Naspers warns of massive drop in earnings

 ·22 Nov 2022

Multinational media group Naspers has warned shareholders that it expects its earnings for the period ending 30 September 2022 to decline sharply.

The group said that shareholders should expect headline earnings per share to drop by over 100% for the period, largely due to its interest in Chinese tech giant Tencent.

“The significant decrease in earnings per share relates to a gain of US$12.3 billion realised on the sale of a 2% interest in Tencent in the prior year compared to an expected gain of only US$2.8 billion on the sell down of Tencent shares in the current period to fund the open-ended share-repurchase program announced on 27 June 2022.

“Impairment charges and dilution losses related to investments in associates are expected to be approximately US$1.8 billion higher in the current period. These are excluded from headline and core headline earnings per share,” the group said.

Headline earnings are expected to decrease in the current year mainly due to lower profitability across the group’s associates, including its share of Tencent’s fair value losses on financial instruments of US$372 million compared to fair value gains of US$1.0 billion in the prior period.

“Headline earnings are also impacted by our increased investment in earlier stage e-commerce extensions of autos, convenience and credit,” it said.

The group illustrated the anticipated changes in earnings, headline earnings and core headline earnings per share for continuing operations for the period ended 30 September 2022 as compared to 30 September 2021 for total operations (as previously reported) as follows:

  • Earnings per share are expected to drop by between 2,467 and 2,679 US cents from 3,031 US cents in 2021, representing a decline of between 81.4% and 88.4%.
  • Headline earnings per share are expected to drop by 370 and 396 US cents from 368 US cents in 2021, representing a decline of between 100.6% and 107.6%.
  • Core headline earnings per share are expected to drop by between 228 and 257 US cents from 416 US cents in 2021, representing a decline of between 54.7% and 61.7%.

Naspers said that the board considers core headline earnings an appropriate indicator of the operating performance as it adjusts for non-operational items.

Core headline earnings per share declined due to investment in adjacent opportunities in e-commerce, lower contributions from associates and Tencent, it said.

“During the period, growth expectations and valuations came under significant pressure as consumers adapted to the realities of higher inflation and interest rates on their daily lives and spending power. The group has taken action to meet these challenges and will take further action to continue delivering long-term value to our shareholders,” it said.

Discontinued operation

The group announced its intention to exit its Russian classifieds business, Avito, in May 2022.

“We completed the disposal and received the proceeds in October 2022. Following the disposal, results of the Avito business will be presented as results from discontinued operations. Also, the prior reporting period income statement will be restated to distinguish between continuing and discontinued operations,” Naspers said.

Naspers will publish its condensed consolidated interim financial statements on Wednesday, 23 November 2022.

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