The CFO believes their track record and disciplined approach will continue to deliver excellent returns.
Naspers released their half-year results ended 30 September last week, announcing that their “e-commerce units delivered strong profit contributions”.
Naspers Group CFO Basil Sgourdos said:
“We executed well in the first half of the financial year, growing revenue 29 percent to US$11.0 billion, and trading profit 34 percent to US$2.0 billion. The classifieds business is now profitable including letgo. Trading-loss margins in e-tail [the business segment consisting of eMag, Takealot and Flipkart] and payments narrowed considerably as the businesses delivered solid revenue growth and continued to scale. Naspers continues its track record of locking in strong returns with the recent sale of Flipkart.”
Flipkart was sold for a sizeable US$1.6 billion gain and an implied IRR of 29 percent.
The group’s core headline earning grew 39 percent to US$1.7 billion.
Basil told CFO South Africa:
“We continue to deliver healthy returns as we optimise our portfolio. Return on investment remains important when allocating capital. By comparing all internet investments (excluding Tencent) since 2008 against current market valuations, our IRR remains at 17 percent. The IRR on a similar basis, but based on our existing assets, is 22 percent. Rates are significantly ahead of our cost of capital, Nasdaq and many of our peers. This track record (including ~29 percent Flipkart IRR) and our disciplined approach to capital allocation, provides us with confidence that we can generate excellent returns for shareholders by investing in growth opportunities.”
This came shortly after the unbundling and seperate listing on the JSE of MultiChoice Group.
Basil said that Naspers will continue to invest in future growth and that they will do so with the same disciplined capital allocation approach that has driven their success to date. They have set their sites on acquisitions in Africa in the coming months for their $10 billion stockpile.
“With regard to capital allocation going forward it's hard to predict how much and how fast we will be allocating but we have a good pipeline of opportunities we are exploring and hope we can bring some of those across the finish line in the current financial year.”
He concluded that this year’s market correction has benefited Naspers:
“As painful as it has been, a market correction like the one we have seen this year, typically benefits well capitalised companies like Naspers and may create opportunities to put capital to good use and deliver great future returns.”