By Lehlohonolo Lehana.
Naspers has warned shareholders that it expects a drop in earnings for the six months to end-September due to a global economic downturn — characterised by high inflation and interest rates — leading to reduced activity in e-commerce.
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.
Naspers will publish its condensed consolidated interim financial statements on Wednesday, 23 November 2022.