Advertise with fastmoving.co.za
 
 

Unit dealing with online retail payments and food delivery shows promise.
Unit dealing with online retail payments and food delivery shows promise.

Naspers on track in e-commerce lane

SERVICES NEWS

By Nick Hedley - Nov 30th 2017, 09:30

Naspers said on Wednesday that it was making progress with its e-commerce business, which continues to drain cash as companies in this particular division build scale. 

The e-commerce unit, which includes classifieds, online retail payments and food delivery services, grew revenue by 15% to $1.6bn in the six months through September. On a like-for-like basis, revenue was up 38%.

While e-commerce trading losses rose 9% to $318m, the classifieds unit edged towards profitability and Naspers said its main payments business – PayU – "is well on track to achieve break-even by the end of the financial year".

On the other hand, the group’s traditional video entertainment and media operations – comprised mostly of MultiChoice and Media24 – generated trading profits of $255m.



"It’s not a straight net-net but it’s sustainable in that they continue to make money from the old business and push into the new," said Byron Lotter, a portfolio manager at Vestact.

Naspers said group trading profits increased by 40% to $2.1bn thanks to "a healthy boost from Tencent" and the maturing e-commerce businesses.

Core headline earnings rose 65% to $1.5bn.

The group said it would "continue to drive scale to bring its e-commerce business to profitability and cash generation".

Lotter said the e-commerce businesses "are starting to turn and show profit in some regions". He said a large chunk of the unit’s losses stemmed from Naspers’s reinvestments into the underlying businesses.

Early movers in the e-commerce industry showed these businesses were difficult to get off the ground, considering the investments required in distribution centres, logistics and relationships, he said.

Naspers said it was growing its online food-delivery footprint. The group holds nearly a quarter of Frankfurt-listed Delivery Hero and has interests in iFood and Swiggy.

Although Naspers’s 34% interest in Tencent remained firmly in the spotlight, the group’s other businesses were showing "a lot of potential", Lotter said. "PayU is looking fantastic and Flipkart is 70% of the Indian market now."

Naspers said PayU "continues to realise scale efficiencies following the consolidation in India with Citrus Pay and from its drive to automate and consolidate platforms in other markets". PayU recently invested $99m in Kreditech, a credit-scoring business and the company planned to extend these consumer credit services in its key markets.

Meanwhile, Lotter said Tencent was likely to continue on its strong growth trajectory.

"When you look at the potential of Tencent it’s massive – it’s not just a Chinese business, it’s also a global gaming business."

While some investors had called for Naspers to unbundle its Tencent stake, Lotter said he would prefer that the company remained invested.

Naspers said that it would continue to invest in "emerging businesses that may power future growth", adding that its balance sheet remained strong and its "current business plan is fully funded".

Ratings agencies have indicated that Naspers’s development spend was a major factor in its sub-investment rating.

Excluding the investment in controlled newer initiatives, such as classified advertising company Letgo and streaming service Showmax, totalling $155m, development spend on older investments decreased 12%, Naspers said.
© BusinessLIVE MMXVII 

Read more about: retail | payments | online | naspers | ecommerce | deliverym

Related News

Smartphone sales growth stalls while panel TVs soar during Black Friday week 2018 – GfK data
13/12/2018 - 15:42
Panel television sales soared in South Africa during Black Friday week, climbing by 66% to just over 93,000 units when compared to the same week in 2017, according to point of sale tracking data from GfK South Africa’s Weekly Monitor. This builds on the 47% growth over 2016 recorded during the week of Black Friday in 2017.

5 Retail trends and predictions for 2019
13/12/2018 - 14:01
2019 is here, and if you’re in retail, you’re likely wondering what the next 12 months will bring.

Shoprite opens first store in Kenya to battle French retailer
13/12/2018 - 10:33
Shoprite is seeking a foothold in Kenya’s retail industry, where the collapse of two local supermarket chains has created opportunities for Africa’s biggest grocer and its international rivals.

Superdry half-year profits drop by 49%
13/12/2018 - 10:13
Superdry has revealed a massive drop in underlying profit in its interim results despite an uptick in overall revenue, as the fashion retailer conceded it had a “difficult first half”.

SA to spend more than R200bn over the festive season
13/12/2018 - 09:57
South Africans are set to spend over R200bn this festive season, with an average of nearly R6 000 each, a recent survey has found.