Why Naspers Looks Best Positioned to Weather COVID-19 Storm

"We also expect that group businesses are likely to benefit from a further acceleration of the underlying trend toward online - brought about by the COVID-19 pandemic - to emerge well-placed for long-term growth.”

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Naspers
Naspers. Image source: livemint

Naspers, the South African-based tech and media giant – which owns global tech investor Prosus, seems to be better prepared to bear the impact of coronavirus.

Late on Monday, Naspers informed investors that it closed its financial year on 31 March 2020 with more than $8.3 billion (R144 billion) of cash and cash equivalents (including short-term cash investments), net of $3.5 billion (R61 billion) of interest-bearing debt (excluding capitalised lease liabilities).

The company has an undrawn $2.5 billion (R43 billion) revolving credit facility.

Therefore, the company has a solid net cash position of $4.8 billion (R83 billion).

The group said it is well-positioned to navigate the COVID-19 uncertainty ahead.

“In recent months, COVID-19 has had a marked impact on the daily lives of citizens and
economies across the world. From the start, we have prioritised the health and well-being
of our people, their families, and the communities we serve. We are working hard to
protect our businesses for the long term,” Bob van Dijk, Group Chief Executive Officer, said.

“At both a group and a local company level, we have also provided support to governments and communities to play our part in the response to the pandemic. While the global societal and economic impacts of COVID-19 are likely to persist for some time, we are confident of our ability to weather the storm. We also expect that group businesses are likely to benefit from a further acceleration of the underlying trend toward online – brought about by the COVID-19 pandemic – to emerge well-placed for long-term growth.”

On 11 September 2019, Naspers listed its international internet assets Prosus on Euronext Amsterdam.

Naspers reported core headline earnings stable at $2.9 billion (R50 billion) for the year to end-March 2020. The company said this reflects a 72.63% contribution from Prosus since its listing, compared to the previous year’s 100% contribution. Excluding this impact, core headline earnings grew 15% year-on-year.

“The past year was a truly transformational twelve months for the group, marked in
September by the listing of our international internet assets as Prosus on Euronext
Amsterdam. This is an exciting step forward, opening up fresh opportunities to build long-term sustainable value,” said Van Dijk.

“Throughout the year, we continued to execute our long-term strategy of building leading consumer internet companies.”

Naspers said this was reflected in a solid performance driven by revenue growth, notably the Food Delivery segment, and improved profitability in our ecommerce businesses, particularly the Classifieds segment, underpinned by the continued growth of Tencent, its largest investment.

Prosus said ecommerce revenue grew 33% to $4.3bn versus $3.6bn in 2019.

While, Food Delivery orders grew by 102%, driving revenue growth of 105% to $800 million versus $400 million in 2019.

The company added that its Classifieds and Payments  & Fintech segments remain profitable at their core and continue to grow profits while investing to drive further growth.

Looking ahead: navigating uncertain times

The fundamentals of the group are strong, and the year ended with good momentum off
the back of a solid performance.

Naspers said it is focused on the long term and expects to benefit from a further acceleration of the underlying trend toward online e-commerce companies brought about by the Covid-19 pandemic.

“We face the challenging period from a position of relative financial strength, with sufficient liquidity to navigate the changing environment, to continue to invest in our businesses to position them well for future recovery, and to continue to seek out new opportunities.

“We will remain disciplined in our investment approach, deploying capital on growth assets operating in growth industries with an expected return in excess of our cost of capital.”

 

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