Prosus Nv Sp/Adr

Good day ladies and gentlemen and welcome to the process for national results presentation. 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 operator by pressing star and then zero. Please also note that this event is being recorded. I would now like to turn the conference over to Owen Ryan. Please go ahead.

Great. Thanks, Chris, and everyone for joining the call today. As you have no doubt seen, we have a lot of news out there today and a lot to discuss on this call, so we may go a little bit beyond the hour. All of the materials for the buyback program, our results, the annual report, the REM report, are all on the website, and it's there that you'll be able to find a replay, which will be there quite shortly. On the call with me today, I have our CEO, Barbara Dyke, and our CFO, Basil Skouras, and I also have the CEOs of all of the segments. We'll walk through an update on the financials of the group for the year, and then we'll open the call for questions. Before I hand it over, I just want to reiterate that Process is a subsidiary of NASPERS, and its financial results are almost completely accounted for in the NASPERS results. So to ensure that the shareholders of Process and NASPERS are provided with the information simultaneously, we're having one results call focusing on Process's results, but where necessary, we will highlight the impact on NASPERS. And with that, I'm going to hand the call over to Bob.

Bob? Thanks, Owen, and thanks, everyone, for joining the call today. We have a lot of things to cover, so I'll jump right in. So operationally, financial year 2022 was a year where we delivered strong growth and scale across the businesses, and that positions them well for future growth and for value creation. And when I look at our operational performance and our market trading performance, I actually see a very large disconnect. And I think with that comes actually a big opportunity. And that's why we today announced a major step to unlock value for shareholders. And if we turn to slide three, it is summarized in some detail there. So the discount to NAV has risen to an unacceptable level. It is bad for you, our shareholders, and it distracts us from our strategic priorities. And now we've taken steps in the last few years, such as the process listing and the share exchange last year, And while they have not resulted in a discount reduction, I'm confident that over time they will be beneficial. But given where we are, today's action creates value for shareholders by making use of the discount. So what we're announcing today is the beginning of an open-ended share repurchase program of process and NASPRA shares. So we have authorization to begin this immediately, and we will. And we will be asking shareholders at our AGM in August for approval to increase the share repurchase authorization up to 50% of the total issued share capital of process. This will give us the capacity to execute this program at scale. Now Tencent has been supportive of the withdrawal of our voluntary lockup on our selling of Tencent shares. And we will be beginning selling small amounts of Tencent immediately and regularly in an orderly way while concurrently repurchasing shares of the group. So we intend to buy back shares of Prosys and NASPERS within regulatory limits, and we will do so in a balanced way over time. And the execution of the program will in fact result in a group increasing its exposure to Tencent on a per share basis, as well as increasing overall NAV per share. So importantly, we've designed the program to manage the number of pros and nos for shares that will be bought back and Tencent shares that will be sold on a daily basis. And as such, we do not anticipate an overhang on Tencent, and it would also not be in our best interest. And the amount sold per day will on average represent a small percentage of the daily traded volume of Tencent shares. So for example, had we executed this program over the last three months within European regulatory limits, The resulting Tencent shares that would have been sold on a daily basis would have been, on average, not more than 3% to 5% of daily traded Tencent volume. I want to be very clear, we remain extremely bullish on Tencent. But at the current discount levels, the process and NASPR reports believe that buying back our own shares and monetizing some of our Tencent holdings in order to achieve this is in the best interest of our shareholders. Finally, I want to stress that this program presents a lever that we will pull to create value. It in no way precludes us from taking further action to build on the benefits of previous actions to drive a greater degree of simplicity in the group. This is something we will continue to pursue. The program will result in substantial value creation at scale, and slide four illustrates this in a practical way. These examples of the potential impact of the program are based on last week's closing prices, and they assume no change in the underlying discount. So first, selling shares in Tencent and immediately repurchasing shares of the group will enhance NAV per share for both process and NASPR shareholders. We intend to buy back shares of Prozis and NASPERS within EU MAR regulatory limits. And based on today's prices and levels of liquidity, this would result in more than 10 billion of shares brought back across the group per year split between NASPERS and Prozis by economic ownership of the free float. So the example on the right-hand side demonstrates that a 10 billion buyback program would enhance NAV per share by 9% at Prozis based on current prices and discounts. This is possible because we can sell 10 cent shares at market price and we buy back discounted process. So the actual enhancement will vary depending on how the discount changes over time and the overall size. The larger the program, the greater the enhancement. And as we show on the left, when we get to 20 or 30 billion, NAV per share improvement would be at around 20% to 40% respectively. So a further benefit of the program is that it increases, not decreases, our exposure to Tencent on a per-share basis with no additional cash outlay, as we show in slide five. So currently, based on market consensus, Tencent represents approximately 87 euros per process share. And the left-hand graph illustrates that a 10 billion buyback increases the value of Tencent in each process share by 7%, and that enhancement increases to 16% and 29% at a $20 and $30 billion scale. Now, this value creation is made possible because the process and NASPRA share count will decline much faster than the NAV, and that results in a sizable increase in Tencent exposure for remaining process and NASPRA shares. So this applies even more so to our e-commerce segments, where shareholders' exposure would increase at even larger percentages on a per share basis. And finally, it's helpful to quantify what we're solving for. So every 10 percentage point improvement is worth around $17 billion at today prices. So a 20 percentage point improvement would take the discount towards 40%. And this equates to roughly $34 billion in value creation at that level already. This highlights the scale of the opportunity and why we're making reducing the discount our number one priority. So the board is aligned with this path and has also adjusted management incentives accordingly as you will see from our remuneration report that we published this morning. Now, I'm sure you'll have plenty of questions about this announcement in the Q&A, but now I actually want to turn our attention to our results and to the highlights of Goodyear for the group, and those can be found on slide eight. The first, we delivered a strong set of results with 51% underlying revenue growth in e-commerce, despite already being at high scale. Second, we have continued to invest in scaling up adjacent opportunities in each of our segments while at the same time improving profitability at the core. And third, while we're making good progress in building out our segments, we are very aware of how the world has fundamentally changed. And Basil will discuss this in more detail, but in the current environment, you should expect to see us to, number one, prioritize organic investment over M&A, and the bar for M&A is very high. We will focus that investment only in the areas of the highest return, and will reduce corporate expenses across the organization. Fourth, in addition to building substantial NAV, we are also committed to taking action to unlock shareholder value through restructuring and enhancing NAV per share. So over the last year, we returned more than $6 billion to shareholders, and we're committed to continue crystallization in the future, as we've made very clear in today's announcement. And finally, fifth, we'll continue to make progress on our sustainability initiatives, as you'll see in more detail in our integrated annual reports. Sustainability is firmly a part of everything we do. So, our strategy, which you see summarized on slide nine, has been consistent, and it aims to create and crystallize significant value over time. So, from an invested capital base of about $25 billion, our total NAV is currently at around $170 billion, and this is after a major drop in valuation for Tencent and growth assets globally over the last six months. And a key ingredient for success has been our track record of identifying and investing in opportunities across segments to create meaningful value. We've done this many times across multiple segments. And as our businesses are still young, we have focused more on building rather than crystallizing. And going forward, we'll be more focused on how best we crystallize value and make the process systematic and repeatable. And again, today's announcement is a major step in that direction. So we've created substantial businesses and value over the long term. And while our valuation has contracted along with the market, as you can see on slide 10, we have taken action along the way to lock in value for shareholders, growing NAV per share by 23% over the past two years, as you can see from the right-hand side of this slide. There are good reasons for the valuation contraction, with unprecedented volatility as we face higher rates of inflation and higher cost of capital. That said, over the last three years, the IRR on our current portfolio has consistently been above 20%. And it was there actually as recently as December, and I'm confident we can get back to those levels of return in time. I say this because despite the volatility, our affirmations remain really strong, and we're building businesses at the forefront of innovation in our industries. They have significant runway ahead of them to grow profitably for many years to come. So we're entering a period where great companies will differentiate themselves by balancing controlled investment to lay the tracks of future growth with profitable businesses and cost structures that are fit for purpose. So in this period, we will be extra careful how we allocate capital. We will set the bar high for M&A returns, and we will ensure good liquidity on our balance sheet. And meanwhile, we will take action to manage expenses and free cash flow generation, even as we invest across the portfolio for growth. One of the key benefits of today's announcement is that it will increase shareholders' exposure to Tencent, but also to our e-commerce portfolio on a per-share basis. As you can see on slide 11, the portfolio had a strong year with great growth momentum. We will look at each sector in a moment, and Basil will take you to the financials. But before that, I'd like to make three observations. First, apart from EMAC, which grew only 3%, On the back of an exceptional year last year, we actually saw strong growth across all the segments, and that's despite a challenging environment. Second, the scale of growth is impressive, and it's further evidence that the investment that we've been making is bearing fruit. In classifieds, for example, we delivered close to a doubling in revenue. And third, and importantly, growth is being driven by growth in the core and new initiatives, but with a core of profitability at each of the segments. So let's dig a little deeper now in each of our operating segments, and we'll start with classifieds on slide 12. So OLX had a successful year, and it leveraged its base of more than 300 million engaged users to produce revenue growth of 93%. This was driven by OLX Autos and an outstanding performance from our platforms in Eastern Europe. The business grew revenue and profitability strongly at the core. The team added much more functionality and tools for car dealers and real estate agents. We also rolled out pay-and-ship products, which actually gained significant adoption as the year progressed. Olex Autos continued on its strong trajectory, and it sold close to 80% more cars year-on-year, despite the business being impacted by some COVID restrictions and supply issues in some markets. We're now selling around 20,000 cars every month, and we recently surpassed $2 billion in total card transactions. If we take to slide 13, we talk about food delivery. So after an outstanding 2021, we continued to see strong growth in the business. During the year, the strong momentum continued with restaurant delivery orders and GMV for the total segment up more than 50%. So if we look at iFood only, orders in the last five years the last five years have grown at a 91% CAGR, which is driving the business to scale, and it's enabling it to experiment with additional value products and services for customers, but also for restaurant partners and for delivery personnel. As a result, iFood has grown tremendously in value, and we've transitioned the business from a profitable but only 3P business to a profitable 3P and 1P business, and that has a significantly larger opportunity set. And the center graph highlights how the core restaurant business in Brazil delivered profits after an investment of over 200 million two years earlier. And levering this strength and relationship with the Brazilian customers, iFood is now rolling out convenience and grocery products across Brazil. The number of dog stores, for example, increased fivefold in the last six months to 90, and iFood is quickly becoming a significant player in Brazil's grocery industry. It's early days, but we have momentum, and we will build out this opportunity. We'll do this in the same measured and metrics-driven way that we build out the first-party delivery business. And our iFood team has an excellent track record of diligently building great new businesses. On slide 14, you can see Payu's core business is growing strongly across all our markets, and especially in India. So our payment segment grew transaction value close to 50% as it benefits from the continued migration of consumer spending online. So it's mainly in India, but also in its global platforms in Latin America, in Europe, and in Turkey. The core business remains profitable, and we are ramping up our credit activities. While it's still quite early, the credit business is growing strongly, and it's benefiting from access to consumers, to data, and to capital at scale. That's a combination that very few others in the space have. Issuances grew by more than 300% during the year, and we issued about half a billion dollars worth of loans to 3 million customers, while keeping delinquency rates below 3%. And that really speaks to the strength of our data scoring capabilities. On a current trajectory, profitability is actually in sight. Now, we're waiting for the regulatory process to finish for acquisition of Buildesk. It's an important transaction, and if we're successful, the combined business will have a TPV of over $100 billion from 4 billion transactions, and we'll have data on 300 million Indian customers, which is pretty much all of the consumers that are transacting online in India today. So now let's turn to our newest segment, EdTech, on slide 15, where we have now deployed close to $4 billion on 12 excellent businesses. So the EdTech opportunity is huge globally, and the market is ripe for disruption. And I believe our assets are extremely well positioned to benefit from this disruption. And I'm happy to say that the business grew revenues 55% on average in the last year. We closed the acquisition of Stack Overflow, and it's making good progress rolling out its new collaboration product, which is called Stack Overflow for Teams. So Teams is a SaaS product that leverages the unique level of engagement with the software and the developer communities. Including our other app tech companies, we now reach 90% of the Fortune 100 across our corporate learning companies. And in addition, we have very exciting opportunities in the K-12 and supplemental space with companies like Byjuice, Brainly, and GoStudent. So education at all levels is ripe for disruption, and we have now assembled a portfolio of assets that is growing strongly and that is positioned very well to benefit from this opportunity. And finally, before I hand over to Basil, I would like to update you on the progress that we're making in our sustainability initiatives, and that is shown here on slide 16. So last year we put in place a sustainability framework that focuses our efforts in areas that matter most, and we made real progress. We took a major step forward to become carbon neutral at the corporate level and our portfolio companies. We achieved carbon neutrality to both reductions and offsets from certified projects around the world. And this year we will take this further on our journey to net zero. During the year, we signed up to the UN Global Compact, committing to their principles, which align very well with our strategy. The NASPR's process human rights statement was adopted by all companies where we have a controlling influence. We also pushed our on-demand platform worker statement. And this articulates minimum standards on fair pay, social protection, working conditions, and flexibility across the platforms we invest in. And we improved our ESG reporting and transparency standards. And our efforts have been acknowledged by prominent rating agencies. So MSCI upgraded us to a AA rating, And process was also recently included in the AEX ESG index in Amsterdam. There's much more to come. And here again, we have the board's full support. And you will see this reflected in a meaningful increase in the weighting of ESG objectives in our short-term incentives. And with that, I'll hand over the call to Basil.