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Naspers' half-year earnings jump on e-commerce, Tencent

Johannesburg - Internet and media giant Naspers [JSE:NPN] recorded an earnings jump for the six months ended September 30 2016 thanks to its e-commerce unit and stake in Tencent.

The company on Friday recorded that its core headline earnings increased 31% to $914m for the half year period.

Trading profit increased 21% to $1.5bn, thanks to Tencent's performance. Tencent is China’s biggest internet company and Naspers has a 34% stake in the business. Tencent's revenues were RMB67.7bn for the period, up 48% year on year.

Naspers said that its revenues were $6.8bn on an economic-interest basis, growing 16%. Excluding the impact of currency translation, and acquisitions and disposals, growth was 27%, said the company.

Naspers further said that its consolidated development spend increased 38% year on year to $387m as new growth initiatives were pursued.

This development spend was earmarked for the likes of letgo, a US mobile marketplace, building its hotel offering in the Indian travel business and its subscription video-on-demand unit ShowMax, which was launched in August 2015.

“Development spend on these new initiatives totalled $188m. Across the rest of the portfolio, development spend declined by $40m, as the ecommerce businesses, particularly classifieds, increased scale and profitability,” added the company.

The group’s share of equity-accounted results was $912m for the period.

However, currency headwinds particularly impacted Naspers’ video entertainment business, which reported revenues of $1.6bn, down 8% on the prior year.

“Trading profit declined by 43% year on year to $226m. As the group bills in local currencies, the continued weakness of currencies and economies in many African countries resulted in lower US dollar revenues,” said Naspers of its video entertainment business.

“A sizeable portion of content costs are US dollar-denominated which, coupled with the reduction in revenues and our investment in ShowMax, impacted trading profit.

“Constrictions in foreign exchange availability in Nigeria, Angola and Mozambique have resulted in cash balances of $202m being trapped in these countries. These balances remain exposed to further currency depreciation,” Naspers said.

The company, though, said that its video entertainment customer base returned to growth and closed at 11m on September 30 2016. 

The company said it will increase its focus on e-commerce going forward.

“In the second half of the financial year we hope to deliver revenue growth and scale the more established e-commerce businesses,” said Naspers.

“The group will continue to invest in long-term opportunities such as letgo, and seek further promising models within the internet segment.

“We expect to accelerate letgo's development spend to further strengthen its position in the US classifieds market.

“In African video entertainment, a tough environment at present, we aim to grow DTH (direct-to-home) customers by offering increased value and reducing costs to counter the impact of falling currencies. Earnings and cash flows in this segment will continue to be constrained in the foreseeable future,” said the company.

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