Naspers, a South African internet company and Africa’s largest company by market capitalization, has issued a warning that its financial results for the six-month period ending 30 September 2022, which will be released today, will see a big hit on the company’s earnings per share.

According to the statement published on the Johannesburg Stock Exchange, the company’s core headline earnings per share for the six-month period ending September 2022 declined due to investments in adjacent opportunities in ecommerce, lower contributions from associates and its stake in Chinese tech company, Tencent. The company’s headline earnings per share is an important measure of operating performance. 

Naspers further stated that the significant decrease in earnings per share is related to a gain of US$12.3bn realized on the sale of a 2% interest in Tencent in 2021,  compared to an expected gain of only US$2.8bn on the sell down of Tencent shares in the current period to fund the open-ended share-repurchase program announced on 27 June 2022.

“Impairment charges and dilution losses related to investments in associates are expected to be approximately US$1.8bn higher in the current period,” the Naspers statement read.

Naspers stated that growth expectations and valuations came under significant pressure during the reporting period, as consumers adapted to the impact of higher inflation and interest rates on their daily lives and spending power.

The shareholder warning from Naspers also stated that headline earnings per share for its continuing operations would decline by  100% to  108%, from $3.51 to -$0.28 – -$0.02, while core headline earnings for continuing operations would decline by 52.3% to 59.7% — from $3.94 to $1.59 – $1.88.

“Headline earnings is [sic] expected to decrease in the current year. This is mainly due to lower profitability across our associates, including our share of Tencent’s fair value losses on financial instruments of US$372m compared to fair value gains of US$1.0bn in the prior period. Headline earnings are also impacted by our increased investment in earlier stage ecommerce extensions of autos, convenience and credit,” read the Naspers statement.

Prosus, a Naspers subsidiary which holds the company’s Tencent stake, also put out a similar warning, stating that it is anticipating its core headline earnings to decrease by 51%- 58%, its headline earnings to decrease by 97% – 104%, and its earnings per share to decrease by 80% – 87%.

Naspers shares fell by about 5% following the announcement, while Prosus shares fell by as much as 4.7%.

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