Prosus Nv Sp/Adr

Good day, ladies and gentlemen, and welcome to the process interim results call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the call. If you should need assistance, please signal an operator by pressing star and then zero. Also note, this event has been recorded. I will now hand the conference over to Owen Ryan. Please go ahead, sir.

Great. Thanks, Chris. And now that we're all in the holiday mood with that music, I'd like to welcome you all to the call tonight and to thank you for joining us. We are speaking with you today from India, where we spent the last few days meeting with our teams and investments here, and it's been really a great experience. With me today, I have our interim CEO, Urban2. We have Basil Skordos, our CFO. and they will take you through the results for the past six months. We'll then move to Q&A, as per usual, where Ervin's team will join us and be available for the Q&A. And as always, if there are any follow-up questions post-call, do not hesitate to reach out to us in IR. And with that, I'll turn it over to Ervin.

Thanks very much, Owen, and everyone for joining the call. We have come a long way since our peak losses just 12 months ago, and my aim is to further strengthen our execution across a number of fronts. ProSys is a company with a rich history. I joined two and a half years ago because I wanted to play a role in furthering that legacy and creating meaningful additional enterprise value. I've been an observer of technology businesses for over 25 years. and believe we sit today at a fascinating time of change with continued opportunity in existing business models within the consumer internet arena and new opportunities driven by B2B momentum, particularly related to AI. I'm very excited about this opportunity because the opportunity this presents the group because of our ability to allocate capital fluidly during transitional periods such as this one. Within our portfolio, operations have improved meaningfully. We own a number of gens with long roads ahead for continued value creation, and I see great opportunity to further scale them profitably and build out their growing ecosystems. As you can see from our results today, we are making real and sustainable progress in this regard. I believe this era will also provide well-capitalized companies like ours the opportunity to invest in generation-defining businesses. AI will play a large role here, and we have real institutional knowledge. We are carefully assessing how we can play a winning role both by industry vertical and by geography. Backing exceptional technology companies, whether through controlled or minority investment, continues to be core to our strategy. We will invest patiently and diligently, always with an eye on both profit and generating strong returns. I am very excited about the future process. Thank you for your continued support and trust in our company. Let's get into the slides. On slide four, you can see today that we announced a set of strong results, underpin consistent execution across our segments as we make fast progress against our commitments. First, we are ahead of our original target for consolidated profitability for e-commerce businesses. The profit trajectory of the group has improved meaningfully and we continue to outpace our peers on growth. Second, we continue to invest in ourselves. The open-ended share repurchase program will carry on at elevated discount levels and will compound value over time, particularly as the portfolio reaches profitability. Third, we have eliminated the cross-holding and greatly simplified our operations. Fourth, we are working to better highlight the value of our e-commerce assets through listing or selling our businesses as appropriate. And finally, Core to our future is building sustainable businesses and we are making meaningful progress there. Fast forward 12 months. If we continue to deliver as we have, we will have exceeded our profitability target and set a path for continued profit growth. We will have run the buyback program for another year, shrinking our equity and compounding value on a per share basis. And we will have highlighted value from some of our investments. If we do this consistently over time, I am confident we will generate tremendous value for our shareholders. Ultimately, I am focused on maximizing value over time by growing NAV per share and to have that manifest in our stock price, as shown here on slide five. First, there remains substantial opportunity in each of our segments, and we will look to improve our returns by further improving their operational performance. Second, we aim to allocate capital effectively to back exceptional growth companies. I will note that we have made mistakes in the past, and I will speak to that more in a bit. And finally, Tencent is a big part of our present and our future. We are committed to remaining a large shareholder for a long time. We believe the stock is undervalued across almost all metrics, and we see a clear trajectory for a new revenue growth, accelerated profit growth, and continued capital return. We like this about Tencent in the same way we like this about process. We are often asked what we intend to do to address the discount. We agree the discount's too high, and our goal is to translate the actions we are taking to discount reduction at that drive shareholder value. We know that the discount was not billed overnight. Similarly, it will not disappear overnight. It requires attention and consistent execution across each of the drivers highlighted here, and the team is focused on doing just that. So on a macro level, we are making progress quickly, and it's backed by the strong fundamentals across our key business lines that you see here on slide six. Rather than get into detail here, you'll hear more from Basil on this in a few minutes. On slide seven, the results show themselves clearly. On the left, you see our strong growth on a relative basis, and on the right, our progress to profitability. There is scale in each of our businesses, and we are beginning to flex that scale now with strong incremental e-commerce margin in H1 of FY24, driven mainly by food delivery and classifieds. This level of incremental margin will decline over time, but our businesses will continue to benefit from the scale we've achieved in addition to our cost discipline. While we will continue to manage our costs, organic growth remains imperative because in the long run, we know that we cannot cost cut our way to greatness. Let's move to slide eight. I am very happy with our operating performance, but I am not happy with our returns, which, as you can see, have been unsatisfactory. Our returns have historically been strong, but the past two years have been difficult for us, as they have been for the market in general. We are very focused on improving our returns from here. You can see on the right-hand side of the slide our main investments across our segments and our ventures portfolio. They are clear winners and great returns, for instance, iFood in Brazil, but unfortunately they've been weighed down by a few larger investments that have not panned out the way they were intended, predominantly in Olex Autos, Delivery Hero, and EdTech. We know the story in Olex Autos. It has impacted our returns, but shutting the business down was the right thing to do, and that has meaningfully improved the profit trajectory of the portfolio. We are very bullish on food and have done well there, particularly with iFood. There's a secular shift occurring with the rise of local marketplaces, and some of our brands are at the forefront of this disruption. We continue to be confident in Delivery Hero and know that within their portfolio sits some of the most valuable delivery brands in the world. However, the returns on this investment have not lived up to our expectations, and we are pleased to see management taking action, committing to profitability and being open to rationalizing the portfolio. With continued progress here, we see a path to a reasonable return. EdTech, it's been a notable laggard. Firstly, we paid 2021 prices for businesses that were not worth those valuations. And secondly, we did so right in front of the disruptive wave of Gen AI. We still believe EdTech as a theme continues to offer substantial promise, but we know well we have some fixing to do in the short term. I am spending a lot of time on EdTech. Ultimately, we aspire to returns of 20 plus percent. Improving our current returns will take some time, but we are committed to that work and any new investment must continue to pass a high bar. As difficult as the past two years have been, we have learned valuable lessons that will make our processes stronger in the future. Slide 9 outlines how we have adapted our approach based on the insights gained. Firstly, our focus on profitability is here to stay. Profitability and growth can and should coexist. As we look for new opportunities, they will have to screen against our ambition for growth while producing profit at the bottom line. Secondly, in the past we might have been too attached to our businesses and too invested in their success. We must become more dispatched in making portfolio decisions. Selling OLX autos is a good example and we will do more of this. Thirdly, making good portfolio decisions is only possible if we have the right information. We have to improve and sharpen the way we engage with our companies, the way we express our expectations of them, and the way we monitor and discuss their performance as a team. Fourthly, I want to see us better understand the lifecycle of our investment before we invest and highlight value when and where possible. That isn't to say that we will not be long-term holders of the things we love most. but it does mean we will put in place a more rigorous process to ensure a more consistent assessment of an investment's progress and future potential. And finally, we must continue to remind ourselves that no matter the market, patience is a virtue in life and investing. If valuation or business outlook does not work, we have to ask hard questions of ourselves. We did this with Just Eat in 2019, eBay classified in 2020, and Build Desk in 2021. So we have discipline and patience in our toolkit already, but I want to make sure it is front and center of our thinking always. When you take a step back, what we are building is a repeatable process to create value for many years to come. We identify opportunity, we scale it to value, we highlight that value, and we repeat. So going forward, you should expect us to be very considered and measured in our capital allocation. Slide 10 outlines how we intend to allocate our capital to maximize return. We're very well capitalized. We have not been in this position for long, and we are not in a rush to deploy capital. We will invest organically in our P&L. We will acquire stakes in part or in whole of external businesses, and we will return capital to our shareholders. Indeed, it may be a combination of the above. When looking for opportunities externally, we will explore early and late stage investments as we always have. Currently, profitable businesses will take priority. We also look at unprofitable businesses as we are not afraid to invest early, but we will only do so with a clear path to future profitability. Backing exceptional growth businesses in technology involves taking risk. but we will aim to do so only with appropriate return. Whether organic or external investment, whether the opportunity is big or small, our aim will be to generate returns of 20% plus. And as we build net asset value and allocate capital smartly, we will continue to dramatically reduce the free flow while increasing our per share economic exposure to our portfolio, the effects of which are shown on slide 11. The buyback program has created $25 billion in value for shareholders over the last 15 months, reduced the free flow by 17%, and improved NAV per share by more than 7%. Continuing the buyback for the next 12 months on the same basis as has been done before will result in another 5% to 6% NAV accretion while reducing the free flow cumulatively by almost 30%. since the program's initiation late June last year, 2022. And finally, on slide 12, we were excited to announce the Science-Based Targets Initiative validated our climate targets. This milestone reaffirms our commitment to a climate journey aligned with the Paris Agreement to limit global warming to 1.5 degrees Celsius. We will take action in our corporate offices and we will continue to work with our portfolio companies to support them on their climate journey. With that, I will turn the call over to Basil. Basil?