Naspers Ltd S/Adr

Good day, ladies and gentlemen, and welcome to the Process NASPASH FY23 results call. All participants will be in listen-only mode, and there will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an oscillator by pressing star and then zero. Please also note that this event is being recorded. I will now hand the conference over to Owen Ryan. Please go ahead.

Great. Thanks, Chris, and welcome, everyone. Thanks for joining us on the call today. With me on the call, I have our CEO, Bob Van Dyke, and our CFO, Basil Skordos. They're going to take us through the key highlights for the year and then the proposal to eliminate the crossholding. We'll then move to Q&A, at which time we'll be joined by Bob's team and the segment CEOs. And as always, please reach out to IR if you have any follow-ups afterwards. Before I hand it over, I want to do some quick housekeeping items. We've commenced but not completed the exit from OLEX autos business. So as such, reported IFRS continue ops still includes some autos operations whose exit process was not finalized at the 31st of March. Our intention remains to exit these businesses and as such, we thought it more useful to present pro forma numbers excluding OLEX autos. So a reconciliation to the IFRS numbers has been appendix, and that's on page 34 of the deck that is on the website. Lastly, FX translation negatively impacted the group's revenue and trading profit by about 7% or $2.4 billion and $347 million respectively. So to get a true view of our results, we will speak to organic growth, excluding FX and M&A, and the OLX autos operations. So with that, I'll now turn it over to Bob.

Yeah, thanks a lot, Owen, and thanks everybody for joining us on the call today. Today we announced strong results and we also put forward a proposal to simplify the group structure. We are really making clear progress on the commitments that we made to you last year. So you would have seen that our businesses are growing really strongly and they are on a clear path to profitability. At the same time, we are reducing our share count and we are improving NAV per share every day. We continue to have very strong confidence in and support for Tencent, and Tencent has been rebounding quite well. And today we're proposing a transaction which will meaningfully simplify the structure of the group by eliminating the crossholding. And we thought we should start there, so if we can go to slide three, we'll talk about the proposal. So we have received approval from the South African authorities to unwind the cross-holding in the group structure, and we will be putting this proposal to shareholders to vote on. Now, Basil will talk you through the specifics in a bit, but first, I am very pleased with this outcome. It is an excellent solution with minimal cost, and it will ensure the continuation of the open-ended share repurchase program. And second, the elimination of the crossholding will meaningfully simplify our corporate structure while it preserves the benefits that we gain from the listing of process and from the share exchange transaction. And third, the economic interests of both sets of shareholders will be preserved and NASPERS will remain domiciled in South Africa. So more on this later from Basil, but let me talk about results now. So I'll first highlight our strategy on slide six, and it's been a source of great strength for the group in a very volatile environment, and it will continue to define our path in the years to come. So we build a strong portfolio in markets that are really transformed by technology, and it's technology that empowers local marketplaces, and it's technology that disrupts consumer transactions and access to financial services, and it is technology that delivers enhanced education all the way from kindergarten to enterprise. We see a lot of upside in each of these categories. And as we build value operationally, we're also taking meaningful steps to improve our NAV per share to our open-ended share purchase program. And every day we sell a small amount of Tencent shares, we buy back our own shares at a discount. And this actually increases our per share exposure to Tencent. We remain very bullish on Tencent's future about its assets and also the management team. And in the past 12 months, We have repurchased and sold about $12 billion worth of stock. It's minor compared to the overall size of Tencent, but it's really significant when it compares to the size of Process. And in the coming year, we do not expect changes to the parameters of the program. Now let's move to slide seven, where you can see that sticking to our strategy resulted in another strong year for the group, where we executed well across our key objectives. So first, we delivered a strong set of results. So our food, classifieds, and fintech segments combined delivered peer-leading growth of 36% in revenue. Now, e-tail, which is take a lot of e-mag, was negatively impacted by the macroeconomic backdrop, like all of its peers in e-tail. And it actually saw a small revenue decline year on year. And that decline had a large impact on our total consolidated revenue growth, which came in at 16% when we include the retail business. Second, we've taken significant action to achieve our goal of e-commerce profitability during the first half of financial year 25, and we are very well on track. Third, our open-ended share buyback is doing exactly what it's supposed to do, which is to grow NAV per share while increasing our per share exposure to Tencent. Fourth, we have a very strong financial position with gross cash of almost 15 billion, and that is a strategic advantage and provides flexibility to pursue opportunities when they arise. And finally, sustainability is a strategic priority and it's core to our strategy and to our capital allocation process. If we can take the slide eight, it shows the strong execution across our core segments with each delivering between 20% and 50% growth, Despite tough comparisons from a strong period last year and a weaker economic backdrop. So food deliveries revenue grew ahead of peers and profitability improved tremendously. And iFood benefited from sustained momentum in the core restaurant business and from improved traction in quick commerce and in groceries. Core classifieds delivered good growth and improved profitability with solid operating metrics and strong performance in Europe. We made a tough decision that you've heard about to exit the Olex Autos business that was facing significant challenges at the end of last year. And this will lead to a sizable improvement in the e-commerce profitability. Our payments team is making excellent progress and is growing revenues by 52%. And we're especially excited about India's credit business, which continues to scale meaningfully. And in EdTech, our enterprise platforms continue to grow and better position themselves by scaling and by improving their product offerings. And in the future, we will focus our investment on leveraging the group's generative AI capabilities for EdTech in particular. Now we're committed to achieving profitability while growing revenue. And slide nine shows that we're doing exactly that across each of our segments in financial year 23. So it's not either or, it is both. So I expect peer-leading growth and improved profitability in financial year 24 as we look to achieve our ambition of e-commerce profitability during the first half of financial year 25. And we're making real progress towards that ambition. You can see the turning point was reached in the second half of the year on slide 10. And this is being driven by two things. So first, the benefits of scale, right? With increased revenue and solid revenue growth, this is falling to the bottom line. And second, we have a leaner cost base following significant reductions at both the business level and at the corporate level. And I'm very confident we will hit consolidated e-commerce trading profit during the first half of financial year 25. Now over the past year, we have been allocating capital to our own stock and to the future growth of our current businesses. Our current businesses we know well, and we believe the risk there is much lower. And slide 11 shows this nicely. So all in all, we have invested $13 billion, and $10.5 billion of that was allocated to share repurchases. And the vast majority of the remaining capital we invested was devoted to the food segment, with $1.6 billion used to acquire the remainder of iFood. And as you can see in today's results, this is a great company that is doing very well, and we're very excited about its future. We also invested $600 million in delivery hero, as we have seen some dilution in our holding over time, and we continue to believe that stock is undervalued. And we increased our holding to just under 30%. And finally, we've invested 200 million in early stage investments, primarily in India through our process venture zone. The impact of our investment and share repurchase is actually illustrated on slide 12. There are not many other companies of our size that have the ability to do this, and the benefits are many. Now, in the last financial year, we've returned $12 billion to shareholders. We reduced the free float by more than 20%, and we improved NAV per share by more than 6%. And the buyback has contributed to a significant reduction in the combined holding company discount, and it equals, in the last financial year, 29%. billion of value created for the group shareholders. And while it's not shown on the slide, NASPERS has also bought back about $3 billion of its shares, and it reduced its free float by 12%. And we will continue this program for as long as the large discount to NAV persists. You can see here how the benefits would compound over time, so improving NAV per share by 19% after three years. And as we make progress on the top and the bottom of the NAV per share equation, we've also made real progress on our sustainability initiatives. And you can see that on slide 13. So we know that the investment choices we make matter. And recently we established our responsible investment thesis. And our ambition is to invest more into sustainability driven businesses. We took decisive action on climate and in financial year 23, we implemented all necessary measures to reduce our corporate level scope one and scope two emissions to zero. It's a great achievement, but it's only a step on the journey ahead. And we've worked hard to build a real world climate transition plan. And we have developed our climate targets, applying the science-based targets initiatives guidance. Our teams are also focused on managing waste and we've developed principles that enable impactful and scalable packaging strategies for digital delivery platforms in the group. And finally, before I turn over to Basil, I'll spend a moment on slide 14 that highlights our progress in AI and generative AI. And it's really difficult to capture everything that's going on on one slide because we've actually prioritized AI across the portfolio. We've been completely embedding it in our workflow for the last five years. So in 2018, we created our own AI lab. And since then, it's been supporting group companies to accelerate machine learning and AI and also to scale adoption. And it also helps companies to develop AI by design products and services. And we always do this with an eye on ethics and privacy. So the early start we had, our scale and also our ability to apply AI in real world examples has enabled us to develop really strong connections with important partners in the ecosystem, and that has granted us early access to releases of new models and the very latest tools. And based on that access and the tools, we have developed an AI assistant based on Gen AI, which is called Plus One. Today, there are already 4,000 people across the organization that are using Plus One to improve their daily work. So across our group, our colleagues are using AI for better product recommendations, but also for things like fraud prevention, content moderation, logistics optimization, and much, much more. To give an example, in OLX, AI models are used to attribute ROI to single marketing campaigns, and it allows OLX to better optimize spending, which is drastically reducing costs for the same marketing outcomes. And similar initiatives are now being implemented across the group. Another example is in iFood, which leverages GenAI to provide a personalized offering to customers, and that really improves the reliability and efficiency of the food and grocery delivery process. Things are moving quickly, and we also continue to look at early stage AI companies. We already invested in a number of those. And actually in our investment decision-making process, our AI leadership team is actually in the lead and very central, and it's hugely helpful in understanding the right opportunities. And finally, our team are really working across the group to make sure that ethical, social, and legal considerations are integral to our AI development. And I think it's really crucial to preserving the quality and longevity of AI products and their performance. So lots going on on AI and Gen AI and a lot more to come. And with that, I will turn the call over to Basil.