Prosus

 

Summary from the annual report 2024

for the year ended 31 March 2024

 

 

Extract from the annual report

 

 

Commentary

We are pleased to report that the group has achieved consolidated Ecommerce profitability in the second half of the financial year and is also profitable for the full year ended 31 March 2024 (FY24). This is significantly ahead of our commitment to achieve consolidated Ecommerce profitability in the first half of the financial year ending 2025. Our work continues to focus on delivering sustained, profitable growth, which we believe will highlight the value of our businesses over time.

 

Unless otherwise stated, the growth rates discussed further in this report compare FY24 to FY23. The percentages in brackets represent local currency growth, excluding the impact of acquisitions and disposals (M&A), and provide a clearer view of our businesses' underlying operating performance. Financial results are presented on a continuing operations basis.

 

For the 12 months to 31 March 2024, the group intensified its focus on profitable growth in its core growth businesses, and driving improvements in underperforming investments. Consolidated revenue grew 11% (19%) to US$5.5bn, driven by strong performances at OLX and iFood. Ecommerce consolidated trading profit improved by a sizeable US$451m (US$429m) to US$38m in FY24 as growth, scale and cost reductions positively impacted results. Consolidated trading losses for the group have reduced by US$468m (US$446m) to US$118m, underlining our accelerating profitability path.

 

Core headline earnings, our measure of after-tax operating performance, were US$5.0bn - an increase of 84% (109%).

 

While we continue to seek long-term growth opportunities, external investment (M&A and minority investment) was limited to US$571m, meaningfully off the US$6.3bn peak in 2022 as we maintained discipline in a challenging investment landscape. Historically the group had achieved some investing success over a sustained period of time. But in the last two years, our internal rate of return (IRR) has been far below target. Steps have been taken to learn from our errors and address this underperformance, including by more actively engaging with our major operating companies and investments, flattening our overall organisation to get closer to our businesses and redesigning the investment team, investment process and incentives. Enhancing our knowledge, expertise and capability is the group's DNA, and when we have conviction in our ideas, we will increase our deployment of capital.

 

We have created additional value for our shareholders by continuing the open-ended share-repurchase programme. Since its inception in June 2022, this programme has reduced the free-float share count by 21% and generated US$30bn of value for shareholders. From the programme's launch to 31 March 2024, the combined holding company discount of Naspers and Prosus has reduced by some
21 percentage points. Over the same period, Prosus has repurchased 318 170 126 Prosus ordinary shares, with a total value of US$17.1bn, leading to 8.2% accretion in net asset value (NAV) per share. Naspers funds its open-ended share-repurchase programme with regular sales of Prosus shares. By 31 March 2024, Naspers had sold 113 092 796 Prosus ordinary shares N and bought back
34 793 336 Naspers N ordinary shares to the value of US$5.7bn.

 

In September 2023, we simplified our structure by removing the cross-holding structure, with overwhelming shareholder support. Stronger performance of our operating businesses, better investments, and our open-ended share-repurchase programme are important contributors to long-term value creation and shareholder returns. The group remains committed to these goals.

 

iFood continues to deliver strong performance which underlines its position as one of the best food delivery businesses globally. iFood's core restaurant food delivery businesses generated a strong increase in trading profit of US$166m (US$137m) year on year (YoY). Progress has been made in developing growth extensions further and the management team at iFood see significant potential in their lending, grocery and meal vouchers business. This strong ecosystem is central to iFood's long-term potential.

 

Our Classifieds businesses accelerated profitability markedly, driven by strong revenue growth and effective cost-control measures, particularly in OLX Europe. During the year, we concluded deals or closed most of OLX Autos, the automobile transaction business.

 

PayU continued to grow well in its core payment service provider (PSP) business. Strong revenue growth and improved profitability were driven by improved operating leverage and effective cost control, despite regulatory hurdles in India. The sale of GPO, announced in August 2023, is progressing and expected to close in the second half of calendar 2024.

 

In the Edtech segment the broad adoption of generative artificial intelligence (GenAI) tools and challenging macroeconomic conditions have affected our businesses, particularly Stack Overflow. Revenue growth has been more modest than anticipated, and we have taken significant action to improve trading profit and free cash flow performance given this revenue base. Stack Overflow has leveraged the group's inhouse AI capabilities to improve its AI value proposition with positive early results. GoodHabitz is benefiting from its investments in product enhancements and a more measured international rollout programme.

 

The group's balance sheet is strong, with US$16.0bn cash on hand (including short-term investments). We remain committed to managing our balance sheet within its investment-grade rating; therefore, not all of the cash on the balance sheet is available to the group. At 31 March 2024, our estimate is that approximately US$8.0bn is available for new investment.

 

In September 2023, Bob van Dijk stepped down as chief executive after nearly 10 years at the helm. Ervin Tu, the group's chief investment officer (CIO), was appointed as interim chief executive. On 17 May 2024, we announced the appointment of iFood CEO, Fabricio Bloisi as group chief executive. Fabricio acquired iFood in 2013 when it was a 20-person start-up. He has since grown it rapidly and profitably to become Brazil's leading food delivery company and one of the best food delivery businesses globally. Fabricio is a proven entrepreneur and innovator with deep roots in operating, building and scaling world-class technology companies in growth markets. Ervin will continue to play an important role in shaping the group's future in a new position, president and CIO.

 

A reconciliation and relevance of alternative performance measures to the equivalent International Financial Reporting Standards (IFRS) metrics is provided in 'Other information - financial alternative performance measures' of this annual consolidated financial commentary. Economic interest represents results reported on an economic-interest basis, ie, equity-accounted investments are proportionally consolidated within reportable segments.

 

Financial review

Consolidated revenue from continuing operations increased by US$520m (US$915m), or 11% (19%), from US$4.9bn in the prior year to US$5.5bn. This was primarily due to strong revenue growth in Classifieds and Food Delivery.

 

Operating losses

Operating losses decreased by US$481m to US$546m due to greater profitability from the group's consolidated businesses and lower impairment losses recognised in the current year. This is offset by an increase in expenses from the remeasurement of the share-based payment liability. Given challenging macroeconomic conditions and the decline in growth expectations and valuations, we recognised impairment losses on goodwill and other assets of US$374m (FY23: US$612m), primarily related to Stack Overflow in the Edtech sector.

 

Ecommerce consolidated trading profit from continuing operations improved by US$451m (US$429m) to US$38m in FY24 as growth, scale and cost reduction boosted profitability. Aggregate trading losses for the group have reduced by US$468m (US$446m) from a peak of US$586m in FY23.

 

Net finance income/expense

The group generated net interest income of US$428m in FY24 (FY23: net interest expense of US$133m). Interest income increased by US$437m, or 92%, from US$475m in the prior year to US$912m in FY24 due to higher interest rates and cash balances on hand. Interest expense increased 1% to US$557m in FY24.

 

Other finance income rose from a loss of US$55m in the prior year to income of US$73m in FY24. This relates primarily to a gain on foreign exchange differences related to the translation of assets and liabilities, offset by fair value losses of derivative instruments, which include forward exchange contracts and other derivative financial instruments.

 

Share of equity-accounted results

Profit from equity-accounted results decreased by US$2.4bn, or 46%, from US$5.2bn in the prior year to US$2.8bn. This is driven primarily by Tencent's decreased gains on acquisitions and disposals of US$5.8bn offset by a decrease in impairment losses of US$1.3bn and increased contribution from its associates of US$638m. A further positive offset to the lower gains on assets disposals
is Tencent's strong increase in profitability by US$1.1bn to US$6.2bn.

 

Trimming the group's Tencent position by 2% resulted in a gain of US$5.1bn during the year (FY23: US$7.6bn).  

 

In addition, we recognised impairment losses on equity-accounted investments of US$483m related to Delivery Hero (US$255m), Skillsoft (US$42m) and unlisted equity-accounted investments of (US$186m).

 

 

Income tax expense

Income tax expense rose to US$161m from US$42m in the prior year, primarily due to increased profitability from our continuing operations.

 

Earnings, headline and core headline earnings

Earnings from continuing operations decreased to US$6.9bn from US$9.8bn in the prior year. This was primarily due to a decline in equity-accounted results, partial disposal of the investment in Tencent offset by lesser impairment losses recognised in the current year.

 

Core headline earnings from continuing operations were US$5.0bn - an increase of 84% (109%) or US$2.3bn. This was mainly driven by the improved profitability of our Ecommerce consolidated businesses and equity-accounted investments, particularly Tencent, as well as higher net interest income during the year.

 

Headline earnings from continuing operations rose US$2.7bn to US$3.4bn, given the same factors noted for core headline earnings.

 

Loss from discontinued operations

In March 2023, the group announced its exit from the OLX Autos business unit. All the operations of this business are presented as discontinued operations as they have been disposed of, classified as held for sale or closed by 30 September 2023. OLX Autos operations previously presented in continuing operations for 31 March 2023 have been presented in discontinued operations as of
31 March 2024.

 

Losses from discontinued operations during the year were US$270m related to the Autos business unit. This includes impairment losses of US$137m for the operation classified as held for sale as at 31 March 2024.

 

Revenue and trading profit on an economic-interest basis

Group revenue, measured on an economic-interest basis, grew 1% (12%). Ecommerce continued a strong growth trajectory, with revenue growing 13% (17%) in a challenging environment. Our economic-interest share in Tencent's revenue grew by -4% (10%). Trading profit on an economic-interest basis grew 61% (82%) to US$5.8bn, reflecting improved profitability of our Ecommerce consolidated businesses and equity-accounted investments, particularly Tencent.

 

Cash balances and free cash flow

The group remains well positioned to navigate a difficult macroeconomic environment due to its strong balance sheet. At corporate level, Prosus has a net debt position of US$618m, comprising US$14.6bn in central cash and cash equivalents (including short-term cash investments), net of US$15.2bn in central interest-bearing debt (excluding capitalised lease liabilities). In addition, we have an undrawn US$2.5bn revolving credit facility.

 

The group's free cash inflow was US$422m, a sizeable improvement from the prior year free cash outflow of US$382m. This was due to increased profitability in Food Delivery and Classifieds as well as better working capital management in the Etail segment and Payments and Fintech. Excluding OLX Autos, free cash inflow was US$524m. Tencent remains a meaningful contributor to our cash flow via an increasing dividend which was US$759m for the financial year ended 2024. The group has also received its dividend for the financial year ending 2025 amounting to US$1.0bn.

 

There were no new or amended accounting pronouncements effective 1 April 2023 with a significant impact on the group's annual consolidated financial statements. 

 

The company's external auditor has not reviewed or reported on forecasts included in this annual consolidated financial commentary. 

 

Segmental review

Ecommerce

Ecommerce consolidated revenue from continuing operations increased by US$520m (US$915m), or 11% (19%), from US$4.9bn in FY23 to US$5.5bn in FY24. This was primarily due to strong revenue growth in Food Delivery and Classifieds. For the first time, Ecommerce recorded a consolidated trading profit of US$38m, from a trading loss of US$413m in FY23, with Food Delivery and Classifieds delivering ahead of expectations. On an economic-interest basis, ecommerce revenue grew 13% (17%) to US$10.3bn and trading losses reduced by US$1.0bn (US$876m) to US$275m.

 

Food Delivery

iFood is Prosus' only consolidated food delivery business. In addition, Prosus has several investments in associates, most notably Delivery Hero and Swiggy.

 

 

iFood

iFood delivered a strong performance in FY24. The business accelerated sales at its core food delivery business into the second half of the year (2H24).

 

iFood grew gross merchandise value or GMV by 20% (in line with FY23), with 2H24 growth 10 percentage points higher than 1H24. Order growth remained strong (18%), 4 percentage points ahead of 1H24 growth of 14%. iFood recorded nearly 56 million active
users annually (over 22 million monthly unique buyers) who connect to over 350 000 merchants and over 313 000 drivers operating
in 1 530 cities in Brazil.

 

Revenue grew 22% in local currency, excluding M&A, to US$1.2bn, driven by strong performance from its core business. iFood grew trading profit by 248% (249%) to US$96m, led by the core food delivery business which grew by US$137m in local currency, excluding M&A. Improved trading profit was largely due to gross profit margin expansion on the back of more efficient marketing investment and increased cost control. iFood Pago¹ grew its credit portfolio by 62% year on year, with over US$110m in assets under management by March 2024. This conservatively managed credit portfolio is funded largely by debt secured from external participants and offered to restaurants based on a credit-scoring model.

 

The core food delivery business grew revenue 24% to US$1.1bn in local currency, excluding M&A. GMV grew by 23%, an acceleration of 5 percentage points from 1H24, driven by increased order volume (21%) and higher average order value (3%). This growth was supported by several initiatives, including Clube and AnotaAI. In March 2024, 41% of core business orders originated from these initiatives. Clube is a loyalty membership programme which had over 5 million subscribers by the end of March 2024, and increases user frequency and retention by offering personalised deals. AnotaAI is a chatbot designed to facilitate restaurants sales through WhatsApp.

 

Revenue from extensions² grew by 25% without incorporating the effect of converting dark stores to a marketplace model grocery business. Inclusive of that effect, on an as-reported basis, extensions only grew 3% or US$4m in local currency, excluding M&A.
Overall grocery marketplace GMV grew 18% during the year; in 2H24, growth accelerated to 35%, 33 percentage points ahead of 1H24 growth. Extensions' trading losses reduced by -US$5m (US$15m) to US$164m.

 

Delivery Hero

Delivery Hero grew GMV 6% for the year ended 31 December 2023 and revenue grew 16% to €9.9bn, both in constant currency. Delivery Hero reported adjusted EBITDA of €254m for FY23 (from -€467m in FY22) and provided the following guidance for FY24: a positive adjusted EBITDA between €725m and €775m, and positive free cash flow. Prosus held 29.3% of Delivery Hero at the end of the reporting period.

 

More information on Delivery Hero is available at ir.deliveryhero.com.

 

Swiggy

Swiggy's revenue on a local reporting basis grew 24% in local currency, excluding M&A. In its tenth year of operations, Swiggy's GOV³ grew 26% year on year, and its ever-transacted user base reached the milestone of 104 million at the end of December 2023, supported by a fleet of around 387 000 active delivery partners. Prosus held 32.6%⁴ of Swiggy at the end of the reporting period.

 

Swiggy's core food delivery business GOV³ grew by double digits on healthy order growth and higher average order value. Operating leverage improved as the business added revenue streams like restaurant advertising and introduced nominal platform fees which supported improved operational profitability.

 

The quick-commerce business GOV grew much ahead of the ecommerce industry, led by geographical penetration (now 487 active dark stores across 26 cities) and SKU (stock-keeping unit) expansion (over 9 500 unique items now listed on the platform). Unit economics continued to improve as a result of larger basket sizes, expanded user base and improved operational efficiency.

 

Swiggy has confidentially filed a pre-DRHP with India's market regulator SEBI and the stock exchanges on 26 April 2024, in relation to the proposed initial public offering of its equity shares.

 

Economic-interest revenue for the entire Food Delivery segment grew by 16% (19%) to US$4.9bn, with trading losses reducing by US$491m (US$466m) to US$158m.

 

1     iFood Pago refers to meal voucher (B2C) and credit (B2B) businesses.

2     Extensions refer to grocery, meal voucher and credit businesses and iFood's corporate costs.

3     GOV - gross order value, equivalent to GMV in previous reporting. Changed terminology to align with Swiggy's reporting.

4     Outstanding shareholding, excluding ESOPs.

 

 

Classifieds

The OLX classifieds businesses continued to accelerate growth, margin expansion and cash-flow generation.

 

Classifieds consolidated revenue grew 36% (27%) to US$707m. This strong performance was mainly driven by OLX Europe, where the motors category grew 45% across both horizontal and vertical platforms, and OLX Ukraine where marketplace activities recovered to pre-conflict levels. Additionally, pay-and-ship revenue grew 73% (69%) to US$45m, driven by improved monetisation and product optimisation. Despite the impact of high interest rates on property transactions across our markets, the real estate category experienced growth, with a solid 25% increase in revenue, reaching US$96m. South Africa continued to grow both its vertical platforms and sustained its profitability, delivering revenue of US$46m for the year.

 

Trading profit more than tripled to US$172m, from US$56m, with margins expanding sharply to 24% from the previous year's 11%. This improvement was driven by strong revenue growth, balanced investment and optimisations across technology hubs to leverage costs through scale. Additionally, the business restructured headcount to streamline operations and optimise resource allocation.

 

As noted, we exited OLX Autos, our automobile transaction business, by selling businesses during the year in India, Indonesia, Chile and Turkey, and closing operations in Mexico, Colombia and Argentina. We continue to explore options for our WeBuyAnyCar business in the US.

 

After a successful year, we are optimistic about future business opportunities and plans for OLX. We expect the strong value proposition of its platform to continue to drive further profitable growth and cash generation.

 

OLX Brasil

OLX Brasil, our 50% joint venture with Adevinta, is navigating a weak macroeconomic environment and is focusing on cost optimisation, mainly through headcount restructuring. Revenue and trading profit increased 1% and 79%, to BRL887m and BRL243 respectively. Our local management team is committed to reinvigorating growth in this very important ecommerce market with balanced investments.

 

On an economic-interest basis, Classifieds grew revenue by 26% (19%) to US$951m and more than tripled trading profits to US$187m, from US$47m.

 

Payments and Fintech

PayU's core PSP and credit businesses delivered strong revenue and increased scale. Notably, this was achieved despite pending regulatory approvals in the Indian PSP business and new regulation impacting our Indian credit business. After an embargo of
15 months, we received in-principle authorisation by the Reserve Bank of India on 23 April 2024 to operate as a payment aggregator and this allows PayU India to onboard new merchants.

 

PayU grew consolidated revenue 22% (38%) to US$1.1bn in FY24, driven by the PSP businesses in Turkey (Iyzico) and India, as well as India credit. Consolidated trading losses improved by US$52m (US$67m) to US$31m. Profitability improvements were driven by GPO, partly relating to the once-off loss provision in FY23, closure of the loss-making digital bank offering in India and cost optimisation.

 

Core PSP, which accounts for 88% of the segment's revenue, primarily comprises payments operations in PayU India and PayU GPO. Core PSP grew revenue by 23% (41%) to US$975m as total payments volume (TPV) grew 22% (25%). Core PSP trading profit improved to US$19m, a margin of 2% (a percentage point decrease when excluding the once-off loss provision in FY23), as GPO and Iyzico's performance was partly offset by losses in India.

 

India, the largest market in PayU's PSP business, accounted for 46% of core PSP revenues and 60% of TPV. India grew revenue 11% (14%) to US$444m, despite being unable to onboard new merchants due to the noted embargo during the year. Revenue growth was driven by increasing volumes from existing merchants and growing value-added services such as affordability. India grew TPV 22% (25%), ahead of revenue growth on the back of strong growth in ecommerce, financial services and government segments. While our payments business in India achieved a 3% trading profit margin in FY23, this worsened to -3% in FY24 due to the change in merchant and payment method mix (predominantly driven by the embargo).

 

India credit offers buy-now/pay-later (BNPL) and personal loans to consumers in India. India credit has also started a pilot to diversify its portfolio by providing loans to small and medium businesses this year. Our credit business grew revenue 29% (31%) to US$107m, despite a slowdown in loan issuances as part of a response to evaluate new regulations shared by the Reserve Bank of India. India credit widened trading losses from US$10m to US$20m, driven by continuous investment in building the merchant lending portfolio and relatively stable loss ratio⁵ from 2.5% in FY23 to 3.1%. India credit issued US$873m in loans and grew its loan book to US$468m in FY24.

 

 

5     Loss ratio - implies expected credit loss provision for loans outstanding in current bucket.

In August 2023, PayU announced the sale of GPO, excluding Iyzico (Turkey) and Red Dot Payments (south-east Asia), to Rapyd. The process is ongoing and expected to close in the second quarter of calendar 2024. GPO, including Iyzico and Red Dot Payments, grew revenue 36% (69%), an acceleration from FY23 to US$533m. GPO's 6% trading profit margin improved from -4% in FY23, driven by the once-off loss provision in FY23 (2% excluding once-off provision), operating leverage from enhanced scale and cost optimisation.

 

Iyzico remained PayU's fastest-growing PSP business, with revenues growing 119% (238%) to US$186m, driven by new and existing merchants. The trading profit margin was 9%, on par with FY23, as marketing in 2H24 offset a better customer and model mix. Iyzico grew TPV 23% (85%) on an improved and expanded service offering.

 

Remitly

Remitly, PayU's largest associate, maintained strong revenue growth of 44% to US$944m for the year ended 31 December 2023. This was driven by 38% growth in send volume as the active customer base increased from 4.2 million at the end of 2022 to 5.9 million. Increased scale and focus on improving platform economics supported Remitly's improvement to a positive adjusted EBITDA margin of 5% from -2% in 2022. Prosus held 19.8% of Remitly at the end of the reporting period.

 

More information on Remitly is available at ir.remitly.com.

 

On an economic-interest basis, the Payment and Fintech segment grew revenue by 24% (39%) to US$1.3bn and trading losses improved from US$116m to US$59m.

 

Edtech

In the Edtech segment, the broad adoption of GenAI tools and challenging macroeconomic conditions have affected our businesses, particularly Stack Overflow. Revenue growth has been more modest than anticipated, and we have taken significant action to improve trading profit and free cash flow performance given this revenue base.

 

The consolidated Edtech businesses - Stack Overflow and GoodHabitz - grew revenue 10% (9%) to US$148m while trading losses decreased by US$33m (US$33m) to US$98m.

 

Stack Overflow

Stack Overflow grew revenue 4% (4%) to US$98m, driven by growth in its Teams product. The growing adoption of GenAI, which impacts user behaviour, along with continued lower marketing spend, negatively impacted the business. Total bookings grew 7%, driven by new offerings such as OverflowAPI. OverflowAPI enables AI/LLM (large language model) providers to leverage Stack Overflow's public data asset into their AI capabilities. In March, Stack Overflow announced its first API partnership with Google Cloud, which will deliver new GenAI-powered capabilities to developers through Stack Overflow's platform and Google products. Recently, the company signed a similar partnership with OpenAI. It also launched OverflowAI in May 2024, which consists of an 'add-on' bundle of AI-assisted features that target longstanding pain points for Teams customers. The company has focused on reducing costs across all areas of the business and progressing towards profitability, leading to a reduction of US$28m in trading losses to US$57m.

 

GoodHabitz

GoodHabitz grew revenue by 25% (20%) to US$50m. This was driven by growth in new business and upselling across its core markets, particularly the Netherlands, with annual recurring revenue growing 15% to US$55m. Trading losses improved to US$8m driven by cost-saving initiatives.

 

Skillsoft

Skillsoft's revenue remained largely flat while its adjusted EBITDA margin improved by 1 percentage point to 19%. The company recorded a 2% decline in bookings, primarily from instructor-led training, and partially offset by content and platform segment growth of 2% year on year. Prosus holds 37.9% of Skillsoft at the end of the reporting period. More information on Skillsoft is available at investor.skillsoft.com.

 

On an economic-interest basis, Edtech segment revenues grew 7% in local currency, excluding M&A, to US$444m and trading losses reduced by US$178m (US$67m) to US$80m.

 

In the current financial year, the group wrote off the fair value of its 9.6% effective interest in BYJU'S, due to the significant decrease in value for equity investors. A fair value loss of US$493m was recognised in other comprehensive income in the current year.

 

Etail

Etail grew consolidated revenue 14% (8%) to US$2.2bn, driven by growth in the eMAG Romanian etail business. Trading losses improved by US$26m (US$27m) to US$35m, as the segment continued its path to profitability.

 

 

eMAG

eMAG grew consolidated revenue 14% (8%) to US$2.2bn, driven by growth in the Romanian etail business, which accelerated in the second half, as well as in emerging businesses such as logistics (courier and lockers) and grocery. Trading losses improved by US$27m to US$26m, as the business continued its path to profitability. The group's GMV grew 9% (in local currency) in FY24, led by Romania (11% in 4p⁶ which also generated trading profit for the first time, delivering US$40m of trading profit) and partially offset by Bulgaria and Hungary. Both Bulgaria and Hungary are now managed by the Romanian team, acting as a single organisation across all three territories. eMAG is monitoring the competitive landscape and consistently taking steps to future-proof the business using its inhouse
AI and tech capabilities, as well as competitive value drivers.

 

eMAG's Sameday courier business increased revenue 32% (32%) and halved trading losses while expanding in Hungary and Bulgaria.

 

This group's growth extensions recorded strong growth. Revenue grew 57% (19%) driven by its food extensions: Freshful and Tazz. Freshful increased revenue 86%, reflecting order growth and an expanded customer base (79%). Tazz's revenue grew 18%, on an increase in average order value and extended geographical footprint. Tazz has made satisfactory progress in improving its order economics, contributing to a US$7m reduction in trading losses while Freshful maintained the same trading loss level for a business almost double the size. Overall, the trading losses for its food extensions improved from US$62m to US$50m.

 

On an economic-interest basis, the Etail segment grew revenue by 14% (8%) to US$2 229m and trading losses improved from US$63m to US$36m.

 

Tencent

For the year ended 31 December 2023, Tencent reported revenues of RMB609bn, up 10% from last year. Non-IFRS profit attributable to shareholders (Tencent's measure of core earnings by excluding certain non-cash items and certain impact of investment-related transactions) increased 36% to RMB158bn.

 

Revenues from value-added services rose 4% to RMB298bn, driven by the strong growth in international games revenue. Revenues from fintech and business services were RMB204bn, up 15%, driven by increased payment activities, higher revenue from wealth-management services, and the introduction of ecommerce technology service fees in Video Accounts. Revenues from online advertising increased 23% to RMB102bn, driven by greater advertising demand for Video Accounts and Weixin Search, as well as the ongoing upgrade of Tencent's advertising platform.

 

In 2023, Tencent further enhanced its business efficiency and focused on core activities while developing new services and revenue lines to support sustainable and high-quality growth. During the year, it launched its proprietary AI foundation model, Tencent Hunyuan, which is now in the top tier of large language models in China, with notable strength in advanced logical reasoning.

 

Monthly active users of Weixin and WeChat reached 1.34 billion, up 2% year on year. User time spent on Weixin continued to grow as it expanded its content, service offerings and short-form video capability. Time spent on Video Accounts more than doubled in 2023, reflecting the benefits of enhanced recommendation algorithms. Video Accounts is now entrenched as a major short-form video and live-streaming platform in China, while Mini Games is regarded as the leading casual game platform in China.

 

The number of Tencent mobile and PC major hit games in China (defined as games with average quarterly daily active users exceeding 5 million for mobile or 2 million for PC and generating over RMB4bn annual gross receipts) increased from six in 2022 to eight in 2023. The international contribution to games revenue reached a record 30%.

 

Tencent Video and Tencent Music Entertainment extended their important presence in the long-form video and music-streaming industries, with 117 million video subscriptions and 107 million music subscriptions. Tencent upgraded its AI-powered advertising technology platform, significantly enhancing targeting accuracy and, therefore, revenue growth. It strengthened its payment-compliance capabilities, enhanced mini program-based transaction tools and upgraded the cross-border payment experience.

 

Tencent continues to mobilise its technology and platform to create value for society through initiatives such as its digital philanthropy platform, one of the largest of its kind in the world. In 2023, the 99 Giving Day event raised a record RMB3.8bn in public donations. The company made progress in its decarbonisation journey by applying its fourth-generation data-centre technology to reduce emissions and increase the adoption of renewable energy. In August 2023, Tencent joined the United Nations Global Compact (UNGC), demonstrating its commitment to integrating UNGC's principles into its strategy, culture and day-to-day operations, while supporting the UN's Sustainable Development Goals.

 

In 2023, Tencent returned substantial capital to shareholders through payment of cash dividend, share repurchases and settlement of distribution in specie.

 

More information on Tencent is available at www.tencent.com/en-us/investors.html.

 

6     4p - total of 1p, 2p and 3p.

 

Prospects

Our FY24 results reflect the group's ambitions for profitable growth. We are pleased with achieving group profitability for Prosus for the first time, and consolidated Ecommerce portfolio profitability for FY24, ahead of our commitment to shareholders.

 

We will continue to explore new investment horizons while ensuring our existing ecosystems are future-proof and deliver compelling value propositions to our customers. We focus on improving our return profile and the cornerstone metric - NAV per share.

 

We simplified the group structure during the period and ensured the continuation of the open-ended share-repurchase programme. This programme is a key part of our drive to enhance returns to shareholders as we focus on increasing our NAV per share. The open-ended share repurchase will continue as long as the discount remains elevated. We remain committed to maximising shareholder value with a transparent, predictable and repeatable process of identifying, scaling and highlighting the value of the businesses in delivering strong financial performances.

 

We regard Tencent as one of the best technology companies in the world, run by an exceptional leadership team. Recent capital-allocation actions (increasing both its distribution and buyback programme) reaffirm Tencent's commitment to creating value for its shareholders despite challenging trading conditions. Prosus is proud to be a founding shareholder in Tencent and plans to remain a significant shareholder for a long time.

 

Our in-house expertise in AI at the group and the businesses are key assets we continue to build to realise the potential of AI and improve and build new products and services for our customers. This is essential to long-term growth and further value creation.

 

Risks

We understand the importance of effective risk management and continually strengthen governance and processes. We are proactive in managing risks. To create value, there must be risk-taking, and we may be unable to mitigate all potential risks sufficiently.

 

Our risk management philosophy distinguishes between three categories of risks managed:

·     Strategic risks and opportunities arise from our strategic choices, which are continuously assessed and monitored based on risk versus reward.

·     Internal operational risks: We manage these by upholding our code of business ethics and conduct, clearly defining roles, responsibilities and policies, implementing effective internal controls, and continuously monitoring risk.

·     External risks: We reduce and mitigate, inter alia, by implementing protective measures or risk-transfer arrangements.

 

The board oversees risks and opportunities and sets the boundaries. Businesses keep the board updated through regular reports. Current topical risks are unchanged:

·     Geopolitical tension and depressed market conditions: The Ukraine and Israel wars, as well as broader geopolitical tensions, continue to strain the global economy. We expect inflation and interest rates to remain elevated. In response, we maintain a patient, disciplined approach to deploying capital. We closely monitor and manage our counterparty and credit risk exposures to safeguard our balance sheet.

·     Technology developments: We invest to understand advances in technology. GenAI brings both new opportunities and risks for our products, services and business models. We focus on the responsible use of data and related technologies to keep our customers safe, enhancing our cyber-resilience, detection and response capabilities, and building our AI knowledge and skills while exploring opportunities to pioneer or invest in new business models.

 

The FY24 annual report further outlines details on our risk management approach and specific risks. This report, as well as our risk management and cybersecurity policies, is available on our website at www.prosus.com.

 

Sustainability

As a global consumer internet group and a leading long-term technology investor, we recognise the power of technology to create solutions for some of the world's most pressing needs.

 

A major milestone was receiving the Science Based Targets initiative's (SBTi) validation of the group's science-based climate targets.
As a critical element of our target, we are committed to ensuring that 50% of our portfolio companies, measured by invested capital, will have set their own science-based reduction targets by FY30. To reach this target, we continue to work closely with our subsidiaries to support their greenhouse gas data collection, footprint measurement, emissions management and reduction-target development. Measuring and disclosing scope 1, 2 and material scope 3 categories was a shared group goal across all our operating subsidiaries as the foundation for setting near-term and longer science-based targets. This objective was also codified in annual key performance indicators or KPIs for our senior management, starting with the group chief executive and chief financial officer, then cascading through the organisation. Considering the diversity of business models and operating geographies, this is a major undertaking for our subsidiaries, which are private companies.

We have also partnered with the India-based Green Startup Pledge - the world's first climate pledge designed exclusively for new companies - to encourage our portfolio of associates and investments to begin their climate journeys.

 

As of last year, portfolio companies, Tencent and Delivery Hero, have set and received SBTi verification for their climate targets.

 

Curbing the environmental impact of delivery services is a priority across our businesses in these segments and focuses on two categories: packaging and last-mile deliveries. Our report - Electrifying progress: scaling zero-carbon deliveries of food, groceries and parcels - examines the barriers and enablers to scaling electric-vehicle adoption in last-mile deliveries. We actively support our portfolio companies to measure their packaging footprint and develop sustainable-packaging strategies to prevent waste and harness the opportunity to scale solutions.

 

We have achieved an A score on our CDP submission for Prosus, which falls in the leadership category, and B for Naspers within three years of our reporting journey. Our Standard and Poor's scores also improved. These ratings are a valuable external view of our sustainability performance and help us to improve and accelerate our work to embed sustainability at the heart of all our businesses across the world.

 

Over 2023 and 2024, we performed a double-materiality assessment using the impact and financial materiality definitions and requirements as per the July 2023 guidance of the European Sustainability Reporting Standards. The objective of the double-materiality assessment for our group was to identify the impacts, risks and opportunities linked to our ecosystem of business operations and activities that are deemed material based on the assessment by stakeholders and sustainability experts who are deeply familiar with our group. These areas of impacts on the planet and its people and the potential financial risks and opportunities for our group will inform our strategic sustainability priorities in the short to medium term and consequently in the longer term. This assessment will also guide our reporting to meet the requirements of the new Corporate Sustainability Reporting Directive for our FY25 report.

 

Directorate

On 18 September 2023, the group announced that Bob van Dijk stepped down as chief executive and executive director of the boards after 10 successful years of leadership. Ervin Tu was appointed interim chief executive and has not been appointed to the board.
Bob remains as a consultant to the boards, ending his consulting arrangement on 30 September 2024.

 

Remuneration for directors and key management will be disclosed in the remuneration report for the year ended 31 March 2024, including Bob's remuneration. Ervin's remuneration remains unchanged as a result of his interim appointment.

 

The board concluded a very extensive process in choosing the newly appointed chief executive, Fabricio Bloisi. Fabricio Bloisi will join the Naspers board as an executive director on 10 July 2024 and the Prosus board following the annual general meeting in August 2024, subject to shareholder approval.

 

Following his appointment to the board, he will also be appointed to the risk committee, the sustainability committee and the projects committee.

 

Notice for US shareholders

As Prosus' ownership in Tencent is expected to reduce below 25% before the end of the calendar year, we advise US shareholders that Prosus may be treated as a passive foreign investment company (PFIC) for US federal income tax purposes from 1 April 2024. Prosus has been monitoring its PFIC status for a while and, when applying a monthly measurement period for PFIC testing, we believe that Prosus should not be a PFIC for its financial year ending 31 March 2024 (FY24). It is, however, anticipated that Prosus may be a PFIC in financial years commencing 1 April 2024 (FY25). A definite conclusion cannot be drawn until the close of the financial year in question.

If Prosus is classified as a PFIC, similar to Naspers, it intends to provide information that a US holder of Prosus ordinary shares N would need to make a 'qualified electing fund' (QEF) election starting from the period 1 April 2024 to 31 March 2025.

 

In addition, please note that it is expected that the income, which US shareholders who make the QEF election need to include and report, should be relatively insignificant and will be lower than the PFIC income which US Naspers shareholders who have made a QEF election will pick up.

 

Dividends

The board recommends that shareholders receive a distribution (in the form of a capital repayment for holders of ordinary shares N and a dividend for holders of ordinary shares B and ordinary shares A1) of 10 euro cents per share, which currently represents an increase of approximately 43% for free-float shareholders. Holders of ordinary shares B and ordinary shares A1 will receive an amount per share equal to their economic entitlement as set out in the articles of association. Furthermore, the board recommends that those holders of ordinary shares N as at 1 November 2024 (the dividend record date) who do not wish to receive a capital repayment, can choose to receive a dividend instead. A choice for one option implies an opt-out from the other. If confirmed by shareholders at the annual general meeting on 21 August 2024, elections to receive a dividend instead of a capital repayment will need to be made by holders of ordinary shares N by 18 November 2024.

 

Capital repayments and dividends will be payable to shareholders recorded in our books on the dividend record date and paid on
26 November 2024. Capital repayments will be paid from qualifying share capital for Dutch tax purposes. No dividend withholding tax will be withheld on the amounts of capital reductions paid to shareholders. However, if holders of ordinary shares N rather elect to receive a dividend from retained earnings, dividends will be subject to the Dutch dividend withholding tax rate of 15%.

 

Dividends payable to holders of ordinary shares N who elect to receive a dividend and who hold their listed ordinary shares N through the listing of the company on the JSE will, in addition to the 15% Dutch dividend withholding tax, be subject to South African dividend tax at a rate of up to 20%. The amount of additional South African dividend tax will be calculated by deducting from the 20%, a rebate equal to the Dutch dividend tax paid in respect of the dividend (without right of recovery). Shareholders holding their listed ordinary shares N through the listing of the company on the JSE, unless exempt from paying South African dividend tax or entitled to a reduced withholding tax rate in terms of an applicable tax treaty, will be subject to a maximum of 20% South African dividend tax.

More information on the distribution will be published following approval at the annual general meeting.

 

Koos Bekker                                                                                   Ervin Tu

Chair                                                                                          Interim chief executive

 

Amsterdam

 

22 June 2024