Jun 26, 2017
Executives
Meloy Horn - IR Bob van Dijk - CEO Basil Sgourdos - CFO Pat Kolek - COO Martin Scheepbouwer - CEO of Classifieds Imtiaz Patel - CEO of Video Entertainment
Analysts
David Ferguson - Renaissance Capital JP Davids - JP Morgan Chris Grundberg - UBS Andrea Rafael - Morgan Stanley Richard Tessendorf - Avior Capital Markets John Kim - Deutsche Bank Ziyad Joosub - HSBC Mike Gresty - Citigroup
Operator
Good day, ladies and gentlemen, and welcome to the Naspers Full Year 2017 results. All participants will be in listers-only mode and there will be an opportunity to ask questions later during the conference.
[Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Meloy Horn.
Please go ahead, ma'am.
Meloy Horn
Thank you, very much and good day, everyone. Thank you for joining us today.
I would just like to introduce you to the executive management presenting on the call today. We have our CEO Bob van Dijk; our CFO, Basil Sgourdos; our COO, Pat Kolek; the CEO for Classifieds, Martin Scheepbouwer; as well as CEO for Video Entertainment, Imtiaz Patel.
I would like now to hand it over to Bob to start the presentation.
Bob van Dijk
Hello, thank you all for joining the Naspers result call. So I'll kick off today and I'll talk about our strategic priorities and then I'll hand over first to Martin and then to Pat and they will cover our operational progress, and Basil will actually close off today after Imtiaz speaks about the Video Entertainment business and Basil will talk through the financials.
So going to start us off on Slide 5, Slide 5 shows that we continue to focus on five strategic objectives. First, we continue to partner with exceptional entrepreneurs all around the world to achieve growth.
Second, we pursue business models that have real platform potential. Thirdly, we prioritize business models that serve big fundamental societal needs.
Fourth, we deploy our shareholders capital towards high growth markets and high growth opportunities. And finally, we aim for leadership positions in the markets we choose and we drive for those leadership positions to be sustainable over time.
Now in the next few slides I want to give a few examples of high growth opportunities that we are pursuing and then show how we already have built number of valuable leadership positions over time and finally illustrate how we allocate capital and create value for our shareholders. If I can take you to Slide 7, it shows the very high growth opportunities that we are pursuing.
So monthly unique listers for letgo United States and it’s just in the period of six months, increased by more than 100%. In our payments business PayU in India our payment volume increased by 86% compared to last year.
Our e-tail business eMAG in its core market grew GMV by over 50% than the year that was. And finally, Avito in Russia grew its monthly active app users by 65% in the past year.
These were all excellent examples of the type of growth opportunities that we are pursuing. So if we can take you to Slide 8, it shows why we have made a number of investments into online food delivery.
So online food delivery is expected to grow very substantially in penetration in our core focused markets in the years ahead, and in addition we've seen that business model to deliver very healthy margins at scale and you can see that in the top right with an illustration for Just Eat. Actually, our own iFood investment in Brazil and Mexico is an excellent example of why we think this is an excellent model.
So the volumes of iFood have actually tripled in the last year while the business in the same year turned substantially profitable. And finally, as you would have seen after the closing of our financial year we made a significant investment in Delivery Hero which is the largest food delivery platform worldwide by orders.
As you will see in Slide 9, we have been very successful in building leadership positions in platform businesses over the years. So the group has built by far the largest video platform in Africa with MultiChoice and then we have invested in what turned out to be the largest internet platforms in China and Russia with Tencent and Mail.ru and more recently the group has invested in a number of ecommerce platforms and that are now clearly leading in their markets.
The Flipkart in India and OLX and PayU globally are excellent examples of this. A significant capital has been invested into ecommerce over the last few years and we have already created significant value for our shareholders in these investments although we believe the best is still to come.
So wanted to call out three examples of significant value creation on Slide 10. So we invested in total about $3 billion in Classifieds and currently analysts value this segment at about $7 billion, which is more than 2x return.
So we're actually convinced this is undervaluing the business substantially, but it’s up to us to show that over time this is the case to our investors. So we've also invested about 550 million into the Indian travel business and our shares were trading at about 1.4 billion at the end of March, which is more than 2.5x return.
And finally, we had invested in Flipkart in India at an average valuation of about $3.8 billion, while the last funding round was completed $11.6 billion post-money and that's a more than 3x return. Now, I want to take you to Slide 11 which shows how we think about our asset portfolio.
So, as you know we're a long-term growth focused company and that implies that we need to continuously reinvent ourselves, but it also means that we need to invest and assess the potential of new business models that can really be our growth engines for the future. In the first category of assets which we label Potential, investments are typically earlier stage and significant revenues are typically several years away and these investments will be smaller in size and will typically have higher risk.
And investments that our Ventures division has done are typically in this category. Second, we've invested in a number of well proven business models that are growing fast, but that are typically not yet profitable or at full potential and our focus is on scaling these investments and getting them to profitability with a horizon of about three years.
So they are major drivers of our current growth rates and our investments in eMAG, Flipkart, PayU and letgo are good examples of assets in this proven category. And then there are assets in, what we label, Play-to-Win category, that have significant monetization already and that are at or close to profitability and also are very meaningful in our current growth.
So the OLX group, iFood and go-MakeMyTrip are prime examples of this. Fourth, we've platforms in the Profitable category that provide us with the cash flow to fuel our growth.
So, MultiChoice and Media24 fit in this category and in addition we now have 21 profitable ecommerce businesses that Basil will tell you more about later. Finally, we've a number of strategic stakes in the listed assets where we've a strong belief in the further value appreciation of the assets, which will benefit the group.
So, Tencent and Mail.ru make up this class. In combination, this portfolio of assets [Indiscernible] and make sure that we've both near term and long-term growth potential and as well provides a consistent value creation for our shareholders and then provides for our self-sustained capital structure.
If I take to Slide 12, you will have seen that our asset portfolio is far from static, so we made very significant portfolio moves to maximize value for our shareholders in the last years. First, we pursued a number of value creating consolidations most notably the goibibo-MakeMyTrip merger and also the combination of Citrus and PayU in India and a combination of Wallapop and letgo in the U.S.
Second, we've also sold a number of assets and most notably Allegro in the last financial year which has crystallized a very solid return for our shareholders. And finally, we have made a number of promising investments that will support our future growth.
So now we turn on to the operations part of our presentation and I'll introduce that part first. So if I can take you to Slide 14, it shows our operational highlights for the year.
So Classifieds and you will hear more from Martin shortly is driving skill and monetization across the portfolio. In our business to consumer segment we have significantly optimized our portfolio and we are now focused on scaling and improving unit economics and an excellent portfolio of assets.
In PayU we've prioritized consolidating platforms and we are delivering accelerated growth in our core markets. Ventures has invested in a number of promising new startups and is also been making a number of further investments into the food delivery space.
And finally, in our Video Entertainment business South Africa had a really solid year, while in sub Saharan Africa we've returned to very significant subscriber growth in spite of a number of macro headwinds. And with that I would like to hand you over to Martin, who will talk you through the progress in Classifieds.
Martin Scheepbouwer
Thanks, Bob, and good afternoon everyone. Turning to Page 15, Naspers Classifieds consists of 14 brands represented across 40 countries, with local offices in more than half of these markets with over 4,000 employees.
As consumers continue to increase engagement through the mobile devices we have prioritized building a unique and enjoyable mobile experience, illustrated by performance in app stores [ph] average rating [Indiscernible] is 4.4 and we are leading positions in 22 countries. We continue to be a household name in almost all of our markets which is evident in a monthly reach of over 330 million users, making up 60 million listings per month.
On Page 16, you will see that we continue to expand our leading and monetize acquisitions year-over-year. We are now leaders in 35 markets of which we are currently monetized in 12.
For fiscal year 2017, we achieved a healthy growth in our engagement metrics. The average number of monthly listed increased 22%, while monthly active users in our apps has grown 70% when comparing the yearly average between fiscal year '17 and fiscal year '16.
For those of you who have seen this slide before, you may notice that we have made some changes to our methodology regarding the number of positions operating. In order to be included in the top class, a country has to have a minimum of 1,000 daily unique listers and [Indiscernible] companies need to have a revenue per household consumption expenditure ratio and above a certain [financial] [ph].
Turning to Page '17, we believe that there is still significant room to grow monetization and expand margins. To mature markets like Norway with FINN and New Zealand with trademe have demonstrated the ability to drive revenues for internet user in the high $30 range.
Successful car [Indiscernible] such as AutoTrader in UK and Carsales in Australia also generate high revenues per internet users. For the 12 markets where OLX monetizes, our equivalent number in fiscal year '17 is $1.1 and EBITDA margin is approximately 45%.
Given industry benchmarks we believe there is significant room for growth in both monetization and margin expansion as we continue to scale these markets. Page 18, Avito continues to be at top performer within our portfolio.
On the top left of the page and in line with our group numbers it grew monthly unique listers by 23% and app monthly active users by 65% when comparing full year averages between fiscal year '17 and fiscal year '16. As it continues introduce listening fees across our capitalist, our total number of paying listers has increased 85% year-over-year.
Underpinning these strong metrics has been solid growth in our key app engagement metrics. Our team has been focused on building best in class app experience which has yielded growth in both buyers and sellers in apps of 42 times and 39 times respectively on index to-due [ph] 2014.
We have invested heavily in mobile offering as our Avito and are pleased with these results. Also Avito revenue grew 65% year-over-year in local currency and expand margins resulted in EBITDA growing 95% year-over-year.
Turning to Page 19 now. Poland is our second largest market and despite a very mature listener and user base it continues to grow.
Polish monthly unique listers have grown 13% year-over-year paying listers are 58% [ph] and app monthly active users by 78%, and as we have expanded with our leadership by key verticals and capitalist. We operate three major brands in Poland.
OLX as a horizontal, Otomoto in vehicles and Otodom in real-estates. Team number one involves the horizontal and verticals has allowed us to build differentiated tools for professional sellers.
Selling at organic traffic and optimized pricing along the way, delivering [ph] within a 73% year-over-year growth in local currency, and in terms of revenues, with each category delivering above 50% growth. Turning to the next page, let's give you an update on letgo.
We believe there is a tremendous opportunity for letgo in the U.S. The average American home has over 3,000 U.S.
dollars in items that are no longer used. America has so much stuff that there is more self store facilities in the U.S.
than McDonald's, Subway and Starbucks outlets combined. Because of these factors we have increased our investment to letgo which has resulted in a strong competitive position.
So in the U.S. monthly unique listers continues to grow at a rapid pace and we are pleased that 78% of these are returning ones.
And based on strong and improving engagement and retention metrics as we plan to take down marketing spend considerably. Page 21, despite [Technical Difficulty] political climbs in Turkey, we have the similar resulted in U.S.
Monthly unique listers in Turkey has strong growth with 80% returning on a monthly basis demonstrating strong engagement and retention. C2C goods, [indiscernible] one of our strongest categories in Turkey.
As of March 2017, we had approximately 340,000 new car listers per month. And we want to continue to close the capital side in them.
A year ago letgo Turkey had 35% in its totaled mobile monthly active users. Today we have over 70% with strong momentum.
So in summary, we had a successful fiscal year 2017 while we continue to expand our portfolio and expand our market position. Thank you for your attention.
I’ll now hand over to Pat.
Pat Kolek
Thanks Martin. So staring on Slide 22, I'm going to take you through B2C, where we continue our strategy to build the strong local and regional leaders.
On the left hand side you'll see Flipkart which is the largest ecommerce player in the Indian market and this is a transformational year for the company. In the first half the team improve the consumer experience on the marketplace.
In the second half growth accelerated and market share increased with mobile Phones and Fashion being stand out categories. Flipkart also raised approximately $1.4 billion in U.S.
from new investors including Tencent, eBay and Microsoft and is now well capitalized to further scale in a very competitive but still nascent market. In the middle of the chart you'll see eMAG and that continues to scale leading regional ecommerce player, increased market share in its key markets of Romania, Bulgaria and Hungary.
eMAG Romania accelerated revenue growth in the year and is now approaching profitability. Finally, on the right, takealot which includes online fashion retailer Superbalist and food delivery company Mr D Food continues to grow market share and is still developing South African online retail markets.
If you turn to Slide 23, we'll talk a little bit about PayU. PayU has operations in 17 countries as a reminder.
It continues to scale its regional payments platforms and expanding to cross border payments and also move towards a syntech [ph] operator across all our markets. During the year total payments volume exceeded 16 billion, up 36% year-over-year with over 400 million in transactions being processed during the year.
Additionally, organic transactions and revenue growth grew 49% and 32% respectively. Finally, we expanded the range of our offerings through strategic investment in some of the leading payments and financial services businesses across our markets.
Notably Citrus K allows us to double our merchant footprint in India, Kreditech allows us to provide credit to people with little or no credit history and finally we have in PaySense and zest to extent our syntech service on. Turn to slide 24, we'll talk a little bit about ventures.
If you look to the left of the chart you'll notice our approach there mirrors the broader Naspers strategy that Bob highlighted at the start of the call. You'll also recall that in early 2016 we made investments in three education companies, Code Academy, Udemy and Brainly and we continue to believe that education will be radically transformed by technology and these companies are all making solid progress with Udemy performing particularly well.
And I'd like to highlight two investment ventures we've made since our last update. The first of those of is Human DX which stands for the human diagnosis project.
Human DX is a worldwide effort that combine collective intelligence with machine learning to reach a diagnosis faster thereby enable more accurate, affordable and accessible care for everyone. And in addition to Human DX we also invested in Farmlogs which is our first investment in agriculture.
In Farmlogs again it’s AI Machine learning, but it utilizes software as a science and machine learning to offer insight to farmers to increase yield and eliminate [Technical Difficulty]. So that got big half for ventures.
And with that I'll hand over to Imtiaz who'll speak about Video Entertainment.
Imtiaz Patel
Thank you, very much good afternoon, everybody. On slide 25 we talk about -- we start talking about video entertainment.
It performed well in the financial year '17 with overall med growth at 1.5 million subscribers across the platforms. A solid result when compared to the 186,000 growth reported in the prior year.
This growth comes in the face of growing competition across various platforms in our different territories. Our offering of the best mix of local and international sport and general entertainment content across all devices and platforms, that's how we're offering a path that makes it compelling for subscribers.
On slide 26, the South African DTH business grew by 626,000 over the financial year. We saw strong growth in [indiscernible] segments with the premium base declining; the [indiscernible] segment growth came despite the tough macroeconomic conditions reflected in low GDP growth in South Africa.
Despite the changing mix the South African business grew ARPUs by 2%, largely due to the increased growth in penetration of the Explora decoder which brings with it a reduction in churn. Overall term reduction was also pleasing.
The launch of the popular Catch Up service to Compact subscribers has stimulated good Explora growth in this particular bouquet. Overall PVR penetration improved by 10% over the prior year and now constitutes 20% of the total base.
As you can also see on Slide 26, we're seeing an increasing number of international and local players entering the OTP space in our markets providing a number of offerings at different price points. This is going to become a more competitive arena as broadband penetration increases.
As such we've enhanced our DStv Now digital offering and our ShowMax offering and have seen good growth with more initiatives to follow in the near future. We turn to Slide 27, we made good operational progress in our Sub-Saharan Africa DTH business, which saw a swing of 596,000 customers over the prior year.
Growth came in at 308,000 compared to a loss of 288,000 customers in the 2016 year. This is a result of the implementation of the value strategy which India [ph] earlier included moving key Football content to the contractor, reorganizing content across the bouquets, removing non-performing content, reducing prices in selective markets and improving our overall retention capability.
We also saw good uptake in the Explora decoder in this market. On Slide 28, the Sub-Saharan Africa DTT business similarly saw a good growth with a total of 597,000 customers added to the base compared to a 148,000 in the prior year.
We've seen a more positive trend in the mix of this base with the upper-end GOtv Plus bouquet showing resilience and growth. The majority of all major DTT markets are now profitable barring Nigeria and Mozambique which was severely impacted by the exchange rate depreciation.
The good growth comes in the absence of any analog switch-offs in most of the major markets. We anticipate the momentum of switch-offs to play interaction over the next two to three years.
Our DTT network has been built out with no further investment expected in the short term. Churn both DTH and DTT improved over the prior year, introduction of a strong retention capability across people and systems is beginning to yield positive results.
We believe the turnaround plain for the Sub-Saharan business has delivered good results in terms of what we are able to control. We must double down on the initiative that have worked well and we'll be well positioned to catch the tide when the overall macroeconomic conditions improve.
Thank you everyone, I will now hand over to Basil.
Basil Sgourdos
Thanks, Imtiaz. So, folks on Slide 30 we lay out the financial highlights for the past financial year.
The strong operational growth outlined by Bob, Martin and Pat has driven an acceleration in our revenue growth rate. Our early investments continue to scale nicely contributing meaningful profits and cash flows.
Development spend remains elevated as we take additional opportunity to U.S. Classified, India Hotels and the [indiscernible] space.
My colleagues outlined how these are gaining traction. Of course, development spend is discretionary and if we don’t see progress and the profitability we just won't spend the money.
In [indiscernible] done an excellent job in navigation through the tough macroeconomic climate in Sahara Africa through revised subscriber growth. If we continue to grow subscriber and contain costs the long-term fundamentals remain good.
Tencent's exceptional performance affirms our continued strong belief in its long-term prospect and for further value appreciation. Then our disciplined allocation of capital and management of the portfolio together with the prudent approach to the balance sheet means that we have the firepower to deliver on our strategy and service our debt.
On Slide 31, you will see the customary synopsis financials. I think these are really strong results.
As a call out, as in the past, a presentation includes the growth percentages in local currency and exceeding the impact of M&A. We of course believe it’s the more accurate representation of the other line health for business.
So as I work through the slides I am going to focus on this organic growth, number are also on economic infra spaces so they include our proportional share with process and joint venture unless I tell you otherwise. So as a headline, ecommerce and Tencent fueled the robust 29% year-on-year growth in revenue.
As mentioned earlier the investment letgo India Hotels and ShowMax drove the increased development spend to a $1 billion. The intend stock strong top line growth deliver significant profit expansion which provided a match of the input test [ph] to our 37% growth in trading profits which are now at $2.7 billion and the 41% increase in core headline earnings to $1.7 billion.
As a reminder core headline earnings is a measure of sustainable earning potential and is a consolidated number. Core headline earning was further boosted by more of our ecommerce investment becoming profitable and the profits growing at a rapid pace.
You will see that the board has recommended a 12% increase in the dividend per share reflecting its continued confidence in our financial prospects. So on Slide 32, we analyzed the drivers of the excellent top line performance.
29% year-on-year growth is 7% faster than last year and none of our ecommerce as well as Tencent accelerate the top line growth. Ecommerce grew 27% and Tencent at 48%.
Tencent performance is remarkable given the scale of the business. Tencent payment revenues grew exponentially while both FNF and advertising revenues grew at some 54%.
Gains growth also remain robust at 25%. Video Entertainment grew its revenues by 7% having more than recovered the subscribers we lost in sub-Sahara Africa in 2016.
And we also saw a good growth in South Africa. M&A reduced our revenues by $309 million as a result of the disposal of net retail.
We will see the full impact of the labor sale in January 2017 in the next financial year. Foreign exchange Tencent revenue growth when reporting U.S.
dollars by $756 million or 6%. And 73% of our revenues now come from internet segment, that’s up from 70% reported last year.
Turning Slide 33, we analyze the developing spend in more detail. We have invested $238 million more in our new banks including letgo, India Hotels and Showmax taking their total spend from $189 million to $427 million in the current year.
As Bob outlined earlier the consolidation of ibibo and MakeMyTrip is pointing to strong returns on invested capital. And Martin showed you the strong letgo attraction in the U.S.
and Turkey. Showmax is a longer-term play, leveraging our existing video entertainment platform to take production service as online it will take some time for broadband adoption to expand in Africa and for the business to scale.
We've launched the service in Poland and we'll offer an encouraging start there. Development spend in our order base continues to decline as [indiscernible] reduced burns.
The $92 million drop excluding associates from forex took total spend down from $772 million to $657 million. In particular Classifieds excluding letgo increased scale and profitability and reduced losses by $32 million, and in video entertainment VTT loss declined by $27 million.
AS our VTT business have scaled and is approaching breakeven we're no longer including development spend from full-year '18 onwards. And almost half of our development spend is in the classified segment where we see more and more businesses in real-estate positions, scaling rapidly and moving to profitability.
On Slide 34 you'll see the financial headlines for the ecommerce segments in aggregate. Revenues grew 27%, that's 2% faster than last year on the back of the strong performance from Classifieds, the organic revenue growth was at 64% which was 10% faster than the prior year.
We also saw an acceleration in PayU growing by 32% which is 12% faster than last year as it consolidated the technology platforms and we saw rapid growth in India. There are now six markets growing more than 50% year-over-year.
Ibibo also delivered robust growth on the bank of investments to scale of our booking business which led to the final consolidation with MakeMyTrip. etail now accounts for 57% of the revenues as [Technical Difficulty] product sales from first party businesses, while in other segments will only book our take rate.
We may have had a strong year growing its revenues by 35% in local currency. Flipkart's growth did slow in the first half of the year as it consolidated technology and vested behind customer service deliveries.
Since that investment has been completed it is reinvigorated growth in the second half of the year and has gained share growth with Amazon. Trading losses at ecommerce increased largely due to $731 million on the back of the increased investments spend I spoke about earlier.
Once we exclude these the new initiatives trading loss were ecommerce contracted by a sizeable a $169 million or 24% year-over-year demonstrating our proceed to increased scale and gross profitability. On Slide 34, which you'll see a continuation of that theme we had five more ecommerce business that turned profitable sustaining the pace with recent years.
Their revenues grew by 33% to a $1 billion and trading profit by 26% to $391 million. We have in the last quarter disposed of the five profitable entities with [indiscernible] being the most significant one.
They contributed $317 million in revenues and the $162 million in profits. The profitable business that remain in the portfolio post to these sales are growing at even cost of pace delivering a very encouraging 58% year-over-year revenue growth.
Rapid top-line and training profit growth from our Classified businesses means that we should recover the loss revenues and profits from the disposals in the next 18 to 24 months. Then on Slide 36, we have summarized the financials of our Classifieds segments excluding the letgo.
Revenues including the impact of M&A and currency have doubled year-on-year to $426 million. We now have 10 profitable entities in the portfolio and expect to add more in the coming year.
The profitable entities are growing profits at 70% year-on-year, while developing markets reduced the burn by 13%. These two factors combined to deliver a significant reduction in the trading loss from a $192 million to $78 million.
Through this project we continue in the coming year our Classified portfolio at letgo should be profitable in aggregate once more demonstrating our ability to both start able businesses that scale and drive profit and cash flow generation. Bob earlier laid out how this has led to significant value appreciation for our shareholders.
Then turning to our Video Entertainment segment on Slide 37, we'll see that inclusive of currency impacts, revenues for the segment were flat at $3.4 billion. The Nigerian naira depreciated 44% year-on-year while the Angolan kwanza dropped by 24%.
In the first half of the year we actually recovered the subscribers we had lost in 2016 in sub-Sahara Africa which dampened the year-on-year revenue growth further. U.S.
dollar cost, local currency revenues, weakening exchange rates, with increased content cost of some 13% or a $139 million to $1.2 billion meant that trading profits declined for the segment by $323 million to $287 million. We expect forward content cost to remain elevated as computation continues, that said we secured the epayer rights till the end of 2022 for the continent.
The focus ahead if I'm reducing costs significantly, continues to grow the subscriber base and match delivery in profit and cash flow expansion in years to come. It will take a couple of years to bring the SSA business back to profitability.
CapEx remains well managed and declined by $54 million to a $107 million. On Slide 38 we break out the performance for South Africa and sub-Sahara Africa.
Our team in South Africa has done a phenomenal job in macroeconomic climate, despite revenues some 14% in rand on the back of a strong subscriber growth in the middle and lower segment. Cost discipline, that means we've been able to improve some of the cost increases in content and still grow our profits for South Africa to $738 million.
And sub-Sahara Africa growth to profitability declined that I spoke about earlier for the segment. Currency depreciation wiped out a $191 million of revenues taking them down from $1.1 billion to $954 million which together was a higher content loss meaning trading losses increased from $38 million to $358 million.
This said, there is a sizeable growth opportunity in sub Saharan Africa and the measures we've taken to reposition the strategy puts the business on an improved trajectory going forward. A currency recovery would boost prospects even further.
Then on Slide 39 we outlined the profit performance of Tencent and Mail.ru. Tencent's exceptional top line performance discussed earlier has also fueled profitability.
Operating profits measured on a non-GAAP basis grew a sizeable 16.4 billion renminbi or 39% to 58 billion renminbi sustaining a CAGR of 38% over the last three years. Tony Markham and the Tencent team are doing an exceptional job and we believe Tencent will uncover a number of incremental engines of long term growth creating significant further value for our shareholders.
Mail.ru has been impacted by weak macroeconomic climate in Russia, but has been able to grow its revenues by 15% during the year. Advertising grew at a faster pace of 25%.
EBITDA was partially impacted by the sale of [indiscernible]. The new investments in Delivery Club, pixonic and other new opportunities are very encouraging and could deliver a reacceleration of revenue growth and in time fuel profit and cash flow expansion.
Tencent and Mail.ru covered the financial results extensively and I encourage you to visit their website for further information. On Slide 40, you'll note the cash flow performance.
These are of course consolidated numbers. Free cash outflow increased from $38 million last year to $125 million in the current year primarily due to the decline in the sub-Sahara video entertainment profitability.
This was offset by lower capital -- working capital burn of $224 million as a result of timing of decoder inventory and contemporary payments between the current and prior year in the segment. The expectation though as that in the year ahead we'll see a reversal of this positive impact which will weaken free cash flow further.
CapEx declined by $55 million to $173 million on the back of the declined in video entertainment that I spoke about earlier. And our dividend income continues to grow nicely with an incremental $47 million taking it to $193 million as Tencent pays higher dividends of improved profitability.
And the improvement in the long-term free cash flow trajectory will continue to drive a turnaround in sub-Sahara video entertainment business, grow the profits and free cash flows in our ecommerce segment while continuing with our disciplined approach to capital allocation. On Slide 41, we'll see the breakout of our M&A and we made investments of some $550 million in the year.
This is above the $425 million average of the last four years as we invest to draw consolidation in India with a $130 million to acquire Citrus Pay and $92 million as part of the MakeMyTrip-ibibo merger. We made a number of additional investments post the financial year.
Bob took you through our ambitions for online food delivery and the rationale for the $434 million investments Delivery Hero and a $60 million investment in Swiggy in India. We also invested another $132 million to MakeMyTrip given them the financial flexibility to pursue the sizeable India Travel opportunity.
The Takealot investments should enable Takealot to move towards profitability. We expect Takealot to accelerate revenue growth and we'll also see improvement in new unit economics and profitability in the years to come.
Then, we also posted sale of our 36.4% interest in Souq to Amazon for a $173 million after the yearend. Finally, on Slide 42, we highlight our strong balance sheet.
The combination of disciplined capital allocation with the 3.2 billion in proceeds from the Allegro sale and manageable cash burn has meant gearing has move from a net debt position of $1.2 billion last year to net cash position of $1.1 billion in the current year, continuing a two-year improvement in the net position. This also drove the decline in our net interest expense from $207 million to about a $198 million.
Our revolving credit facility of $2.5 million remains largely unutilized. Our balance sheet is further strengthened by the sizeable appreciation of our listed investments.
They're valued at some $93 billion at the end of March 2017. We've announced that we're considering issuing a bond as our current $700 million bond comes up for repayment at the end of July.
So folks, that's the summary of the excellent financial progress of the last financial year. I'm now going to hand you back to Bob.
Bob van Dijk
Thanks a lot Basil, and I'll keep it brief, I'll say just a few words about our priorities for the year ahead. So, first and foremost, we're going to continue scaling our ecommerce businesses and focus on driving profitability and cash generation in a number of the core ecommerce businesses we operated in should turn to profitable in the year ahead.
Second, we know it's important to continue to be competitive and innovate and transform our businesses and we'll make sure that happens. Third, we are all focused on growth and we will also continue making investments in the next array of growth for the business.
And finally, we intend to remain very disciplined in allocating capital and make sure we continue to optimize the portfolio. So, that’s it from our side for now.
And I would like to open up for questions from the call.
Operator
[Operator Instructions] We have question from David Ferguson. Please go ahead sir.
David Ferguson
So, I've got two questions please. The first is on OLX.
I guess it's around 2.5 years since the Schibsted deal. So when you look at OLX Brazil, is it today where you expected it to be at the time?
Or is that sort of I guess three years to profitability taking longer than perhaps you would have expected? So that’s the first question.
And then the second question would be on OfferUp -- sorry, would be on letgo. You have given a lot of detail and talked about how it's doing relative to OfferUp.
Can you give us a sense of the traction you're getting in verticals, cars, jobs, real estate? So, I don’t know if you talk about GMVs or the inventory levels, but what is the sort of the level of traction in those categories versus C2C?
That's it.
Martin Scheepbouwer
It's Martin here. So, with regard to Brazil, that is by and large on the plan we had when we formed the JV some I should say 2.5 years ago.
Underlying volume growth has been very solid, listings and listers. Direct competition is relatively subdued, although there are some strong verticals in cars and property side, but we are very pleased with that volume growth as it extends into very monetizable categories like cars and property where we launched commercial vertical offerings over the last year.
So, in the back of that, revenues are growing rapidly as well and we need less marketing expense to sustain it. So overall pleased with the results there.
Now when it comes to letgo U.S., well both in the U.S. and in Turkey, the backbone of proposition is C2C goods as you pointed out.
But then without any particular efforts in marketing or product, we also see strong traction in cars. So, I think that’s the first vertical we will look at when we consider that verticalization or monetization.
Operator
Next question we have is JP Davids of JP Morgan. Please go ahead sir.
JP Davids
I've also got two questions. Firstly, when it comes to allocating capital at the moment, can you talk a little bit about how buybacks would fit within -- or how buybacks would compare to some of the investments that you are making at the moment?
Separately and switching gear to the payment space, you have done a handful of deals over the last 12 months. Can you talk a little bit about how that changes -- that M&A package changes your go-to-market strategy in the payments space and maybe also some of the steps we should look out for to see that segment move from a proven model to play-to-win model?
Thank you.
Martin Scheepbouwer
Would you mind repeating the second question, I guess it was broke up at some point.
JP Davids
Yes, so on the payment space actually just to keep the question nice and simple, can you talk about some of the steps ahead of you, in making that segment shift from the proven space into the play-to-win space?
Pat Kolek k
On the buybacks JP, that’s not on the cards we've said repeatedly, there is great investment opportunities ahead of us and that's where we're going to allocate our capital.
Bob van Dijk
Yes, and if I can speak that to the second question. I think that what we've seen with PayU in the last year is actually quite encouraging, so the team managed to accelerate its top line growth while at the same time in the core business actually the cost levels and the loss levels are coming down quite nicely, it's exactly what we hoped Laurent and the team would deliver.
The fact that we still and we started an investment mode that has to do with the number of new businesses that's we aren’t been tapping into, particularly around global merchants and credits, but that core PayU business is actually moving very nicely into profitability in the year ahead.
Operator
The next question we have is from Chris Grundberg of UBS. Please go ahead sir.
Chris Grundberg
You typically mentioned that valuation by analysts of your classifieds business being above the amount you've invested, but well below your assessments -- your own assessment of where the valuation are. I've got a couple of questions on that.
The first and I suspect I know what you're going to say, but can you give us an indication of what you think that business is worth, if it's down the 0.5x, 2x, 3x [Indiscernible] you referenced in analyst models? And then the second question is kind of philosophically to share price and the discounts to NAV, kind of tells us that the market isn’t really paying too much attention to evaluations that analysts are putting on these unlisted assets, [that was on a very large] [ph] discount to core portfolio.
Can you give us your reason why you think that discount exists and why that it is? And then you said that [Indiscernible] investors the value is higher.
Just wondering if we can give us an indication how you think you are going to [Indiscernible]? Thanks.
Bob van Dijk
Yes, I can have the first go at it and maybe Martin you can contribute to it as you see fit. So without calling out on an exact number, I think it's just clear from the progress and the business and the further ARPU upsides that we are really at the beginning of the journey where we can end.
And so there's both growth in the number of markets where we are winning and gaining critical mass, but also growth in the markets where we've won and we're already monetizing in ARPU. So, I think you see growth out of those two main sources which will lead to significant further upside beyond that analyst valuation.
Now on the discount, I think we don’t try to second guess the market where the discount comes from. We are obviously determined to make the discount reduce over time, and we believe the best way to do it is actually to scale these businesses that we see are on the verge of becoming profitable on cash generation and I think it will be harder and harder for the market to not ascribe very substantial value to.
Operator
Next, we have Andrea Rafael from Morgan Stanley. Please go ahead ma'am.
Andrea Rafael
I have two questions please. Firstly, you've made a number of investments in food recently.
I was wondering if you could comment on what you think sort of the end game is here if you see a potential value from consolidation in the space, just like you've done in other segments like Classifieds or travel? And then my second question is in sub-Saharan Africa, PayTV, I mean, this yes, the subscriber growth did look good in the second half, but it seems like that you're adding subscribers that are unprofitable.
And so, if the economy doesn’t turn, if the FX doesn’t improve, I struggle to see how you're going be able to bring those subscribers into profitability in the numbers of years, but if you could help me understand that? And if you could help me maybe understand whether this is a core business to you?
Thanks.
Bob van Dijk
Thanks, Andrea. So, I will cover the first question and Basil can start on the second and maybe Imtiaz can chime in as needed.
So, in food, the investments we've made so far are individually I think extremely attractive. So, iFood, we've been in there for a few years, has turned profitable, it's growing so very-very rapidly.
Clearly, we're in its markets. Now, we've recently invested in Delivery Hero and Swiggy.
I would say earlier markets, but already on a fantastic trajectory. So I would say regardless of how the world plays out, those investments I think are going to create lots of value for our shareholders, and there might be room along the way of combining certain markets that is definitely not required to get the return we're looking for.
Basil Sgourdos
On the sub-Sahara PayTV question and the two halves, I think a couple of things. First of all, it’s absolutely incorrect, these subscribers are adding strong margin.
And in fact, across all our packages, every incremental subscriber has a significant positive financial impact on our numbers. Why you see the weaker results in the second half of the year, there's a couple of things that drive that.
First of all, the naira depreciated a lot more in the second half of the year than they did in the first. So, we saw a big chunk of that impact coming in the second half of the year.
Secondly and our constant costs are higher in the second half of the year, and that's when we run the soccer and the bulk of sports cost, so that's elevated. I mean -- thirdly, and we have seasonality, it's a peak growth period so that's when we invest in marketing and decoder subsidies to get the customers on board.
Imtiaz, is there something that you'd like to add to that?
Imtiaz Patel
No, Basil, I think you've covered it all, except to say that, you know the last portion of our costs are fixed, so any subscriber that we add is incremental.
Operator
The next question you have is from Richard Tessendorf of Avior Capital Markets. Please go ahead sir.
Richard Tessendorf
Good afternoon, my first question is on food delivery. And I just want to get a sense of longer term, how you see your sort of competitive advantage playing out in that space specifically as you may compete with someone like Amazon or potentially Uber, just given the fact that some of the food delivery models rely on your end deliveries versus some of them out sourcing to the restaurant?
And then my second question for Martin is maybe just, if you could give us an update on OLX India and potentially Dubizzle in UAE? Thanks.
Bob van Dijk
I'll answer your first question around food, what we've seen is that the food delivery business has a very strong local component to it, and what is required in particular to sign up at right restaurants and service them with a great restaurant facing application and become then meaningful to their overall volumes, which makes you their preferred supplier is a local game, it's not a global game. So whenever a global player has an interest in the market, they'll have to do all that work from scratch.
So, I think primarily local is a very defensible business and even though for example UberEATS has launched in Brazil which is iFood's strongest market, we've seen them gain virtually no traction because of those reasons I mentioned earlier. So, we're relatively comfortable that is primarily a locally driven market with excellent execution and a strong consumer proposition can be very sustainable.
Martin Scheepbouwer
Yes, it's Martin here. When it comes to OLX in India, we saw a very good growth let say the six months leading up to the end of our fiscal year, driven by a new product introduction of sort of an improved version of our app and in combination with vastly reduced broadband prices and that has becomes much more competitive for mobile bandwidth, which led to a very substantial increase in engagement on our apps, and other mobile products of about 30% and an uptick of most volume and metrics far north of 40% in just six months.
So, India is growing fast and continues to be strongly leading in the core Classified around goods and cars. And competition is stronger in real estate and in areas like jobs and services, which is also focus of our strategy.
When it comes to Dubizzle, I think it's a good example of what we talked earlier around market in which we primarily organized increased ARPU. Our position is very mature and we're the local champion around C2C good trade, but also the leader in cars and in property, but we see a lot of room for further ARPU increase based on product differentiation, pricing and commercial pressure.
Operator
The next question we have is from John Kim of Deutsche Bank. Please go ahead sir.
John Kim
I'd like to chat a little bit about the OLX portfolio. One of the things we're seeing over the past few years is that the monetization rate in the countries that you lead in has been pretty evenly paced.
What do you see as the key barrier here to getting monetization across a wider footprint? Is it -- and speaking in general terms, is it about the markets not being ready?
Is it strength of the broad base over the vertical competition? Any color here would be helpful?
Thank you.
Martin Scheepbouwer
Yes, it's Martin here. So, as you rightly point out, the number of markets that we -- that we add to let's say the monetization bucket, it grows gradually and to the tune of sort of two per year.
And that's because as we firmly establish a leading position before we focus after the monetization and that we've good let's say framework, being based in 40-odd marks, on when markets are ready for monetization. And we can see they are not, as you mentioned then, centered around internet penetration competition and the number of people who had pushed to cell.
And I think what's fair to point out is that direct competition is much less of certainty based, if its also in our portfolio overview, and it's mainly we want to make sure that when you focus on monetization it's when our opposition with few enough so that the monetization we charge is in line with the value we create.
John Kim
And a quick follow-on question. Are you seeing any changes behavior out of Quikr this past year or so in India?
Martin Scheepbouwer
Quikr India, yes we do. What we've noticed is that when it comes to our core C2C goods and cars that's an area where we are already were leading strongly, but Quikr needs to lead even stronger if you like.
So, volume wise OLX is really the place to go to go when it comes to mobile phones, electronics, goods or secondhand cars. And Quikr has seemed to focus their efforts on adjacent area such as real estate, the optional services and which they seem to pursuing and buying business strategy, they've done a lot of small acquisitions in the past of half year.
And yes, we continue to focus on -- with classifieds core and not for instance a car vertical alongside OLX to increase monetization rates in that category.
Operator
The next question we have is from Ksenia Mishankina from UBS. Please go ahead ma'am.
It seems that her line is muted. At this time I hope that she can hear us and she will ask another question.
Next question we have is from Ziyad Joosub from HSBC. Please go ahead.
Ziyad Joosub
Just two questions, please, both of them for Martin. The first questions a bit of a longer-term question.
If you look at a lot of your peers, letgo peers globally, [indiscernible] in Japan or Quikr in India or even Shpock, a lot of them have launched delivery and logistics functionality as well as third-party payment functionality. And in some cases, they also holding money in escrow on behalf of the buyer.
I was just wondering how do you see this sort of functionality coming into play for letgo in the near to medium term? And also, just longer-term speaking, given that you've got all this third-party payment logistics as well as delivery services, could you one day see a letgo-like platform move into the B2C third-party space?
Martin Scheepbouwer
Yes, this is Martin here, so -- sorry do you want to say anything else?
Ziyad Joosub
Yes. Just the second question has just got to do with the U.S.
classifieds space. And it is interesting because I believe Mercari has launched commissions about six months ago in the U.S.
But over the last three or four months, it's done really well in the app rankings on the shopping side in both Android and iOS. It's moved from about 40 to the top 10.
And if you have any view on why Mercari seems to have gained so much traction over the past 6 months in the U.S.? Thank you very much.
Martin Scheepbouwer
Yes, so it's Martin here. So, I think we went through quite right on the say end-to-end consumer experience that includes payment subsequent to delivery.
If it doesn’t as it some say consumers appreciate in many markets and would be preferred solution for the vessels [ph] straight which is in and quite meaningful part of classifieds despite the fact that meeting in person is often the [indiscernible]. So we are looking to upgrade that as well and we have payments running in number markets such as the UAE, Ukraine, Bulgaria and Brazil.
And yes, and what works we'll take elsewhere. With regards to Mercari that is a good example of an -- let say of an integrated service that, I think -- yes and of course according to what we just said I think it's something we are looking at.
And yes I needed to say that the U.S. is an increasing competitive market where by mix to let go [indiscernible] competition offer up, there is obviously Facebook to the send text rate, how many verticals the Mercari model.
So, yes, the thing we focused on is how do we continue to serve our customers even better. And yes, that's under business strong agenda of product improvements and I think combination with smart market.
Operator
Thank you [Operator Instructions]. Next question we have is from Mike Gresty.
Please go ahead sir.
Mike Gresty
Just two from my side. First of all, on an annual basis you did show a good attraction in the Video Entertainment subscriber adds.
But as one looks at the second half versus the first half, it's quite a marked change in profile of that, it certainly looks to us like the down shading was much more severe in the second half with make that sort of connection in the top end and middle categories of your bouquets. And I was just wondering what are you seeing, is a more than impact coming through from the competitive offering, is it entirely macro?
That's a one question and the other is just around on debt levels and what have you. I understand that as the next three years or so, you certainly are adequately funded according to your business trends.
I just wanted to enquire whether that includes anticipated investments spend or is that over and above or how you think about of your actual business plans? And then ultimately what level of debt could you see yourself tolerating before the prospect of so the capital raising might become necessary, by which I mean a further equity issue?
Basil Sgourdos
And I will go with the debt levels and then I'll hand over to Imtiaz to deal with the first question. So, look, at the end of the day as I said, our business is freely funded, we can't predict what M&A might come on the table over the next one, two, three years.
As you know we're out there, we have a very -- we fill the funnel and we look at things in a very disciplined manner. So, it's very hard to predict, and I don't go and race ahead of that.
But we certainly have capacity within our current pipeline to do incremental M&A. The current one that we're looking to do is going to replace the bond that's coming up for maturity and then as I've mentioned our balance sheet is very-very healthy.
So -- and the underpin of our listed assets continues, so should there be more opportunities I think we could add more debt if we needed to and I don't anticipate with capital raise at this point. I mean we've got a very healthy balance sheet.
Mike Gresty
Just to understand you've got certainly a strong asset base, but you now unless there is an intention to sell, which it certainly wouldn’t appear to be, maybe there's a constraint in terms of ability to gear against it, is there any?
Basil Sgourdos
Yes, look, we have cash, OEM [ph] marketable securities of a $100 billion and our next debt after settling this bond is going to be $3 billion, so there's plenty of room to borrow against that asset base, I don't think we've constraints there and it doesn't involve -- it doesn't require us to sell assets.
Mike Gresty
Okay, thank you. And then just moving to the sort of subscriber change that you're seeing, particularly in the second half?
Imtiaz Patel
Yes, Mike, I think to start off with Basil has sort of partially answered the question, on partially your question on the second half in terms of weaker exchanges in Nigeria in particular. If you just compare that the second half last year to the second half, this year we've had a 53% increase in the devaluation of the naira against the dollar compared to the first half 2016 versus first half 2017, which was 35% then you know we've already mentioned the fact that many of our football costs have been the second half of the season, the financial year as a result of the way the season is.
On Slide 25, we give you a profile of how the mix is changing, so there is definitely a softening in the top end premium subscriber base, but you've seen that the middle and lower tiers are growing strongly across the markets. And right now, as we've said previously, the opportunity sits exactly there which is in the mid and lower end of the market, and that's the market where we're focusing really hard and that's where the real opportunity lies.
Operator
The next question we have is from Chris Grundberg of UBS. Please go ahead sir.
Chris Grundberg
I've just got a follow-up actually on some of the kind of funding discussions and actually on Slide 11, you've got a nice description there of the various assets in their roles in the portfolio. And I'm interested in your categorization of video entertainment print.
Can you maybe describe how you think about assets that have been moved from the left to the right on that slide? Is there a point when assets return and growth of the maximized and the times right to dispose of the business?
And then maybe you could contextualize your answers specifically to comments on MultiChoice? Thanks.
Bob van Dijk
I think if you look at what we've done in the last year, I think the sale of Allegro is an example where we end up firmly in the profitable category previously. We believe that we could find -- first of all, realize an excellent return for our shareholders and then find a better way to deploy that capital.
And also, so if we come to that conclusion for other assets, we'll act accordingly. Where that is the case- for Media24 or MultiChoice, that's hard to speculate about, but we're constantly looking at our assets that we think we can generate a better return by parting with that's something we'll do.
Operator
[Operator Instructions] At this time, it seems that we've no further questions on the line. Do you have any closing comments?
Bob van Dijk
No, just to thank everybody for listening, thanks for the great questions and spending good time.
Operator
Ladies and gentlemen, that concludes today's conference. Thank you for joining us.
You can now disconnect your line.