Prosus Execs Highlight Impact of War on OLX Ukraine and Avito.ru and Reveal $700m Regional Write-off

March 9, 2022
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Executives at the international marketplace business operator Prosus spoke about the impact of Russia's invasion of Ukraine on the company's staff and businesses in the region on a call with investors on Monday.

 

Ukrainian business impacted but staff reported safe

Prosus CEO, Bob Van Dijk began the call by condemning Russia's invasion of Ukraine and relaying the news that, as far as the company is aware, none of Prosus's 350 Ukrainian staff has been injured.

Prosus operates the market-leading horizontal classifieds portal OLX Ukraine whose staff have been offered accommodation away from either the east or Kyiv into the west. Some 300 company employees in neighbouring countries have offered their homes to those fleeing. Van Dijk also revealed that the company had donated $350,000 to the International Committee of the Red Cross.

In terms of the continued operations of OLX Ukraine, Group CFO Basil Sgourdos told investors that:

"While the site is [still] operational, it has seen a drastic decrease in supply and demand. We will of course continue to support this business and the team. Until we see an end to this crisis, we’re not expecting revenue or trading profit from this business. In the first half of 2022 OLX Ukraine generated $34.5 million in revenue. To summarise on operations, we have outstanding businesses in the region and we will do all that we can to protect them while positioning them well for recovery in the future. Today they represent approximately 5% of Prosus’ accounting value and a good deal less than that in terms of fair market value. So the impact to the group should be manageable."

 

Divestment and uncertainty for Russian business

Prosus also operates the leading general classifieds player across the border in Russia. Avito.ru along with the company's Russian fintech company PayU face an uncertain future as the Russian Rouble crashes amid wide-ranging western sanctions.

"our focus in the region is making sure our classifieds and our fintech employees are safe and that we can
serve our local customers where it’s feasible. Prosus will continue to run its operations in Russia, including Avitoand PayU. Neither of these are subject to international sanctions and both continue to provide a really valuedservice for many of ordinary Russian citizens", commented Van Dijk.

The Naspers offshoot also has a 27% non-controlling minority stake in the online platform, VK Group (formerly Mail.Ru Group) which operates the second-largest classifieds platform in Russia (Youla.ru) as well as a recruitment marketplace business.

VK Group's CEO and other shareholders have been the subject of international sanctions and as a result Prosus asked that its Directors on the VK board resign and has effectively written off $700 million invested in the business - a loss which Sgourdos sought to reassure investors about:

"Any further change to VKontakte value will not have a material impact on the group. In total we invested approximately $700 million, but we’ve also received $500 million in dividends. We’ve invested those dividends in other areas of the business which have generated very good returns. We expect to write down the full carrying value of VKontakte, and that carrying value is $769 million in the books right now. So we will do that in the current reporting period."

 

Diversification means the overall outlook is not so bad

According to Sgourdos, despite the impact on its local operations and revenues, the impact for Prosus's business as a whole would be manageable:

"We have run the financial scenarios and we believe that we will be able to weather the storm and continue to execute our strategy."

"Outside of the affected regions it’s also important to remember that each of our segments continue to exhibit
excellent growth and very strong consumer demand."

Prosus owns stakes in marketplace businesses all over the world including the OLX Brazil joint venture with Adevinta, leading real estate portals in Poland (Otodom), Portugal (Imovirtual) and South Africa (Property24) as well as a significant stake in Chinese technology and entertainment company Tencent.

March 9, 2022
Since March 2020 Edmund's job has been to read about, write about, collect data on, analyse and generally know about real estate marketplaces and the companies that run them. Before that he worked at the aggregator Mitula Group (which became Lifull Connect) for five years.

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