Huge loss for Takealot

Listed tech and investment group Naspers has seen its operating losses significantly worsen over the last financial year – with South Africa’s biggest online retailer, Takealot, posting a loss of R400 million.

“The operating environment in the fiscal year ended 31 March 2023 (FY23) was characterised by significant geopolitical and macroeconomic uncertainty. Amid that uncertainty, we acted decisively to strengthen our financial footing and deliver value for shareholders,” the group said.

It added that its e-commerce businesses maintained topline momentum, with it expecting to produce substantial profitability improvements in FY24 and beyond.

Its consolidated revenue from continuing operations grew 8% to US$6.8 billion (R126 billion), with the main contributions coming from food delivery and payments and fintech.

However, the group’s operating losses grew from US$985 million (R18.2 billion) in FY22 to US$1.38 billion (R25.6 billion) in FY23.

Moreover, the group’s trading losses grew year-on-year from US$684 million (R12.6 billion) to US$844 million (R15.6 billion).

That being said, the group said that its trading losses were reduced by 21% in the second half of the year compared to the first, which aligns with its commitment to make its e-commerce business profitable by FY25.

Core headline earnings were also reduced by 48% to US$1.1 billion (R19 billion), which it said was primarily caused by lower contributions from its associates, mainly Tencent, which was hit hard by the Covid-19 lockdowns and new Chinese regulations.

Moreover, the group’s headline earnings also decreased from US$249 million (R4.6 billion) to US$1.3 billion (R24 billion), which was due to the group’s lower profitability across its associates and the larger operating losses for its consolidated businesses.

“This was partially offset by reduced share-based compensation expenses related to the remeasurement of the group’s cash-settled scheme and no grants to executive directors, as well as lower net finance costs due to increased interest income from cash balances.”

In terms of dividends, the Prosus board said that shareholders would receive a distribution of a gross amount of roughly €175 million (R3.5 billion) – a 7% increase for free-float shareholders.

The Naspers dividends will be paid in rands. With the rand weakening against the euro, the group said that it expects a year-on-year increase in dividends to be higher than in the recent past. The group said that more information on the dividend will be published in the near future.

Below are some of the group’s key financial results:

Takealot

Takealot’s gross merchandise volume (GMV) was up 13%, while its revenue was up 12% in local currency and excluding mergers and acquisitions.

However, the group incurred a loss of US$22 million (R400 million), representing a trading margin of -3%.

Naspers said that this reflects slowing consumer demand due to rising inflation and high-interest rates

“In addition, profitability was impacted by rising operational costs due to persistent national rolling power blackouts, escalating fuel costs, and the effect of global supply-chain constraints,” the group said.

Takealot.com saw its GMW rise by 14% year-on-year, while Superbalist saw its revenue grow by 11% in rand terms, despite further competition and decreasing consumer demand.

MR D, meanwhile, saw its revenue and GMW increase by 27% and 8% (11% when including groceries), respectively. MR D partnered with Pick n Pay to launch a delivery platform, expanding on the former’s strategy to expand its convenience operations.

Outlook

For FY24, the group said that it wants to take further steps to make its e-commerce business profitable by 2025, continue its share repurchase programme and crystalise value for investors in the group’s portfolio of assets as situations present themselves.

“We believe these drivers, acting in concert, will result in meaningful value creation and shareholder return,” the group said.

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