year-on-year decrease of $129m. This was due to reduced profitability in the e-commerce portfolio as investment in the businesses continued. In addition, working capital requirements rose due to increased investment in credit businesses. Tencent contributed to cash flow via a dividend of $565m.
A “robust liquidity position” was maintained on the balance sheet to navigate the rough environment and maintain the investment-grade rating. Net cash came to $619m, which included $15.8bn in cash and its equivalents, which would be further bolstered by the conclusion of the sale of Avito.
Some €1.5bn (R26bn), and a contingent amount of up to €300m was committed to acquire the remaining 33.3% stake of iFood from Just Eat Takeaway, a deal approved by Just Eat Takeaway shareholders this month.