Naspers Plans To Use $8.7 Billion Cash Pile To Unlock New Opportunities

The massive cash pile is attributable to the proceeds retained from the Flipkart disposal and sale of Tencent shares in the 2018 financial year.

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Naspers products (Photo Credit: Naspers)

Naspers has spent a mere $3 billion of its $12 billion cash pile, its six months report to end-September published today showed.

However, Africa’s internet giant has not disclosed its plans on such massive reserves.

The company, which is unbundling one of its star performers MultiChoice, is now sitting with net cash of $8.7 billion according to its half-year results.

Naspers said this net cash “positions the group to pursue growth”, without providing details.

That said, Naspers today informed investors that its strong balance sheet “provides a basis for driving growth across the portfolio and unlocking new opportunities” that fit its criteria.

The company, which owns stakes in Tencent and Russia’s Mail.Ru, said the remainder of the financial year, it will maintain its focus on driving profitability in the e-commerce units.

“Our strong balance sheet provides a basis for driving growth across the portfolio and unlocking new opportunities that fit our criteria,” the company informed investors on Friday.

“Containing costs and weathering challenging macro conditions will remain a priority for our more mature assets.”

The massive cash pile is attributable to the proceeds retained from the Flipkart disposal and sale of Tencent shares in the 2018 financial year.

The company said this resulted in net interest income of $48 million.

The company’s strong balance sheet is also due to the fact that as at 30 September 2018 put option liabilities were $1.8 billion, which is nothing to Naspers.

Furthermore, Africa’s internet giant continues to generate positive free cash flow was $271 million in the period to end-September, a marked improvement in 2017.

“This reflects improved profitability in the e-commerce businesses, dividend income of US$332m from Tencent and positive working capital effects in video entertainment,” said the company.

During the period, Naspers generated 8% rise in revenue to $3.3 billion, driven mostly by growth in e-commerce business.

The e-commerce division revenue rose 28% to S$2 billion with meaningful contributions from classifieds, payments, food delivery and B2C.

The Cape Town-based company said the classifieds division continued its strong growth trajectory, generating revenue of S$405 million, reflecting a 40% increase driven by Avito, Brazil and the European markets (particularly Poland and Ukraine).

In Brazil, OLX grew revenues 29% and expanded profit margins, benefiting from its market position in car verticals.

letgo began monetising, benefiting from continued growth in its user base, particularly the increase in retained users due to product enhancements.

“We executed well in the first half of the financial year, growing revenue 29%1 to US$11.0bn2 , and trading profit 34%1 to $2.0 billion,” said Basil Sgourdos, Group Chief Financial Officer.

“The classifieds business is now profitable including letgo. Trading-loss margins in etail and payments narrowed considerably as the businesses delivered solid revenue growth and continued to scale. Naspers continues its track record of locking in strong returns with the recent sale of Flipkart.”

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