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- Consumer internet giant Naspers said it is looking to wrap up its complex cross-holding structure with subsidiary Prosus in order to continue share buybacks.
- SA company rules limit how many shares a subsidiary can buy in a parent, but removing the cross-holding means it won't need to buy shares through one.
- Naspers on Tuesday reported its trading loss widened in 2023, but Prosus upped its dividend, and the group's shares leapt by almost double digits.
- For more financial news, go to the News24 Business front page.
Global internet group Naspers said on Tuesday it is pressing ahead with its open-ended share buyback scheme, eyeing a removal of its complex cross-holding structure with subsidiary Prosus later in 2023, which will allow this to continue.
Releasing its results for its year to end-March on Tuesday, Naspers said SA company rules limited the amount of shares a subsidiary can acquire in its parent, which it is close to reaching. The cross-holding structure was also complex and widely seen as negative by shareholders, it said.
Naspers owns a majority stake in its subsidiary Prosus, which almost completely accounts for its earnings. Prosus is the consumer internet arm of Naspers, housing its stake in Tencent, as well as its investments in online classifieds, food delivery, payments and fintech, and education technology. Investees include iFood in Brazil, PayU in India and Swiggy.
In SA, Naspers owns internet and e-commerce companies including Takealot, Mr D Food, Superbalist, Autotrader, Property24 and Media24. Naspers is valued at about R1.3 trillion on the JSE, while Amsterdam-listed Prosus, with a secondary listing on the JSE, is valued at about R2.5 trillion.
In 2021, the group implemented a cross-holding structure that was aimed at reducing the weighting of Naspers on the JSE, allowing shareholders to swap their Naspers shares for those in Prosus.
This resulted in the cross-holding structure in terms of which Naspers currently holds about 60% of the issued Prosus ordinary N shares, while Prosus currently holds about 49% of those in Naspers. Due to this structure, however, the economic interest of Naspers in Prosus is about 43%. The proposed transaction is expected to take place in the third quarter of 2023 and align Nasper's direct shareholding with its 43% economic interest, with Prosus remaining a subsidiary.
Speaking at a media briefing on Tuesday, CEO Bob Van Dijk said the transaction would mean increasing the group's share count, then reducing it, which would not offset the group's buyback programme.
"Naspers will issue a significant number of shares to effectively dilute Prosus out of the Naspers shareholder register, but at the same time, while we do that, we will consolidate a number of shares so that we actually will end up with a healthy number of shares. It doesn't really change the economic value that is traded."
Results
Naspers said on Tuesday its results were hit by a decreased contribution of its lucrative Tencent stake, which fell in the period amid the buyback, and also in which the global tech behemoth had also been under pressure from Covid-19 lockdown policies in China. It also reported increased losses across its associates.
Despite this, Prosus has approved a dividend amounting to about €175 million, which represents an increase of approximately 7% for free-float shareholders. The dividend of Naspers will depend on receipts from this, with the company saying its financial position still improved in the year, with gross cash of $15 billion.
Consolidated revenue from continuing operations at Naspers grew 8% in local currency terms to $6.8 billion (about R121 billion), with the biggest contributors being Food Delivery, and Payments and Fintech. Trading losses increased year-on-year to almost a quarter to $844 million, but had reduced about 21% in the second half relative to the first, it said. Headline earnings slumped by $1.3 billion to $249 million.
During the period, the group reduced its ownership interest in Tencent from 28.81% to 26.16%, yielding US$10.7 billion (about R190 billion) in proceeds.
Since programme launch, the combined holding company discount of Naspers and Prosus has reduced by approximately 18 percentage points, the group said, moving from about 60% to the "high 30s". The group was trading at about a 55% discount at the end of its 2022 year.
During an investor call Van Dijk said the "world has changed quite a bit from an economic point of view," but the group was now much leaner as it pushed towards its profitability goals in 2025. Prosus has committed to achieving profitability from its e-commerce businesses during the first half of the 2025 year.
"We've attacked costs throughout the financial year and the benefits are evident in the second half," said CFO Basil Sgourdos.
"We have turned the corner by accelerating profitability while still maintaining strong growth, and we take that momentum into the new financial year," he said.
Shares in Naspers leapt 9% in early trade, while those in Prosus were up just over 7%. Click here for details of the shares of Naspers as well as other info.
News24 is part of the Media24 stable, which is owned by Naspers.
