Prosus N.V. (PRX.AS) Earnings Call Transcript & Summary

Ladies and gentlemen and shareholders from all over the world, thank you very much for joining. We had a problem to establish sound between London, where I'm sitting, and Amsterdam, where some of our other executives are sitting. We apologize for wasting your time. So I'll chair the meeting today. And as you well imagine, the COVID pandemic has required that this event be held online to keep all of us safe, but we value the participation by so many loyal shareholders in many countries. We thank you very much for being here with us. With us are all of our own nonexecutive directors from as far as field as Brazil, India, some in China, South Africa, California, the U.K.; then also 2 executives, Bob van Dijk, our CEO; and Basil Sgourdos, our CFO. And then keeping the good order are Gillian Kisbey-Green, our Company Secretary; and Joyce Leemrijse, a notary at Allen & Overy in the Netherlands. So please allow me to quickly outline the agenda. Luckily today, we have only a single resolution on the agenda. So we need a single vote. And by now, you probably are very familiar with the whole proposal. Nonetheless, let's ask Bob van Dijk to quickly summarize briefly what the resolution asks you to vote on, also what it means for you and what it is for the company. After that, we'll move to a question-and-answer session, and Gillian will outline the procedures for that. Now most shareholders have already voted by proxy. If you haven't voted, you're very welcome to vote at any moment during this meeting. Nonetheless, after the question and answer, we're holding an extra short pause for last voting chance. I now hand over to Gillian, who will explain to you the process. Gillian?

Thank you, Koos, and good afternoon, everybody. Regarding questions, so shareholders have previously submitted questions, and these have been answered and were published on our company website today. Those shareholders may ask follow-on questions, if they wish to, during the meeting at our Q&A session. Shareholders who registered to vote and have received the required link and security passwords can vote online during this meeting. Please use your smartphone, tablet or computer. You can vote either for or against the resolution, or you can abstain. Once you've voted on the resolution, a message will appear on your screen confirming that your vote has been received. You can change your vote until the vote is closed. Your last choice is what will count. You may vote at any time during the meeting until we close the voting. I also have some information on the votes that may be cast today. So the number of issued and outstanding N and A1 shares in the capital of Prosus is 1,616,289,395. Each share has 1 vote. Joyce, our civil law notary assisting, received proxies with voting instructions for 1,499,626,309 votes ahead of the meeting. In addition, according to the registration list, holders of 744,008 shares -- yes, 744,008 shares, that's just the number that we have who have joined us today and are present in the meeting. So in total, we have 92.8% of the issued and outstanding share capital present or represented by proxy. Back to you, Koos.

Thank you, Gillian. The notice for this meeting was published on the 7th of May this -- 27th of May this year, together with meeting documents. So I declare the meeting properly constituted. Therefore, we can actually take a valid resolution at this meeting. May I now ask you to give Bob a minute to summarize the deal. Over to you.

Thank you, Koos, and good day to you all. The past few years have been transformational for the group in many respects. In early 2019, Naspers unbundled MultiChoice Group, its video entertainment business. Later that year, the Internet assets were listed as Prosus on Euronext Amsterdam. And last year, a large share buyback of $5 billion of Naspers and Prosus shares was announced, which we've now completed. And at the same time, we're building fast-growing and valuable consumer Internet businesses at global scale. We recently announced our full year results for the year through 31 March 2021, and they are the group's best financial performance on record. Importantly, revenues in our e-commerce portfolio, which excludes Tencent and Mail.ru, grew 54% on the previous year, and e-commerce profits improved meaningfully. Our classifieds business, our core payment businesses and eMAG were all profitable. Our food segment is growing fast, and we established a new global segment in ad tech, which already serves well over 0.5 billion users. We are accelerating growth across our businesses, and we are well capitalized with an exciting pipeline of M&A to drive further growth and deliver our long-term strategy. The 33.4% IRR on our investment of the proceeds from the initial Tencent trim 3 years ago shows the strong potential of our businesses and platforms. The latest valuation of our e-commerce portfolio is $39 billion, double what it was just a year ago. We have set the group on a path that we expect will generate significant value for our shareholders over time. However, a side effect of our fast growth is that Naspers' size on the Johannesburg Stock Exchange has become a real problem, and it's a problem that is set to get worse and rapidly as we continue to grow. And that is why in May, we announced the voluntary share exchange offer to Naspers shareholders. The main objective for this step is to reduce Naspers' outside position on the JSE. It's important to briefly explain the size challenge as it is a central issue that this transaction tackles. Over recent years, Naspers has grown much faster than the JSE. And today, it represents 23% of the weighted SWIX index. And most investors and funds have prudential limits on the percentage of their assets that can be held in a single stock, and their higher limit is 15%. So those shareholders have to sell down their Naspers shares to 15%. And when the Naspers share price rises, they need to sell more to stay under the 15%. And we know this because they tell us that. Now there's a clear correlation between Naspers' increasing size on the JSE and the growth in the discount to Naspers net asset value, and a rising discount at the Naspers level lifts the discount at the Prosus level as both stocks have traded in tandem since Prosus listed in 2019. If we successfully complete the voluntary share exchange, Naspers' weighting in the JSE SWIX will reduce from 23% to approximately 11% to 13%, which is a much better position to be in, and then South African funds can hold their full share of Naspers. For Prosus on Euronext Amsterdam, where its weight today is just 1.1% of the STOXX50 Index, we have significant headroom for continued growth. If we successfully complete the voluntary share exchange, we expect Prosus will rise to 2.4% of the STOXX50. That remains way under potential limits. We expect that a larger and more liquid Prosus will benefit those exchanging their shares over the long term and improve Prosus' discount, which also accrue to Naspers as Prosus' larger shareholder. So we view the voluntary share exchange offer as a critical intervention for the future of the group. Put another way, in our view, maintaining the structural status quo is not in the best interest of the company. As you can see from our most recently announced results, our operations and investments continue to improve and grow in value, and we expect this will result in Naspers continuing to outpace the growth of the JSE. The voluntary share exchange offer we are proposing is the most efficient and implementable solution available to us in the near term, and it comes with minimal friction cost. It rightsizes Naspers on the JSE and fundamentally improves the structure and investment profile of Prosus. Prosus will double in size and become a top 20 EURO STOXX company, underpinned by our portfolio of some of the fastest-growing Internet assets globally, essentially becoming a must-buy for large European asset managers. And while the problem we're trying to solve is quite complex, the structure of the company post transaction will be a simple one. The Prosus free float will own 60% of the underlying NAV, and Prosus on the AEX will play the most significant role on how the assets are priced. And this is important as the Euronext Amsterdam does not suffer the same size challenges of the JSE in South Africa. This is positive for both Prosus and Naspers shareholders. And finally, I want to emphasize that we are committed and incentivized to reducing the discounts at both companies over time. And importantly, this transaction preserves all future optionality for the group. Back to you, Koos.

Folks, I hope that you found that useful. We'll now move to the question-and-answer session. Gillian will briefly outline how to navigate the platform and how people can ask follow-up questions. Over to you.

Thanks, Koos. So the process for asking questions is the same as what we had during last year's virtual AGM. We're following the Dutch regulations for virtual meetings. All shareholders were able to raise questions ahead of the meeting, and answers to these questions were published on our website this morning. So please note that follow-on questions may only be asked in this Q&A session by those shareholders who submitted their questions in advance, but we are always happy to engage with all of our shareholders. So if you didn't submit a question in advance and therefore don't qualify for follow-on questions in the meeting today but a question still to occur to you during the course of the meeting, please send it through to our Investor Relations. You can use this address. They'll get back to you pretty sharply once they receive your question. The contact details for IR are also on our website. If we revert now to our agenda. [Operator Instructions] As our Board comprises members from around the world, we would greatly appreciate it if you could submit your questions in English. In terms of process, we will note down questions and I will read them out one by one. We'll read them at once, and then we'll answer them. Of course, we'll allocate the question to the person best able to answer it. After this Q&A session, we will proceed to voting, and then no more questions may be asked. Back to you, Koos.

Folks, you are very welcome now to ask follow-on questions. [ David ], you are the man receiving. Not yet?

We have no questions.

We have no questions.

Let's just double-check because just for background, the team received lots of questions, responded. Some of it's on the website. So there's been a great deal of interaction. But just to double-check, [ David ], no...

No. There are no questions that have come in.

Okay.

Okay.

So sir, maybe I could just say to shareholders once again, just to reiterate that we do welcome any questions. So if you have got any, please send them through to the website address that you saw earlier on the screen, and our IR team will get back to you.

Thank you. So folks, with that, the answer -- question-and-answer session is over. Just to emphasize, it's productive for you and certainly for us to engage. Lots of engagement took place in all sorts of formats. But if you still have a question you're not sure how this will affect you, please post it. Gillian has given the address, and it's on the website, and we will immediately try to respond. Now just to resume, as we outlined at the start, the voting has been open for the duration of the meeting, but we are going to pause again for 30 seconds exactly to allow anyone who hasn't voted to actually cast their vote. There's one simple resolution to vote on. Please vote now. [Voting]