Takealot suffers a significant setback

Naspers, the JSE-listed e-commerce group, has released its interim results for the six months ending September 30, 2022 (HY23), reporting a trading loss for the period as its exposure to Chinese group Tencent continues to weigh on its finances.

Group revenue increased 9% year on year to US$17 billion, with e-commerce revenue increasing 38%, thanks to strong operating performance across all four of the group’s core segments. However, total trading losses in the e-commerce portfolio increased to $1 billion from $524 million in the previous period.

Core headline earnings fell 51% to US$372 million as a result of increased investment spending and its exposure to Chinese tech giant Tencent. The decrease in core headline earnings is 74% or US$1.1 billion, with Tencent accounting for $879 million of this.

Naspers’ board of directors believes that core headline earnings are the best indicator of the health of its ongoing business operations.

Core healine earnings per share were 174 US cents, a decrease from 394 US cents in HY22.

The revenue from continuing operations was $3.73 billion. After deducting costs and other losses, the group reported an operating loss of $311 million. It reported a $3.72 billion total comprehensive loss for the period.

Headline earnings fell by $1.3 billion, resulting in a loss of $30.5 million. This was due to lower profitability across its affiliates, including Tencent’s fair-value losses of US$371.5 million.

Despite a turbulent period in which industry growth expectations and valuations were under significant pressure, the group said its e-commerce revenues increased, and it is committed to continuing organic investment into segments with the greatest growth potential.

This investment will be focused on expanding and expanding offerings within its core products, specifically autos at OLX, convenience delivery at Food, and credit at PayU, according to the company.

However, in addition to continued investment, the group intends to consolidate its e-commerce portfolio in order to become profitable in the first half of FY2025.

“Our buyback programme will continue for the foreseeable future, as it meaningfully improves net asset value (NAV) per share, creating permanent value that will compound over time,” it said.

Naspers Group CEO Bob van Dijk stated that the company had gone through a “volatile and challenging time.”

“To further scale our e-commerce businesses, we have made significant organic investments in OLX Autos, credit, convenience delivery and edtech, which will drive sustainable long-term value creation for the group.
“The group’s open-ended buyback of Prosus and Naspers shares is unlocking real value. We expect the benefits of the programme to compound over time. Looking ahead, we will work towards simplifying the group’s structure and crystallising value from our portfolio.”

Takealot

Takealot, an online retailer, is Naspers’ most important e-commerce business in South Africa.

Takealot increased total gross merchandise value (GMV) by 15% and revenue by 13% in local currency, according to Naspers. However, growth in GMV and revenue in USD was flat.

Takelot’s revenue for HY23 was US$384 million, compared to US$388 million in HY22, a 1.0% decrease in dollar terms.

Takealot’s losses increased to US$13 million (versus a loss of $2 million in HY22), representing a trading margin of -3% versus -1% in the previous period.

Takealot.com’s first-party (1P) retail sales increased by 2%, while 3P marketplace sales increased by 27%. Profitability fell compared to the previous period due to higher fuel surcharges, investments in new warehouses, and discounted inventory clearance, according to Naspers.

Despite increased competition from brick-and-mortar fashion retailers, Superbalist, a leading South African online fashion destination, increased GMV by 15% in local currency. Superbalist purchased G-Ways CMT Manufacturing Proprietary Limited in April, a small clothing and textile manufacturing company that adds scale to its private-label business.

Mr. D, the Takealot group’s delivery service, increased orders and GMV by 9% and 13%, respectively, retaining its strong position in South Africa’s major cities. In May 2022, Mr. D announced its Pick n Pay grocery partnership and began trial deliveries in August.

Mr. D plans to roll out the service across the country in the coming months.