Naspers’s and Europe-based subsidiary Prosus’s share prices increased by more than 3% and 2.5%, respectively, on the JSE yesterday even though they had announced plans to retrench up to 30% of their corporate staff across their global internet businesses.
The planned job cuts over the next 12 months did not, however, indicate their managements had been caught flat-footed in a much weaker than expected trading environment, Andrew Bahlmann, the chief executive corporate and advisory at Deal Leaders International Trust, commented yesterday.
With the two firms being the latest in a series of global tech firms announcing job cuts recently, Bahlman said Naspers had already disclosed trading conditions “that were bad enough”.
“The group announced last year that headline earnings are expected to decrease in the current financial year mainly due to lower profitability across the group’s associates, including Tencent. It has also invested in early stage e-commerce extensions of autos, convenience and credit, which by their nature are long-term investments,” he said.
According to the Daily Investor website, companies from Amazon.com to Alphabet Inc’s Google recently announced staff reductions after years of growth, as they seek to lower costs and improve profitability. China internet giant Tencent, in which Prosus is the largest investor has also announced job cuts in recent months.
The tech sector announced 97 171 job cuts in 2022 – up 649% compared to the previous year, according to the Daily Investor, which cited consulting firm Challenger, Gray & Christmas Inc as the source for the figures.
Naspers announced last year that earnings per share were expected to drop by between 81.4% and 88.4%, while headline earnings per share are expected to drop by between 100.6% and 107.6%.
Core headline earnings per share were expected to drop by between 54.7% and 61.7%. Core headline earnings are typically an appropriate indicator of the operating performance as it adjusts for non-operational items.
“Many people were retrenched after the Covid-19 lockdowns of 2020, enabling companies to survive when otherwise they might not have, and later re-employ many of those employees. It is an unfortunate but necessary process which actually protects jobs in a free economy. South Africa would have far more jobs if employers were free to retrench people to match their revenue,” said Bahlman.
According to reports, Euronext-listed Prosus will also seek to cut costs at the more than 80 companies it has invested in, although those efforts have different timelines and scales, and the company had already closed some offices and made cuts at others. The aim was to make Prosus profitable by the first half of 2025.
BUSINESS REPORT