Good day, ladies and gentlemen, and welcome to the Process and Naspers Full Year 2021 Earnings Call. While this is the FY 2021 results call, there may be discussion of Processes Exchange Offer for 45.4% of Naspers. As such, this presentation and discussion is not for release, publication or distribution directly or indirectly in or into the United States or any jurisdiction in which such release, publication or distribution would be prohibited by applicable law. The BPR Analyst based in the United States or in particular that's not QRP or QP, you must please disconnect from this call now.
I'd now
like to turn the conference over to Owen Ryan, Head of Investor Relations. Please go ahead.
Thank you, Chris. Hello, everyone, and welcome to the Naspers and Prosus full year 2021 results call. On the call with me today is our CEO, Bob Van Dijk And our CFO, Basil Skordas. Bob and Basil will walk through the operational and financial progress we made during the period, and then we'll open up the call for questions. During that section of the call, we'll have the broader management team available to answer questions.
Before I hand over the call, a quick reminder and a few housekeeping items. As a reminder, Prosus is a subsidiary of Naspers and its financial results almost completely account for Naspers results. To ensure that the shareholders of Prosus and Naspers are provided with the information simultaneously, we are having one results call focusing on Prosus results, But where necessary, we will highlight the impact on Naspers. We report revenue and trading profit on an economic interest basis, Meaning, they include our proportionate share of the results of our associates and joint ventures. The results of our associates, Tencent, Meru, Delivery Hero and others are reported on a 3 month lag basis.
Importantly, free cash flow is a consolidated number as associates And JVs are fully funded via M and A. And finally, growth is in local currency, excluding the impact of M and A. And with that, I will turn the call over to Bob. Bob?
Hey, thanks, Owen, and thanks, everyone, for joining the call today. So this has certainly been a busy period for the group and for all of you who follow us. And today, I'm excited to share the progress that we've made and to take your questions. So I'll start by explaining how our strategy paid off in the results for the 2021 financial year, which was truly an exceptional year from an operating perspective the one in which we achieved a new level of scale, which sets us up for future growth and value creation. So let's start with the highlights of a very strong year on Slide 4, first, we delivered the strongest set of results since I become CEO, with revenue and trading profit growth accelerating meaningfully.
This in turn has translated into a period of free positive free cash flow generation. This is an outstanding performance for the year, but importantly, It is the outcome of a trend that has been in place now for many years. 2nd, the results of 2021 further reinforce my faith in our strategy, We just created outstanding value in the e commerce segment, value which is becoming large and should continue to grow at some speed. We are disclosing the valuation of this portfolio for the first time today and hope you find it helpful. More important than a static number Its future potential as our portfolio is very well positioned to benefit from shifting consumer trends to digital consumption.
3rd, we closed a number of major transactions that will position the group well for continued growth now and in the future. So we invested further into Delivery Euro and Ifood and we ramped our exposure to ad tech. We raised €20,000,000,000 through asset sales and new debt, Which gives us the financial flexibility to fund our ambitious M and A pipeline as well as invest €5,000,000,000 in our stock. Finally, in order to have this value more accurately reflected in our share price, it is vital to optimize our capital structure. The voluntary share exchange offer we announced last month addresses the risk and impacts of Naspers becoming too large for the JAC And rightsizes Prosus and Naspers for their respective exchanges.
We have engaged extensively with our investors and taken on a lot of good feedback, I'm confident the end result will better position both companies for future growth. Doing nothing really isn't an option. Finally and importantly, I want to underline that our incentives are aligned and you can see this clearly in the remuneration report released today. So the Board is steadfast and management remain committed and incentivized to take action to address the discount to NAV at Naspers and Prosus. I now have that explicitly included in my goals for the coming year.
I will also note that the proposed transaction maintains and in certain instances enhances our flexibility to unlock value versus our current structure. So let's now talk about our strategy. So it's aimed to benefit from consumers shifting online and transacting more online. And this the consumer shifting online and transacting more online and this secular trend has been accelerated exponentially in the past year, Which drove exceptional performance and also sets our businesses up for continued growth. On Slide 5, the you can see that the strategy we are following remains focused on developing our businesses from their root stages into scaled platforms with deep and engaged ecosystems position for long term growth.
So I'm more convinced than ever that our approach is a real differentiator, particularly as the world normalizes with COVID-nineteen. We always take a long term view, which enables us to be very disciplined in our capital allocation and this has again been the case this year. So our approach, our experience and our reputation has given us privileged access to extending investment opportunities in each of the segments. So over the last 7 years, we have assembled one of the most unique and rare e commerce portfolios, which is only available to our investors. And finally, we have a responsibility to the broad set of stakeholders, which I will come back to.
And we've made great strides in embedding a robust ESG strategy We have been systematic in our approach and that has led to consistently strong performance across the portfolio. And as you can see here on Slide 6, you can see it from the 5 year CAGRs for each of our segments as well as the ventures portfolio. So our segments have grown consistently and strongly over the last 5 years and growth accelerated over the last year. The core to this success is leveraging our online platforms to make offline transactions more efficient. We've invested deliberately in building deeper ecosystems with more touch points with our customers.
And this will
strengthen With more touch points with our customers and this will strengthen our growth over a sustained period of time and will make it more defensible.
The end of
the quarter, all of our large classifieds markets now offer pay and ship options. And this takes us beyond the position of facilitator of transactions, the end of the quarter, we're doing the same in autos, where through FCG and OLX, we're providing convenient transaction services to customers the value safety and certainty and the same is true in food delivery where we know the opportunity set continues to expand. So Ifood and Swiggy are rapidly expanding into groceries and other new verticals and our ventures team have made a number of investments into businesses enabling commerce Such as ElasticRun, Pharmeasy, Amisho in India. So our investments in EdTech are also proving to be presigned. We now have invested approximately $3,000,000,000 on 9 investments in the K-twelve supplemental, professional development and corporate learning space.
This as well as food most recently graduated from our ventures portfolio to become its own segment and it clearly highlights the value of having a team the focus on the next wave of growth for Prosus. So our strategy is evident in the results we reported today with accelerated growth and improvement Across all financial metrics as is shown on Slide 7. So Basil will discuss all of this in more detail. So I'll just highlight key points here. The Group revenue grew 33%, driven by both Tencent and an impressive 54% growth from our e commerce portfolio, Which accelerated from 23% in 2020 51% in the first half of twenty twenty one.
And this acceleration in e commerce growth was driven by a very strong performance across food delivery, retail and ventures as well as a strong recovery in the Classifieds and Payments segment in the second half of the year. So trading profit the end core headline earnings growth was also very strong. And importantly, on trading profits, we saw a significant improvement From businesses where we have been investing to scale ecosystems over the last few years. This is most notable in food, where losses reduced by almost $270,000,000 and an etail, which actually recorded its 1st year of profitability. So these results are reflection of the commitment to investing in our strategy for the long term.
This is a strategy that has generated significant return and has created tremendous value Both through our listed investments and through our e commerce portfolio as is shown on Slide 8. So we deliver returns in excess of 20% And that's not just in 1 year, but over many years. So in recent years, we have deployed close to $16,000,000,000 of net investment and Based on markets consensus valuations that has delivered an IRR of 21% for our current portfolio, That's up from 19% a year ago. Effective momentum has accelerated. So if we look at the businesses we acquired with the proceeds the initial sale of Tencent in 2018, the IRR of those food assets, the Avedo step up and the ad tech portfolio is running at over 30%.
So we've heard you when you have asked for more disclosure around our e commerce valuation. So this time, for the first time, the end of the quarter, we are disclosing the SAR scheme valuation for e commerce as a whole in our remuneration report that we released earlier today. So this is a valuation performed by an independent auditor. And actually, the numbers tally closely with the analyst consensus And is it at around $40,000,000,000 and it shows substantial growth over the past 5 years. So this is now a very large portfolio of fast growing assets operating in fast growing sectors and we have aspirations and expectations for continued strong growth.
So now let's dig a little deeper in each of our operating segments, starting with classifieds on Slide 9. The first, we own and operate some of the best classifieds assets in the world that are only assessable to investors through Prosus or Naspers. And many of these businesses have reached scale and they continue to grow well ahead of global peers. And second, Across all our platforms, there is significantly more upside potential as our strategy is to build up large ecosystems. And there's a tremendous amount of innovation In the group and some of the initiatives we are working on are shown here, particularly in the auto transaction space, which had a really strong recovery in the second half.
So I could have picked any of our focused markets, but I've highlighted Avido, which is a market leader in Russia. So this is a company we have been operating for many years. 5 years ago, it was predominantly a general classifieds platform with potential. But today, it is one of the largest and most used In all the key verticals such as autos and real estate and it has been investing and moving closer to the transaction and have more marketplace capabilities.
It's very profitable and one of
the best classifieds businesses in the world. In total in classifieds, we've invested approximately $6,000,000,000 the end of the quarter, we will continue to grow this business And we want to increase our opportunity set by expanding into transactions. And I believe we can significantly increase the value of this portfolio further in the coming years. So we are adopting a similar strategy in food delivery, which in terms of growth led the way in 2021, particularly at Ifood, which I'll focus on in Slide number 10. So, Eifu had a stellar year and it was growing revenues at more than 200% year on year.
Its revenue base today is close to 10 times larger than 4 years ago, and the trends we saw over the last year confirm our view that food delivery represents a massive opportunity that is still in its early So Ifood has evolved from a predominantly 3P marketplace into a major food ecosystem, Which really became essential to consumers and restaurants through the pandemic. So in the last year, the business added more than 100,000 new restaurants onto the platform That's an increase of 73% year on year. In addition, Ifood saw its market share increase. And by investing in the business, Ifood has been able to innovate and create new services and capacity that enabled it to fulfill the extra demand. Its 1P delivery business now delivers 35 the end of total orders and it is now expanding into new convenience verticals like groceries.
And this expansive strategy is also deployed in Delivery Euro and Swiggy, both assets where we have allocated significant capital in recent months. So overall, our food delivery segment grew GMV by 70% And trading loss is almost half, which is an excellent outcome. And most notably, the market now values our food delivery segment at €15,000,000,000 again, more than twice the value we invest in it and making it the largest in our portfolio with a long runway ahead for growth. So let's turn over to our payment segment. Now this segment is strongly positioned to benefit from platform effects of consumer activity and e commerce migrating the end of the quarter, we have made a big bet in payments in India and that is paying off in terms of growth, in terms of profitability Perhaps most importantly in terms of future opportunity.
So our payment business is global, but today I'll focus on India, where PeiU has almost doubled over the last 2 years and that is despite one of its largest categories, which is travel, That is, of course, grind to a halt during the lockdowns. So I'm really encouraged by good growth in areas like financial services and e commerce, We saw increased rates of digital payments adoption. And this increased diversity and mix will actually benefit us in the long term, particularly when travel and hospitality will recover. There's a leading online payment As a leading online payment gateway and processor, PayU has become an important partner to leading online merchants In India across many sectors and online penetrations are still low, but it's rapidly increasing. And this enabled transaction volumes to increase 59% in the second half of the year, which is more than double the rate of the first half.
As was classifieds and food every, au's ambitions are much bigger and from this data rich base, we have been investing into the broader fintech ecosystem, Notably in remittances, which are also moving online rapidly. We're also ready to accelerate our credit operations in India as the impact of the pandemic the clarifies and we remain very optimistic about the credit opportunity in a more normalized environment. So we also saw strong user growth Across our other markets in Latin America and Eastern Europe, which grew over 50% last year, and they demonstrated the benefit of having leading positions in high potential So overall PayU surpassed $50,000,000,000 in transaction volumes and we expect this to breach $100,000,000,000 over the next couple of years. So and as our core segments flourish, we actually have a new segment adtech that has emerged from the ventures portfolio So we first invested in EdTech 5 years ago and we're well positioned for future growth As the sector increasingly shifts online, so including the recent investments in Skillsoft, which actually went public last Monday, Stack Overflow and Good Habits, we have invested approximately SEK 3,000,000,000 in 9 businesses, and we are already seeing excellent returns.
So we focused in on adtech for very good reasons. First, it's a huge space, right? It's an addressable market of around $300,000,000,000 and it's growing very quickly. And second, it also has a great overlap with our footprint. And third, it's ripe for disruption.
And there's an opportunity for technology to transform the sector. Over the last decade, you've seen tech costs falling, while education costs are consistently rising. This is a dichotomy that should not persist. And finally, the space is highly fragmented and that is very important as there is lots of opportunity to consolidate markets. So on Slide 13, we set out how we've deployed $7,000,000,000 of capital since the start of 2021 across our 4 segments and in ventures.
So we have enhanced our position in all the segments and spent $3,000,000,000 in food alone and the majority to increase our position to 24.9% at delivery euro. In addition, we fully participated in the recent funding rounds at Swiggy to ensure it's well capitalized to execute its ambitious strategy. So we also deployed $3,000,000,000 in adtech, as I mentioned before. So we invested recently in Skillsoft, Stack Overflow and Good Habits. And these are 3 very exciting businesses in the corporate learning and digital markets.
So if I look forward, the pipeline is strong and we will the majority of our capital in these areas, while maintaining a very high level of discipline on valuation. And finally, sustainability has always been core to who we are and what we do and to the companies that we want to partner with. And on Slide 14, we see that we made progress on what is most material to our business. So this year, we put in place a sustainability framework that allows us To focus our efforts in areas that matter most. So this is both in terms of the risks that we need to mitigate and the opportunities where we can have the biggest positive impact.
So in this year's integrated report, which we published this morning, we continue to improve our disclosures to reflect the progress on the 11 most the important issues our stakeholders have identified for our businesses and operations. And to ensure that we live up to our sustainability commitment, the end of the quarter, we'll continue to enhance the reporting on the progress that we're making. We have ambitious goals and targets and we'll refine our approach to make sure the end of the call, we keep contributing to positive change. We are a low carbon, high social impact business and that we're very proud of. So with that, I'll turn the call over to Basil.
So Basil, take it from you, please.
Thank you, Bob. Hello, everyone, and thanks for joining us today. As Bob mentioned, we delivered excellent results for the year in a world filled with turmoil and challenges. The points Bob made about our strategy and its impact on our results underlines our confident ambitions for the future. So let's start turning to Slide 16.
Our overall financial performance was very strong. We accelerated revenue growth And significantly improved profitability and cash generation, while continuing to grow our customer numbers. The full year results underscore the strength and resilience of our businesses and the opportunity ahead. Revenue for the period was $28,800,000,000 the growing 33% year over year. E commerce revenues grew even faster at 54% year over year, Supported by food delivery, e tail, edtech and strong recoveries in the second half of the year by classifieds and payments and fintech.
Trading profit grew 44%, driven by improved scale and unit economics in food delivery, core payments and by our e tail business. Our share of $0.10 revenue and trading profit grew 28% 29%, respectively, reflecting the strength of its diversified portfolio of products, the Businesses and Investments and the leadership team's prompt and focused management in response to a fast changing environment. The core headline earnings were $4,900,000,000 growing 39% year over year, driven by improved profitability from our e commerce segments the Tencent, we reported a cash inflow of $126,000,000 and that's a meaningful improvement From the prior year outflow of $338,000,000 Finally, we continue to diversify our sources of funding Turning to Slide 17, you'll see that e commerce revenue accelerated 21 percentage points year over year. The chart on the right highlights the shape of the growth amid the COVID-nineteen pandemic. Classifieds being most impacted by the mandated shutdowns in the first half of the year, But then rebounding strongly in the second half of the year.
All of our businesses are now benefiting from the acceleration in consumer Internet growth the that Bob mentioned earlier, these are being delivered at scale and in both cases, well ahead of our global peers. On Slide 18, we show the performance of the business from a half year perspective. Classifieds and Payments and FinTech Made a strong recovery in the second half of the year. Food delivery and e tail grew strongly throughout. The classified stronger recovery in the second half of the year and in many cases ahead of global peers underlines the quality of our assets and the opportunity ahead.
In the first half, traffic volumes dropped and inspection centers were largely closed. As you can see, this reversed strongly in the second half of the year In classifieds, we gained good momentum. We picked up investment in some key markets when others were cutting back, and that will deliver benefits over the long term. The Payments, our global payment operations, mainly in Europe and Latin America, maintained the accelerated revenue growth that we saw in the first half of the year. In India, digital payment adoption is increasing quickly, and the business recovered strongly, And the total payment value grew by 59% in the second half of the year.
There is a significant opportunity ahead in that market. The Etail continued to benefit from the tailwinds of the pandemic, but more importantly, from the strength of the platform it has built over the years. The EMAG reported 45% revenue growth in the second half of the year, which is still very impressive. For Naspers, the Take a Lot in South Africa also had a stellar year and grew revenue by 65%. Turning to Slide 19, you can see a healthy 11 percentage point improvement in trading margins versus the prior year, confirming the strength And resilience of our business model and the relevance of our market offerings.
Aggregated trading losses reduced $353,000,000 the 46% to $429,000,000 In food delivery, revenue growth remained strong. Customer acquisition remained lower and the business continued to benefit from the increased scale on the platform. In Etail, EMAG performed exceptionally well and reported a trading profit of $68,000,000 compared to a $20,000,000 loss In the prior period, as it continued to provide customers with the best in class convenience, selection and value. For Naspers, Takealot improved profitability by 81% or $36,000,000 to a near breakeven position. The In classifieds, COVID-nineteen took its toll on trading profit.
The team responded quickly to contain costs and keep the business profitable for the year, While at the same time, continuing to invest in areas of the business that will drive growth into the future. We've defined a clear path for growth, and we continue to execute our vision, focusing on building deeper ecosystems, the while still remaining profitable at the core of
the operations. Now let's dive a
bit deeper into the segments. So let's kick off with Classifieds on Slide 20. The classifieds had a solid second half performance with good levels of revenue growth and user adoption across the portfolio. The accelerated adoption of our transaction capabilities, and this will be a strategic priority ahead. The classifieds revenue grew 18 percent to $1,600,000,000 This reflects the strong recovery in the second half of the year, where revenues in local currency, The impact of M and A grew 36%.
Trading profit of $9,000,000 As I mentioned earlier, decreased from the prior year as the segment felt initial impacts of COVID-nineteen and continued to develop and invested in products and solutions and marketing that will drive longer term growth. This resulted in a 2% drop in trading margin In our core traditional classified business, revenues grew 13% for the year, Representing 23% growth in the second half, Russia and Europe remain the drivers of our classified business. Avita, in particular, was a standout performer and grew revenues 30% in the second half of the year. Similarly, the transaction business continued to see strong momentum despite major disruptions at inspection centers as a result of the pandemic. The transaction revenues grew 28% to $626,000,000 for the year, with the second half the end of the year, it went even faster at 62%.
Trading losses for the transaction business increased marginally to $97,000,000 Reflecting both our acquisition of a controlling stake in Frontier Car Group as well as continued investment the end of the year, we will be able to facilitate end to end transactions with an ecosystem of online and offline solutions that enhance convenience and address trust and safety issues. Momentum in classifieds is strong in our focus markets, And we continue to outperform the peer group. Turning to food delivery on Slide 21. The pandemic corroborated the group's investment thesis in food delivery and acted as an accelerant for the exponential increase in customer adoption. While the pandemic differed by region, the combination of Ifood and our chain delivery hero and Swiggy yielded impressive revenue growth the end of the quarter, we have a notable 60 percentage point reduction in trading margin as efficiency ratios improved meaningfully.
Revenues almost doubled to $1,500,000,000 Ifood grew its revenues by an impressive 205% year over year, strong order and revenue growth led to meaningful improvement in trade losses, which decreased by $204,000,000 or 81% just $43,000,000 for the year. Delivery Hero also contributed the strong results and executed very well. Our share of the revenue grew 99% for the year, And our share of trading losses were $195,000,000 for the period and account for more than half of the losses recognized in the segment. While the pandemic accelerated the shift to online across the board, lockdowns and restrictions in India led to some different dynamics, Resulting in Swiggy experiencing some setbacks. Swiggy's revenue contribution grew a modest 3%.
However, due to various proactive initiatives, our shares figures trading losses for the period improved by a meaningful 58%. Since then, We know that a new wave of infections has hit India and new lockdown restrictions have been imposed. However, the impact has not been as extensive Looking forward, we will drive growth by expanding our ecosystem further into last mile logistic opportunities. The end of the quarter, you will have seen we've already started to invest behind these opportunities. Given the high frequency usage patterns, promising engagement metrics and growing importance of convenience in customers' everyday lives, we see the opportunity set now in a broader Finally, to payments and fintech on Slide 22, Where the accelerated consumer adoption of digital payment methods has positioned us very well for continued long term growth.
The Payments and Fintech segment reported strong financial results despite an initial setback in India in the early months of the pandemic. The revenue grew 36 percent to $577,000,000 and trading losses reduced from the prior year to $68,000,000 With increased profitability from the payment service provider business, which was partially offset by continued investment into the credit business. The trading profit in the core PSP business grew to $15,000,000 Our European and LatAm business grew strongly Throughout the pandemic, we maintained revenue growth. In India, we had a tough start to the year, but recovered very strongly, growing total payment value by 59% in the second half of the year. We expect to see continued strong growth in digital adoption Across our core payment markets and to benefit from the associated increase in transaction volume.
Additionally, we'll continue to invest in the broader fintech space, Credit in particular, to that end, in the last financial year, we stepped up our investment to a controlling stake in Paysense. And in so doing, we increased our percentage ownership of the business and, of course, absorbed higher losses. We remain cautious following the pandemic's negative impact on the Indian economy and have prudently held back On originating new loans, but we know we are all going to recover from the pandemic, and then we see an exciting opportunity ahead. Turning now to Slide 23, where we unpack the increased contribution to central cash flows from our profitable e commerce businesses. The We're seeing the same acceleration in revenue and profitability in our profitable e commerce businesses.
Revenue from these profitable businesses increased $977,000,000 or 59 percent to $3,600,000,000 More and more of our e commerce businesses are profitable. From just 38% of e commerce revenues 5 years ago, the over 60% of our e commerce revenues come from profitable businesses. With this good momentum, We'll continue to push the broader portfolio towards profitability, and you will see continued progress here. However, the
end of the quarter, we
will be mindful not to start future growth. Consolidated trading profit from the businesses increased 37% year over year, Driven by e tail and payments and fintech. This was partially offset By a lower contribution from classifieds due to the effects of the pandemic. That said, the classified still managed to pay dividend to the holding company of $229,000,000 during the period, mainly from Avito and the Polish business. Now let's spend some time looking at the cash flow drivers on Slide 24.
Free cash flow for the year was an inflow of $126,000,000 a significant improvement compared to the $338,000,000 in the prior year. The progress was driven by e commerce profitability due to lower losses from Ifood, totaling $184,000,000 the Investor Relations segment, we have an excellent working capital management and $81,000,000 increase in dividends from Tencent. Dividends from Tencent grew 21% the sizable $458,000,000 And in the new financial year, we've already received our dividend from Tencent, And that's increased by a further 33 percent to $577,000,000 Naspers' free cash flow was, however, an outflow of $4,000,000 This was largely due to the ZAR1 1,000,000,000 donation we made in response to the COVID-nineteen crisis. Now Slide 25, I'll talk you through the dividend and how it will work this year. The board has recommended the EUR 14 distribution for Prosys shareholders, the ultimate dividend flow will depend on the outcome of the exchange offer.
If the exchange offer proceeds, the distribution will be under the proposed cross holding agreement between Naspers and Prosus, the which sees Process Free Float receiving 59.7 percent of the distribution and then Naspers shareholders receiving 40.3%. The Process shareholders will receive a capital repayment and a Dutch tax, which will be free of withholding taxes. Of course, shareholders may also elect To receive a dividend instead, Naspers shareholders will receive a dividend and the requisite withholding taxes The exact amount of the Naspers dividend can, of course, only be determined Once the exchange offer is completed, the timing of the payment will be the same as last year and will happen in November. Moving now to the funding of the business on Slide 26, where you can see that we have significantly strengthened our capital base. The end of the quarter, we raised $5,700,000,000 on the debt markets, improving the term structure of our bond portfolio At the point in time when interest rates seem to have reached their bottom, our balance sheet was further strengthened by the proceeds received from the disposal of 2% the 2% stake on Tencent, which raised $14,600,000,000 in April of 2021.
While we've strengthened our balance sheet, we've also been very active deploying capital. As Bob mentioned, we've invested $7,000,000,000 in the last 16 months Across our portfolio of core assets, we see great opportunities ahead and have the flexibility to chase those. We'll continue to work hard to increase our financial flexibility by building a portfolio of e commerce assets with significant cash flow generating capabilities, increasing leverage responsibly and remaining disciplined in capital allocation. To conclude, the end of the quarter, I'm very pleased with the performance of the group for the last financial year. It's been a year unlike any that we've seen before.
Our businesses have performed exceptionally well, and the value of our portfolio grew strongly. We continue to allocate capital well to the assets and investments, and I'm confident we'll continue
Yes. Thanks a lot, Basil. And while we focus on creating value, we will also continue to take the steps to ensure that value is being realized and Slide 28 illustrates that. So while the transaction that we announced is quite complex, the structure the post transaction is relatively simple. So there will be 2 separate companies with distinct ownership of a very large and fast growing set of Internet assets.
So this portfolio today is worth more than $250,000,000,000 and investors will have access to this portfolio through 2 stocks And the split in economic ownership is codified by agreement. So Naspers will be entitled to 40% of the economics At the process will be entitled to 60%. And as you can see from the NAV per share of each stock, there remains significant At both the process and Naspers level and we're committed to ensure that that is realized. So before we have the questions, I'll summarize on Slide 29, our key priorities. So first, the fundamentals of our businesses are strong and are clearly strengthening.
2nd, we will continue to invest in the growth of our core segments and ventures organically and through M and A. 3rd, we've put forward a share exchange offer that we believe better positions Naspers and Prosus for the future. 4th, as we deploy capital, we will remain very disciplined and focused on continuing to generate strong risk adjusted returns well ahead of the market. And 5th, we remain committed to taking the right actions to unlock value for all our shareholders. So with that, I want to thank you for listening.
Thanks for your time so far.
Our first question is from Cesar Tiron of Bank of America. Please go ahead.
Yes. Hi, everyone. Thanks for the question and thanks for the call as well. I just have four questions. Sorry about that.
The first one is on online education. Can you please explain if there are any synergies across some of the businesses in which we invested And if the end goal could see them being consolidated together. Second question is on the cash burn of e commerce. It was reduced very significantly in 2H. So wanted to understand if this trend would continue or if the investments in EdTech, for example, We'll offset further reduction of losses in e commerce going forward.
And then I have just a question for Bob and for Basil On the interviews you've done this morning, so for Basel, I think Basel said in an interview that process might consider to increase leverage If it sees investment opportunities, just wanted to check if this means there's more appetite on leverage from your side or nothing has changed? And also to understand if investment opportunities include your own stock in the process or the NASDAQ stock? And then a question from Bob's interview, Sorry about that. I think Bob you said that the proposed exchange offer does not preclude other actions to help reduce the discount to NAV in the future. Would you be able to share some of these measures or the timeline for their implementation?
Thank you so much.
Yes. Thanks, Cesar, for your four questions. And I will ask Larry to answer the the question on EdTech, I know he is on the call. And I'll ask Basil to obviously answer the question around the leverage and the use of that leverage and I can speak to the cash burn on e commerce and finally I'll answer the question on Other value creating opportunities. So let me start And I'll give Larry a chance right after on e commerce cash burn reduction.
So I think what you will have seen is Indeed, it is a very significant reduction and we're proud of it. And I think it's the result fundamentally of operating leverage in the business, right? So These businesses have scalable technology and the fixed cost that goes with that technology basically is fairly stable. And that means that with that very significantly accelerated growth, we basically had to invest less because the fixed cost base Stated relatively stable. So I think that same dynamic is going to hold through going forward, right?
So that operating leverage dynamic that we've now clearly proven There's one that will continue, but the aggregate of e commerce cash burn is really hard to predict, Because there's also new investments that we do. Actually, the ad tech businesses are generally not very cash consuming, but we are investing, for example, in food, in convenience delivery and other things. So where Exactly, it will net out that remains to be seen. It depends on the business mix. But I think that trend of operating leverage That reduces burn in that the businesses that are becoming more established that you should expect to continue.
And maybe, Larry, you want to take the EdTech question?
Yes, happy to. So on synergies in the EdTech space, I think if you look across the portfolio of assets that we've assembled, Especially some of the ones we've added in the last several weeks, our user base, we touch North of 500,000,000 users globally, so we start with strength on the consumer side. And on the enterprise side, where the money is made, We touched over 70% of the global Fortune 1,000. So when it comes to synergies among the portfolio, it's really just a matter of introducing the companies to each other and they find ways to work together, be it on content, product, the enterprise relationships, you name it. And it takes no more than the initial PR announcement of an investment from us to get the companies connected, and then they're off to the races.
Hi, Cesar. It's Basil here. Let me deal with your balance sheet question. So indeed, as our financial performance strengthens, we will continue to add leverage to the balance sheet, But we want to do so responsibly. As you can see, we're a business that not only wants to build large and profitable the e commerce business, but we also want to invest in new opportunities into the future, and we need a balance sheet that can support that.
In terms of capital allocation, Bob has mentioned earlier that if you just look at the money we took from the initial 2018, that has yielded an IRR north of 34%. So that's a very strong return. So it's quite clear what we need to prioritize in terms of capital allocation. It's more opportunities like that that deliver return. Now If we can execute on the opportunities on the table and do well with them and we have spare capital, of course, it makes sense to invest in our stock too And particularly when you trade at a discount, but we can't do that at the expense of the long term strategy.
So our ambition is to continue to drive the core businesses, to find new opportunities, to improve our financial flexibility So that we can do these things at scale over the long term.
Yes. And so maybe I can answer your last question, which is around The share exchange and what is next. And maybe I think the to take a step back, right, the results that we just We've seen very strong revenue growth. And I think as a result of that continued growth And our very significant outperformance versus the Johannesburg Stock Exchange as a whole, it is really clear that We need to do this transaction, right? So post the transaction, Prosus will double in size and will the top 20 euro stocks company, right, and it's underpinned with a portfolio of some of the fastest growing assets And that the PROS of FreeFold will own 60% of the underlying net asset value.
And What is great is that the AEX doesn't have the same challenges as the JSE proposes for us, right. So that's both positive For Proseus shareholders, but also for Naspers shareholders. And I think maybe one comment also is that like the status quo Maintaining that is actually not an option, right? So it is as a result of where we are And it has nothing to do with what index you follow, but basically we are so big that basically we have the phenomenon for selling where the stock doesn't get Its fair share in the South African market and it is actually a negative dynamic we need to do something about. In terms of next steps, without getting into the detail, I think we thought through very carefully that what we are proposing here Doesn't in any way stop us from taking further next steps.
So we think this step is the right one. It's one that is necessary. And actually going forward, it doesn't preclude us from any other value creating steps.
Thank you so much, Balm.
Thank you very much. The next question is from Will Packer of Exane. Please go ahead.
Hi, Bob and Madel. Thanks a lot for taking my questions. 3 please. Just to kick off on the exchange offer, there's a backdrop where there's some caution based on the complexity of the new cross holding structure and new share class and You've argued is the best structure to reduce the size of NASBA without crystallizing tax issues. Could you confirm the size of the tax bill If you reduce the NASDAQ to create a similar 40 percent economic ownership via a lot less complex means, just trying to get a flavor of how big the tax savings are from the Secondly, your release mentioned some progress in new products for the general segment for pay and ship in Poland, Brazil, could you share any initial thoughts on the progress and in particular how you're overcoming some of the trust issues that have the characterized e commerce like services for used goods.
And then finally, the transaction side of your classified segment is scaling very nicely. My understanding is that it's a blend of a C to B style, we buy any car and then a Carvana style digital retailing business Along the lines of AutoONE, could you provide some more details on the relative size and growth of these two segments? Thanks very much.
Yeah. Thanks, Will, for your questions. I'm actually happy to take a start On all three of them and Basil, I'm sure you can chime in. We also have renew, so I'll let him to comment, but I'll answer initially on his behalf. So I think when we talk about the exchange offer, I think the important thing to say is, we We're not saving tax with this, right?
We're maintaining our tax structure as it is. We're staying within the South African tax remit And we maintain our detects grouping. If we would have looked at that other ways to reduce NASDAQ's size On the JAC, depending on how that would have been done, that would have resulted in a meaningful tax bill, Which would be an additional tax bill, but it's hard to say what the tax bill would be without specifying exactly what it is that the you were thinking about as an alternative. So maybe as a follow on, you can be a bit more specific on what it is you have in mind and we looked at the tax Impacts of a variety of alternatives and we may be specifically be able to answer that question. So should we do it in an hour or should we do it when we're done?
We can go either way with that, Will?
Let's take it offline. I don't want the time talking about very specific structures, but obviously the obvious structures repeating what you did at IPO by distributing that way. Those are the kind of things I had in mind. And obviously Yes. Those savings are a key characteristic for the advantage of the structure.
So I just wondered if you had any specific numbers you could share?
We do well and actually probably best to indeed take those offline with the team. If you would say, hey, if you would have Another 20 odd percent of Pro's shares to Naspers, I think that is in the order of 1,000,000,000 of additional tax That would have occurred. I think the exact numbers is in the order of magnitude of 5, but Basil, maybe you can chime in there.
Yes, Bob, indeed, it's that's the right order of magnitude. But I think there are some other important points to make about that. Well, First of all, Naspers can't unbundle up to 40%, right? That would not comply With the approvals, the approvals require that Naspers maintains a majority holding And majority voting share in the structure, and that's what creates the deep shares and the control structure. Secondly, if we just did a straight unbundling like that, we would be straight up at where we are within the next 18 months.
So the difference between your idea not your idea, the difference between the idea that you put on the table And the one that we want to execute is that in the proposal that we've taken to our shareholders, we need to create $225,000,000,000 of value To get right back up, so in short, we couldn't go as far because of the regulatory approvals in a straight unbundling. 2, there's a sizable tax bill, but 3, we would climb right back up very quickly and that doesn't happen with this proposal.
Yes. Thanks, Basel, and thanks for the question. Well done. When it comes to pay and ship, I think what we have designed in a number of cases is what is fundamentally an escrow model, right, where the you basically we hold the payment until the buyer is satisfied that the sellers indeed shipped what was agreed upon and we found out particularly with more implementation of technology and actually a fair bit of machine learning, We get really, really quite good at figuring out whether a seller is actually not sending what they're supposed to send or maybe a buyer would be returning items that are not the same as that he or she has received. So it's a combination of escrow plus machine learning that actually makes that pay and ship a much, much better experience Compared to what it maybe was in other businesses a decade ago.
And then in terms of the different sort of sub models Of card transaction business, indeed we have different models where I think the starting point in many cases has been that we offer For consumers to that we can actually buy their car off them as a more convenient option To the simple classified selling process, but we also are increasingly then giving consumers the options to buy those cars as well, so in some cases they go into the dealer the model in other cases, they go back directly to consumer. And we So we are engaged in both models and we actually don't separately disclose the numbers on both of them at this point in time. The consumer business is smaller and it is growing faster.
Many thanks for the color.
Thank you. The next question is from John Kim of UBS. Please go ahead.
Hi, everybody. Two questions, please. First, when you think about value creation in the portfolio and getting the market to ascribe credit the share price through the discount to NAV, is it more of a focus on building critical mass? Are you looking to scale these businesses to a certain the quantum or balance of the NAV or is it more about catalysts and driving realization of value? Effectively, you have kind of 2 measures that you're working against, but I'm trying to figure out what's more important as you invest into new areas.
Secondly, unrelated question, when you think about being too big for the JSE, what do your advisors tell you in terms of how much of the AUM still benchmark to SWIX versus CapSWIX? Thanks.
I don't know if it was just me, but I had real trouble understanding the questions, is it my connection or was that the connection?
Hi, Bob. This is better.
Now I can hear you, yes.
Okay, brilliant. Okay, to rehash, when you think about value creation in the controlled portfolio, are you looking to scale the businesses to a certain number, Whether it's 1,000,000,000 of dollars or a percentage in the portfolio or you rather focused on crystallizing value over time, Whether it be through merger or sub IPOs, what have you, because it's kind of
a dual focus you have.
So I'm trying to figure out what is the the bigger lever in your approach to building the portfolio and closing the discount to the NAV? A second question unrelated. Got it. Yes, thanks. With your advisors, do you have a sense of how much of the AUM in South Africa is still benchmarked to SWIX versus Capsulex?
Thanks.
So I hope you heard the second question because I only heard the first. Did you hear the second?
Yes,
Okay. Then I'll leave you to answer the second question. I'll answer the first, which I did here. So I think the answer to your question is really we want to do both, Right, I think when you look at the results that we presented today, it's clear that getting these businesses to scale is something we're well on our way to do. And if we continue at this pace that will be hugely helpful in getting the full value ascribed to these businesses.
But I think this question is also a fair one around crystallization, right? And I think we've shown in the past We're quite willing when we think it's the best solution for a business to stand on its own feet or bring it to the market separately that we're willing to do that. And I think we are going to do that again in the future. If the time is right, I think things are better off standing on their own. So the short answer to your question is both.
Which of the one is the bigger lever? I think that's hard to say, but they're both, I think, really the tools in the toolbox that we will absolutely use.
Hi, John. It's Basil here. I hope you're doing well. So look, it's clear that the majority of assets under management benchmark to the cap But I think there's an important point to be made here. This size issue has got nothing to do with what benchmark you choose To measure your performance against.
And here's a simple example that Bob has discussed with us internally And that I think it's important that everyone understands. So today, you're an investor on the JSE. You have ZAR100 and you say, well, look, I don't know how to pick these stocks. I want to apportion according to each company's contribution on the exchange. So the ZAR 100, we should get ZAR 25.
Probably, we should argue we should get more than ZAR 25 because we outperformed the JSE. The JAC of the last 5 years, excluding us, delivered minus 11%, including us delivered plus the 16%. So we should probably get more than ZAR25, but we don't get more than ZAR25 for a couple of reasons. The first and most important is most funds can't own 25% of a company in their portfolio. Secondly, as your question implies, many benchmark to this week, so what do they do?
Instead of us getting ZAR25, we get ZAR10. So we are under the Investor and Indexed on the JanSport Stock Exchange, and that's incredibly important when of late, as we've seen over the last couple of years, It's local money that's driving that exchange. Now we take the step and we reduce our size. Our size goes from 20 5% to 13%, now the difference is different. So instead of so we still get ZAR10, but it's now measured against ZAR13, not ZAR25, and that's a 60% improvement.
And that's an important dynamic for everyone to understand. And then, of course, when people are selling and there isn't enough buying, that adds to the pressure. So that's the problem we solve. And whether you benchmark to the SWICs some other index is neither here or
there.
No, that's well put Basel. And I think maybe just To reiterate that, right, if you if our fair share is 25, you get 10, you basically get 60% less than your fair share. But if you're 13% of the market, you get 10% instead of 13%, that's 20% less than your fair share. So that pressure Really, it still goes down very, very materially because of this transaction and it has nothing to do with whatever benchmark people use. All right.
Thank you.
Thank you. The next question is from Ravi Jain of HSBC. Please go ahead.
Hi, there. Thank you for taking my questions. So 2 from me. The first one is just on the overall pace of investment. Obviously picked up a lot in the last 12 to 15 months.
The question I had is, do you see that as more opportunistic what you the last few months or can we expect the pace going forward in the next 2, 3 years to be much stronger than the $1,000,000,000 to $2,000,000,000 that you used to do given what's happening to the consumer tech landscape. The second question is on food delivery. We have seen obviously an increase in competitive intensity in Europe and some other developed markets. We'd love to share your thoughts on in your core EM markets, Which are actually even lower benefited today. So that probably you can add that to the point of The evolution of the trading losses in your food delivery segment, that would be really helpful.
Thank you.
Yes, thanks, Ravi. And let me answer the first question and I can make the quick start on the second and I'm sure Larry will actually correct me and say much wisest things. So Indeed, you're right. I think the pace of M and A has increased. And I think that basically Stands from 2 reasons.
1, indeed, I think, e commerce as Technology as a sector has gone through tremendous growth, so bigger businesses tend to command higher price tags. I think you mentioned that in your the question and I think that is correct. I think the other dimension is that we've actually in our core segments have also Good opportunities and less good opportunities really, really well by now. And I think that also enables us to be decisive and When we see opportunities to go after them. So I think both of those are structural.
On the other hand, And I hope you will have observed us doing that. We are very diligent when it comes to investing. And if we don't like the valuation, we think that there is a competitive pressure that leads to an unhealthy price, then we'll walk away because in the end, We don't do these investments for fun, but we do them because they drive a great return for shareholders. And actually that good and improving track record is absolutely essential for us. So what it certainly doesn't mean is that we're becoming less critical And we are more comfortable and or relaxing our objectives on returns that is certainly not what's driving it.
So Some factors are indeed supporting a strong base in M and A, but our diligence And our discipline most certainly has not changed and will not change. Then in terms of competition, and again, Mary, you can add, but I would say like our most important food markets, which are probably Brazil and India, have been very competitive for many years. And I think our teams have demonstrated, I think to be able to compete well and deliver great customer business and that's why they've done well, right? I think Ifood in particular in Brazil has seen lots and lots and lots of competition, but it still managed to outgrow and actually gain market share rather than suffer from it and I think because we have great operating expertise and great talent there. But Larry, you may want to add?
No, I think you covered it well. I think the only part that I would add is this the sector continues to grow and expand into adjacencies, it just attracts more and more entrants. And it requires that we and our teams focus more and more on consumer experience, but the competitive pressures, if anything, Just intensify over time as the space gets bigger.
Thanks, Rob. That's helpful. So how do you put that in the evolution of the trading losses for your food delivery segment, historically you had said that the watermark was FY 2020. Do you still think that's the case? Do you see increasing competition maybe changing your thoughts on that?
Yeah, I can comment on it or Larry can. I think the if I look at the core food business, I think the same answer, I think, applies to what Cesar asked, right? I think We see operating leverage in the business and I don't expect that operating leverage to change because competition has been there all along, Right, so the business model is a super healthy one and as you grow, you can make money simply put and that dynamic I really don't think is going to change. I I think what does happen is that we are investing in adjacencies like groceries, right, which we see to be extremely promising That will require a certain level of investment, but you should almost see that as a separate new business that we're building. But I think on the core, there is a really healthy operating leverage dynamic.
Thank you so much. It's very helpful.
Thank you very much. The next question is from Andrew Ross of Barclays. Please go ahead.
Great. Thanks for squeezing me in and good afternoon everyone. I've got 3. The first one is just a follow-up on my question on food and to the time, I'll dive in a bit to dark stores, which is obviously an area that is getting a lot of VC money and some of your own money. Can you just help us understand how you Think about the economics of those dark store businesses in a steady state when compared to the core food delivery platform.
And I'm interested both in How users are retained and how about frequency trends, but also how you think about the contribution margins? That's the first topic. Second one is, I guess, across your portfolio, there's a few of your businesses that have had big tailwinds from the pandemic, but are now starting to cycle up against that tough the comp, so can you tell us what you're learning in terms of how your profiles are trending, customer acquisition costs are trending, etcetera? And I guess I'm particularly thinking on food, but also And then the third question is a quick one. Is there any update on the latest position on the ownership of Ifood and how you may get to 100% over time?
Thank you.
Yeah. Thanks. Thanks for those questions. And maybe if okay, then I'll ask Larry to answer the first one, I will start on the second one. And on the third one, the short answer is no, there is no update.
So on sort of the tailwinds that came out of COVID and how have they developed as we're getting into more normalized territory, I think basically what happened because of COVID is that Many people start trialing services like food delivery or e tail for the first time that either have never used it or didn't really get fully known with the concept, so we acquired lots of new customers and based on what we see in places where things are normalizing, those new customers are certainly not going to go away, right? So we see when people like to service, they use it a few times, they actually become loyal customers Quite good retention levels and actually the retention curves are still looking extremely healthy the food delivery and e tail and we see the people who started using these services during the pandemic Very similarly as people who joined them before the pandemic, which is encouraging, right? And you wouldn't necessarily know that in advance. But so the retention curves actually look very healthy, very similar. So I would say that obviously there was a boost That led to very high growth numbers in spaces and you get into more normalized territory, but we see that existing customers that became more frequent, retain their frequency and new customers stay.
So we expect that actually most of what was triggered And maybe Larry, would you mind talking to Andrew's first question around dark stores?
Yes, I have to do and actually ties nicely into That last question, the one prior, I think if you think about the root of the core consumer of not just our online food delivery, but even our e tail transaction all centers around convenience. And these are users While we're seeing them now in dark stores, we would have gone through the hard work of marketing to them, acquiring them, retaining them, often in other contexts, Right. We're on this call. You know, a couple of years back, we would have been talking about marketplace food delivery consumer. Well, they consume first party food delivery.
It turns out that it's the same, largely the same consumer. So we've acquired those core users of the food delivery that naturally just translated into dark stores. Many of them are the same consumer set. It's just a different use case. And to Bob's point earlier, you end up because you don't have to go through weeding out the consumers, your effectiveness of marketing the retention goes up and so you, we feel like you're going to see much better margin from these users over time because You're just pushing more merchandise through the same channels.
Thank you, sir. Then the next question is from Catherine O'Neill of Citi. Please go ahead.
Great. Thank you. I had a question on Stack Overflow, which was a fairly sizable investment. I just wondered if you could give us More details on the asset, what the plan is, how the monetization works and what the long term margin potential would be. And then actually back on EdTech, I noted in the short term incentive goals, the EdTech, it's focused on top line growth and organic trading losses at target, are you able to give any sense of how we should think about sort of the revenue and losses As this is split out into a sort of separate vertical.
Yes. So maybe Larry has been driving the Stack Overflow the acquisition together with Beth Kolek and I'm sure they can comment on our plan and our ideas around monetization. I just want to make sure I fully understand the question, Catherine. I think the way we position it today, At the ACTech from this financial year on, we will really start treating as a new segment. So it will have its objectives, its goals on revenue and bottom line like we said that For other segments, was that what you were asking about or did I not fully get it?
Yes, partly I could see Yes. And your sort of short term incentive goals is separated. I just wondered if you could give any more sense of how we should think about Forecasting the revenue and the trading loss for FY 2020 going forward given there's, I guess, multiple sort of assets that are going to be pulled into that?
Yeah. So and maybe we can take that last one offline because indeed it is a new segment that consists New assets and new ones are coming in and depending on when they close exactly, that will have quite a bit of an impact, right, on how that will develop. And I think to give a very specific input, I think would probably be a bit 2 detailed floor here, but we can get you the information we can get you through our IR team. The but maybe, Larry, you can talk to
the first point. Yeah, happy to. So on STACK, the company Over its history has been really focused on building out its community and driving engagement and it's done just a really phenomenal job at This is one of the most utilized properties on the global Internet and that it sits squarely in the developer workflow. And what they've done historically like many community sites that we've all seen over the years is monetize through advertising and Yeah, that continues to grow strongly, but the opportunities that we see for this business go beyond, advertising. Specifically, They've rolled out a corporate enterprise solution that they call Teams.
That's rolled out very nicely. And we think, why Part of the reason why it sits within our EdTech portfolio is we think that there is a meaningful opportunity to connect As a result, it's early in its monetization journey, but it's growing very nicely. Revenue growth upwards of 50%. And we think at scale it will the monetization will be commensurate with the user reach that it has today.
Okay. Thank you.
Thank you. So we have no further questions in the queue.
All right. Well, then I basically just wanted to thank everybody for joining us here today. We are really excited about the momentum we have with the business. I hope you are as well. And if there are any the questions going forward, you know how to find our IR team and thanks for the time today.
Thank you very much. Ladies and gentlemen, that then concludes this event and you may now disconnect.