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Edited Transcript of NPN.J earnings conference call or presentation 24-Jun-19 2:00pm GMT

Full Year 2018 Naspers Ltd Earnings Call

Cape Town Jun 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Naspers Ltd earnings conference call or presentation Monday, June 24, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bob van Dijk

Naspers Limited - CEO & Executive Director

* Eoin Ryan

Naspers Limited - Head of IR

* Larry Illg

Naspers Limited - CEO of Online Food Delivery & Ventures

* Laurent Le Moal

Naspers Limited - CEO of Payments & Fintech

* Martin Scheepbouwer

Naspers Limited - CEO of Classifieds

* Vasileios Sgourdos

Naspers Limited - CFO, Financial Director & Executive Director

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Conference Call Participants

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* Andrew Geoffrey Ross

Barclays Bank PLC, Research Division - Research Analyst

* Catherine T O'Neill

Citigroup Inc, Research Division - Director, VP and Analyst

* Cesar Adrian Tiron

BofA Merrill Lynch, Research Division - Research Analyst

* David Ferguson

Renaissance Capital, Research Division - Deputy Head of Research & Equity Research Analyst

* John Kim

UBS Investment Bank, Research Division - Research Analyst

* John-Paul Davids

JP Morgan Chase & Co, Research Division - Head of South African TMT Equity Research

* Kevin Stirling Mattison

Avior Capital Markets (Pty) Ltd. - MD & Executive Director

* Lisa Yang

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Richard Alan Kramer

Arete Research Services LLP - Senior Analyst

* Ziyad Joosub

HSBC, Research Division - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Naspers Full Year 2019 Results Conference Call. (Operator Instructions) Please also note that this call is being recorded. I would now like to turn the conference over to Eoin Ryan, Head of Investor Relations. Please go ahead.

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Eoin Ryan, Naspers Limited - Head of IR [2]

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Good afternoon. Thanks, Chris and everyone, for joining us for our full year 2019 results call. You can find our full year report and all accompanying documents on our Investor Relations website.

On the call with me today is our CEO Bob van Dijk; and our Chief Financial Officer Basil Sgourdos.

To kick things off, I'll hand it over to Bob.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [3]

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Yes, thanks, Eoin, and hello, everyone, and welcome to our 2019 results call. So on today's call, I'll spend some time giving context on our strategy and I'll talk about how we think about the growth in the industries in which we operate, and I'll spend some time on our business update, which is really where strategy meets execution. After that, Basil will take you through our financial performance, and then, as always, we have plenty of time to answer all the questions you have.

So if I can start us off on Slide 5. Slide 5 gives a nice framework for the strategy which has guided the group's progress over the last 5 years. I think it's a useful way to give you a proper context on how we make both our operating and our investment decisions.

So at the heart of our strategy is really to build and invest in entrepreneurial platform companies in fast-growing markets that address high and significant societal needs. And that playbook has worked very well for us in building scalable platforms across multiple industries. So in general, we start small and we take a number of positions in promising assets, and we learn, we add value to these businesses and then as we build conviction, we increase our exposure. And when we have sufficient exposure, we then work to bring the assets together to create platforms, which then form our segments. So the business we have in classifieds and PayU are really good examples of this, and food delivery is really following on that same path. So that playbook is really simple, but the execution of it is challenging. And I'm really proud of what the team has accomplished over the years in building up the infrastructure within Naspers to enable this model to be replicated often and with success.

So the next phase of growth as I see it will be in markets where there's a real opportunity for technology not only to disrupt traditional businesses by replicating them online, but also in mechanizing or enabling off-line businesses through online technology. So this is classifieds, this is payment and fintech and this is food delivery at their very essence.

Now if I could move us over to Slide #6. 2019 was the year of the strongest strategic progress in my tenure in Naspers. So we delivered on our key financial objectives, and we generated strong growth and improved profitability across the group. We strengthened the portfolio as well, and we invested about $3 billion in our core segments of classifieds, payment and fintech, and food delivery. We made a number of strategic improvements to Naspers' structure, which we believe will help maximize value for shareholders now, but also into the future. We've also significantly upgraded our talent base across the board and particularly in technology, and we've built more robust AI and machine learning capabilities across the group. And finally, I'm really pleased to say that the business continues to perform well so far also in this current financial year, and I'll say more about that later.

So now if I can take you through the highlights for our financial year '19 on Slide 7. So over the past year, we struck the right balance of scaling the business, investing for the future, but also unlocking value for our shareholders. So from a strategic or structural perspective, a number of things happened. We unbundled our MultiChoice business, and we unlocked approximately $4 billion of value in the process, and this also completed Naspers' transition to a 100% online consumer Internet company.

We announced our intention to reduce our position on the JSE by listing a portion of the company on the Euronext Amsterdam, which has been received really well. So since the announcement, we have seen the discount narrow by about 10 percentage points. We've also disposed of our ownership of Flipkart, which is another good example of our ability to build and then crystalize value. So from a total investment of about $600 million, we took in $2 billion in gross proceeds and we realized an IRR of 29% on that investment.

So from a financial point of view, our revenue continued to grow strongly and profitability also improved materially. So revenue increased 29% year-on-year, while trading profits grew 22%, and that translated into a 26% year-on-year growth in core headline earnings. And we really saw a strong execution by all 3 of our core segments. So in classifieds, we see user engagement continues to grow strongly. OLX delivered its first profitable year, and it was driven by excellent results from Avito, but also in Brazil and in Europe.

In payments, we saw our TPV, or total payment volume, increase 29% to $30 billion, driven by India, and India now accounts for over half of all of our transactions. As with OLX, the core PSP business reached profitability for the first time, while PayU keeps reinvesting into building its fintech ecosystem by growing its data-driven fintech businesses.

We also increased our investment in food. It's still very early in the growth cycle of this space, but the results have been very encouraging. The GMV accelerated strongly in the second half of the year. So core to our strategy is investing in our businesses to make sure they have ample runway for sustained growth, and if I can take you to Slide 8, you can see how we deployed $3 billion across our businesses. So we entered 2019 with about $10 billion in net cash, and we have so far deployed $3 billion primarily in our biggest areas of opportunity, and that will be classifieds, payments and food delivery.

Of that $3 billion, we spent about $2.4 billion in increasing our ownership of our current businesses, and most importantly, we spent $1.2 billion to gain 100% control over Avito. We've also invested to build out a broader, consumer-centric ecosystem in classifieds by extending our presence in convenient transaction models through the Frontier Car Group. And our ventures team added further to its growing holding in education and invested $383 million into BYJU'S, which is a very exciting edtech opportunity that's rapidly revolutionizing the Indian education market.

If I can turn us to Slide 9, you will see that in classifieds, we've continued to invest to build deeper consumer relationships in our core markets. I would say that financial year '19 was a banner year for the OLX Group. While the trend was in place for multiple years, I'm really pleased to see that the group reached profitability for the first time. And I'm even more pleased to see that this occurred as the group invested significant sums on future growth drivers as well. And this is really a testament to the great work of Mark and his team, and it underlines clearly why we view classifieds as an attractive business to be in. We're continuing to have the large global footprint with leadership in 38 countries, and the activity across the platform actually continues to grow strongly worldwide. The key focus area for classifieds is improving the value proposition for our customers and verticals, and we do that by deepening our relationships with our partners in the autos, in the real estate and in the jobs verticals. And we, actually, really made significant progress there during the year.

So in cars, as I have mentioned before, we bought a stake in Frontier Car Group, and we believe this model will accelerate organic growth and also offer strong strategic synergies in our autos category. Then real estate, we took a majority stake in Properati, which is a leader in the Lat Am market. And in jobs, we took a majority stake in Aasaanjobs in India.

Further to that on Slide 10, you will see that the focus on our core 5 markets is really paying off and driving the operating metrics of the group through scale and strong growth in each of these individual markets. So the focus on monetization helped drive an impressive 37% underlying revenue growth, which is more than double the industry average. So our average monthly paying listers grew 33% year-on-year; and in our monetization markets, the average revenue per Internet user grew 29% to $1.80. And this still leaves plenty of room for growth. So when you benchmark us against global peers, you see that they typically deliver north of $5 per Internet user. So on the right-hand side of the slide, you can see continued strong traction in the high-growing markets, such as Brazil, so we see 40% growth in paying listers; in India with 36%; and in the U.S. where letgo continues to perform very well.

So if we look at Slide 11, you can see that we're now leveraging that strong core to build broader, consumer-centric ecosystems. So we're leveraging the market leadership positions that we have to grow monetization by extending the business models into highly monetizable verticals and into convenient transaction formats that typically have very high ARPUs. So after experiments yielded outstanding results, we have accelerated investments into convenient transaction models, such as the Frontier Car Group. So at the heart of the ecosystem lies the consumer. So we're investing to ensure that our platforms are not only convenient, but they have to be trusted and safe, smart and personal and finally, easily and liquid. And it's this focus across the OLX Group that continues to help to drive the business growth.

And now let's turn to Slide 12 and focus on the progress that Laurent and his team are making in payments and fintech. So the PayU journey has really developed in a very similar way to OLX, and it's following the playbook that I outlined a few minutes ago. Early on, we invested in a number of payment service providers in different markets around the world, and as we learn more, we invested behind the ones that have a lot of potential. And in time, we stepped up our holdings and eventually, we rolled these key assets into the 18-market platform that PayU is today. And PayU had made strong progress on its ambition to become the largest payments and fintech business in growth markets. So across the 18 markets, PayU supports over 300 local payment options in 25 currencies through 1 single API. A good example is our acquisition of Zooz, and that enables us to serve global merchants in all our markets with a single integration.

If we look at Slide 13, in payments and fintech, we're doubling down on India, and we're expanding beyond payments itself. The wider opportunity here is to leverage our leadership position in PSP to address the adjacent opportunities, such as credits and remittances. And we're making real progress here, and the metrics support it. So the average daily transactions are growing strongly. They're up 43% year-on-year, and TPV is up 29% year-on-year on a constant currency basis.

India's PayU is the largest opportunity and it increased average daily transactions by 61% to 1.6 million per day, and India now generates more than 50% of transaction value. And the ambition in India is to reach leadership across all digital payments and in the alternative credit business. And our own business, LazyPay, is already gaining significant traction and it's issuing about $20 million of credit each month.

So as we can move on to food delivery on Slide 14. This segment is really right at the beginning of its growth cycle, and I'm quite pleased with the position we have here today. So here is how we think about food delivery. So first, I believe that Naspers has the broadest [level of] perspective on the food industry, and this perspective has been achieved through our close involvement with iFood in Brazil, with Swiggy in India, and through our involvement with Delivery Hero's 40 worldwide markets, but also indirectly through Meituan in China and Delivery Club in Russia. And this perspective is unlikely to be replicated by anyone else. And I think it's important to note that the food delivery space has evolved beyond simply connecting restaurants and customers.

And today, the opportunity in food is really to disrupt and transform all the aspects of the supply chain from how food is sourced, prepared and ultimately consumed. And the impact of this disruption is likely to have a major societal impact in the areas of nutrition, but also wastage and employment. And this is the type of opportunity that lies at the heart of Naspers' strategy. So Naspers is really at the forefront of this platformization of food. I'd say it's still very early days and the opportunity is very large. And the chart on the right-hand side shows that food accounts for close to 10% of global GDP. And if you look at the total addressable market worldwide for online food delivery, it's now over $150 billion. And that addressable market will continue to grow at a strong pace as technology and innovation will drive further disruption, and that will increase convenience and will reduce costs. And more and more meal occasions will shift from being home prepared to outside prepared and delivered over time.

And we believe that we're seeing online food at a really early stage, I think similar to where Amazon was in the early 2000s, when it was mainly focused on books and media. So we started with third-party marketplaces in food and have proven the overall profitability of the model. But as a result, our ambition has increased considerably. And now we're investing beyond that. We're investing to transform the food industry. We want to disrupt and improve the entire process from how meals are sourced, prepared and distributed.

On Page 15, you can see that the biggest opportunity in food delivery arguably lies in growth markets, and that's exactly where we're investing the most. So the table on the left shows our markets and shows that they are significantly less penetrated. In India and Brazil, for example, less than 2% of food eaten from restaurants is actually being delivered. And rather than simply replicating the shift of online consumption online, which was just basically what happened in developed markets, our businesses can essentially create new markets for consumers. And this allows companies like Swiggy and iFood to extend their platforms, adding value to all constituents. So for our restaurant partners, the opportunity is not only to increase high-margin meal occasions, but also to provide value-added data insights and supply side logistics. And if this is done well, consumers will benefit through improved delivery times, cheaper food and greater choice.

These new models create a larger addressable market than in developed countries, and that also brings stronger economics. So the right-hand chart shows the relationship between average order values and wages, and that is a key driver for profitability and works particularly well in growth markets. As Swiggy and iFood scale, we are confident that they can generate large and sustainable profits over time.

I can take you to Slide 16, you can see that we've chosen to invest based off knowledge that the unit economics of the food delivery business really work. So our brands have proven that already, and now we're really investing in achieving much more scale than what we previously expected. So that investment is predicated on the fundamentally attractive unit economics due to the high level of customer loyalty and the existence of network economics. So iFood, as an example, started as an online food delivery marketplace. At scale, we know this is a very profitable business and leading players are generating more than 50% margins. We, however, realized the opportunity is far bigger, and we're now aggressively investing and expanding the products, the technology, the logistics and the ecosystem in food.

Swiggy is a first-party model, which is expanding into new cities with new products and marketing. In early days, it will generate losses, which is normal, but the core underlying business has excellent economics. So for example, in September 2017, 4 of its priority 7 cities were already profitable at the contribution level. And a cohort analysis indicates very strong retention, and as frequency increases and the business matures, margins will improve.

So increasingly, our investments, while they're still early, are showing both impressive size and growth, and you can see that on Slide 17. It's still very early days here, as said, but I'm pleased with the progress so far. And so across the portfolio, order growth has accelerated in the second half, increasing to 100%, up from 77% in the first half. In March, iFood recorded a record 17.4 million orders, which is up 129% year-on-year. It has expanded into 500 cities and has full geographical coverage of Brazil. Swiggy, at the same time, has expanded its presence from 7 cities in 2017 to 130 and now partners with more than 85,000 restaurants. Then the benefiting from new products, such as convenience items, a VIP program and private-label food and order growth, is year-on-year up more than 3x.

And finally, on Slide 18, before I hand over to Basil, I'll spend a moment walking you through our upcoming transaction, something that has already unlocked significant value for our shareholders. For me, here are the core reasons why we've chosen to go down that path. So first of all, we've had an amazing run, but the reality is that Naspers has outgrown its listing on the JSE. So we now account for roughly 25% of the value of the exchange, while that was only 5% in 2013. And that has caused a number of technical issues for Naspers and our South African investors, many of whom have actually been continually forced to reduce their ownership to avoid exposure -- over-exposure to any one individual stock. So this transaction significantly reduces our size on the JSE.

Second, Prosus will be the largest consumer Internet company in Europe, and we all believe this will significantly deepen and widen the pool of investment capital that will be attracted to our very attractive portfolio of international Internet assets.

And before I close, I want to be very clear that the intent of this transaction is to take meaningful steps to reduce the discount in aggregate, for Prosus and for Naspers. And in structuring the transaction the way we have, we've created for ourself significant optionality to do just that.

And now I hand over to Basil.

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Vasileios Sgourdos, Naspers Limited - CFO, Financial Director & Executive Director [4]

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Thanks, Bob. Hi, everyone, and thank you for joining us today. I'm going to spend a couple of minutes walking you through the financials for the year and calling out some of the items that I think are important for you to consider.

Before we kick off, a quick reminder on a few housekeeping items. First, we report revenue and trading profit on an economic interest basis. They include our proportional share of results of associates and joint ventures. I believe this is critical to take into account when understanding Naspers' portfolio and the value being generated. Free cash flow and core headline earnings are, of course, consolidated numbers. All percentage increases are in local currency, excluding M&A, to give you visibility on the underlying operational growth. Foreign exchange impact is largely a translation impact. Revenue and expenses are mostly in local currency, and they are then converted to U.S. dollars for reporting purposes.

As I walk through the deck, I'm going to focus on the organic growth. So as Bob mentioned, this was a transformational year for Naspers. First, we grew our portfolio strongly and exhibited real operating leverage in our classified and payments segments. Second, we invested significantly in our food segment. We're at the beginning of a big growth curve here. Our investments are aimed both at growing the market as well as our position within it. Third, we've made significant progress in unlocking value for our shareholders. We ensure we do this without sacrificing future growth.

Specifically, we crystalized our returns in Flipkart by selling to Walmart and unlocked roughly $2 billion for shareholders, delivering a 29% IRR. We followed this with the unbundling of MultiChoice Group, unlocking $4 billion for shareholders so far. This completed our transition to a 100% online consumer Internet company. Perhaps just a side note on the MultiChoice Group unbundling. Video entertainment is presented in the numbers as a discontinued operation, so all the numbers in this presentation are from the continuing operations unless I mention otherwise.

And finally, as Bob mentioned, by announcing our intention to list Prosus in Europe, we are addressing significant structural issues that have negatively impacted our valuation. This has already unlocked a substantial amount of value and will continue to do so in the coming months and years.

So let's turn to Slide 20. We're pleased to report, firstly, that classifieds is profitable, including the investment in letgo. Our core PSP business in the payments and fintech segment has also reached profitability at the operating level. So 2 of the 3 main segments are scaling very nicely and are profitable at their core, even while each continues to invest for continued growth over the long term. This leaves food delivery as the main investment area of the group. Tencent continues to perform strongly. Our share of Tencent revenues and trading profit grew 31% and 16%, respectively. Core headline earnings grew 26%, faster than Tencent, which is important for us as we continue to invest to strike a better balance in our portfolio.

In food delivery, as Bob mentioned, we're still at the early stages of a significant tech-enabled shift in eating behavior. The potential here is significant. Our food business sits at the center of this disruption and is well positioned to benefit. As such, in the second half of the financial year, we encouraged our food businesses to invest heavily in capturing in a sustainable way a sizable portion of this opportunity. The step-up is evident in the results for the year, with strong operating metrics and revenue growth, while losses did widen. This will continue into the new financial year. On the right-hand side of the page, you'll see the strong performance all around.

We grow our revenues by 29% to $19 billion. Our trading profit rose 22%, as classifieds, payment and fintech, travel and etail accelerated the profitability, and Tencent delivered a good performance as well. Free cash flow improved by a sizeable 60% or $178 million year-on-year. The substantial improvement occurred even as we increased investment in food delivery. Core headline earnings increased 26% year-on-year.

So Slide 21 gives you a good snapshot of revenue and profitability in e-commerce on a segment level. Revenue growth in our e-commerce segment remained strong at 26% year-on-year with meaningful contributions across the portfolio, totaling almost $4 billion. Profitability has improved significantly with trading losses narrowing $100 million or 15% year-on-year to $630 million and this despite our step-up in the investment in food delivery. Classifieds in the aggregate contributed profits, payments and fintech reduced losses and the core PSP business is profitable for the first time. Etail and travel also reduced losses.

If we exclude food delivery, trading losses narrowed 52% or $241 million. So that really is sizable. The right-hand side of the slide highlights our progress made in improving profitability. E-commerce trading loss margins improved from 20% to 16% this year. All margins across the portfolio improved, except for food delivery where we are very deliberately increasing our investment. Classifieds continued to show strong profit growth. Margins improved a sizable 18% in the year. This includes our investments in letgo, where losses also narrowed 35% year-on-year. Investment to acquire new customers is always heavily skewed to the second half of the year, thus impacting first half versus second half profitability. Payments and fintech, including the impact of new investments, improved trading loss margins from 19% last year to 12% this year. Losses were driven by investment in the next wave of growth, as Bob mentioned earlier in the presentation. Again, to repeat, our core PSP business reached profitability at an operating level.

And then recently, we announced that we'll be swapping our stake in MakeMyTrip for a stake in Ctrip. The IRR on this transaction will be about 26% with further growth to come from our Ctrip investment.

Turning to Slide 22, let's look at classifieds in a closer way. Financial progress has been strong. Revenues grew 37% year-on-year to $875 million. In our key markets, we continue to see the strength of the model at scale. Avito continued to solidify its position growing revenues by 28% to $322 million at a 57% trading profit margin. OLX Poland grew revenues 40% at a 61% trading profit margin. The business growth continues to come on the back of growth in engaged users and delivering value-adding and innovative products such as instant cash for cars. OLX Brazil grew revenues 44% and improved its profit margin 13% year-on-year. OLX Brazil turned profitable in 2019. That is a few years behind others in terms of its marginal potential, but it's growing quickly and will become a significant and sizeable business. Improved performance in 2019 was driven by the autos and real estate verticals, where we are the fastest-growing operator in the market. Letgo's performance was strong too. With solid user metrics, it began building out its commercial capabilities. We've seen a solid start to monetization and meaningfully reduced marketing spend. You've heard us say a couple of times now that classifieds, including letgo, is now profitable. Clearly, this is something that we are very proud of. The left-hand side of the slide shows you why. The trend is very clear. Achieving profitability is another milestone, and profit improvements from here will continue to be very strong.

I do like to call out some discrete items that impacted classified profitability in the second half of 2019. First, the second half has always been a seasonally higher period of investment. Second, as we increase marketing investment to support launches of our new Panamera tech platform in India and Pakistan. Third, we invested significantly in our global tech backbone, Panamera. This enables best-practice sharing and product innovation across geographies. And finally, we rolled out cash-it-for-me and other convenient transaction initiatives. These will expand the classified ecosystem and drive longer-term revenue and profit growth.

So let's move on to the payment and fintech segment on Slide 23. The business delivered revenue growth of 28% to $360 million, driven by a 43% increase in transactions and a 29% increase in total payment value to over $30 billion.

During the year, we merged the Europe, Africa and Latin America businesses realizing signification efficiencies and cost reductions. Losses narrowed an incredible 67% to $43 million. The core PSP business delivered $12 million of profits for the financial year 2019, while overall trading margins improved 7% year-on-year.

India is a major part of our payment strategy and a major contributor, representing more than half of the segment's total payment value. As the leading e-commerce payment gateway in India, we've also made progress in credit, issuing over $20 million in loans monthly. It is still early days in India, but we are very pleased with our position. We believe there's lots of upside to come.

Now to Slide 24 and food delivery where we are seeing very strong growth across the board on the back of the increased investment. Bob has already spoken about the opportunity and why we are optimistic about it. I want to tell you why, I, as the CFO, have significant confidence here. First, we really are just at the beginning of what food delivery will be. Our businesses sit in leadership positions in all of the major markets, and we thus have an unparalleled worldwide view. This gives us early insight and clarity into what works and what does not, allowing us to invest quickly and either fail fast or flourish quickly. From a unit economic perspective, we have already seen in our businesses that the economics can be very attractive in marketplaces, but first-party models, too. The opportunity, as Bob mentioned, is to build this business into a data-driven platform where the economics can achieve scale. This is where we are spending our time and directing our investments.

The results are encouraging to say the least. In 2019, we more than doubled revenues in our food segment. iFood continues to execute exceptionally well, reporting GMV growth of 84% year-on-year and an increase in orders of 107% year-on-year. I'll remind you that we committed $400 million of funding to invest in food -- in iFood, in fact, over the next few years. In the second half of 2019, we invested approximately $79 million of this, and we will accelerate that momentum meaningfully in 2020.

In India, Swiggy continues to record exceptional growth. Order growth is up 3x year-on-year and GMV growth grew 265% year-on-year. So India is growing incredibly fast. During the year, we invested an additional $760 million in Swiggy, bringing our effective interest to 39%. And finally, Delivery Hero continues to execute well and reported revenue growth of 93% on a constant currency basis to EUR 267 million. Order growth was up 55% in the Q1 2019 announcements.

Now if you'll turn to Slide 25, which illustrates continued momentum in the contributions with central cash flows of our profitable Internet businesses. On the right-hand side of the slide, we illustrate improved e-commerce profitability, particularly in our classifieds segment, which results in a greater contribution to overall central cash flows. This year, the group reached another milestone as profitable businesses now represent more than 50% of the total e-commerce revenues.

Trading profit from profitable businesses increased by a whopping 44% year-on-year, ahead of the e-commerce's segment 15% growth. This highlights the leverage in our businesses once they reach scale, and this drives profits and free cash flows which accelerate. The aggregate of free cash inflows generated by the Internet units that are free cash flow positive totaled $673 million. That's a 22% increase year-on-year, and if you compare it to 2016, that's a 210% or $456 million improvement.

On Slide 26 is a walk of our free cash flow results. While free cash flow from continuing operations is still negative, it improved significantly year-on-year, up 60% or $178 million. This marked improvement is the outcome of classifieds, payments and fintech improved profitability, converting to cash generation, dividend income and dividend income from Tencent. These 3 drivers will continue to grow and will come to offset the investment in food and the impact of the unbundling of MultiChoice Group in the coming years.

So turning to Slide 27, you will see that we've been very disciplined in our approach to allocating capital. In March 2018, we told the market that we would use a portion of the proceeds from the Tencent [firm] to settle put option liabilities, and the remainder of the funds would be allocated to accelerate and building our core e-commerce segments. Since then, we've invested just over $3 billion. The bulk of the investment went to classifieds, where we invested $1.8 billion. We settled $1.6 billion of put option liability. We also increased our exposure to the cash-it-for-me car opportunity in several high-growth markets through the $89 million investment in Frontier Car Group.

Finally, we strengthened our position in India with the $36 million investment in blue-collar jobs vertical, Aasaanjobs. The group has a healthy balance sheet with net cash of $6.3 billion. Post year-end, we announced the exchange of our stake in MakeMyTrip for a minority stake in Ctrip. We believe this transaction will be a win for all parties. It will result in better strategic alignment between Ctrip and MakeMyTrip, and the Naspers' resulting stake in Ctrip will give us exposure to one of the global leaders in online travel.

And finally, on Slide 28, we'll see this slide illustrates Naspers' core headline earnings growth over the last 3 years from -- to Tencent's contribution to our core earnings. Naspers is growing at a very healthy pace of 44% year-on-year, and in fact growing faster than Tencent. We believe our excellent financial progress, especially e-commerce profitability, will drive the growth of our core headline earnings into the future.

So folks, in conclusion, we continue to be disciplined in allocating capital, we've made excellent financial progress in the financial year 2019, we've accelerated investments in food delivery and we'll spend more to address the full market opportunity. It's clear that we've made significant operational progress, but have also made sound strategic moves, like the successful unbundling of MultiChoice Group during the year. We're also focused on the listing of Prosus in September. I track -- our excellent track record provides comfort of our commitment and our determination to deliver great value to you, our shareholders, over the long term.

I'm now going to hand back to Bob to go through our thoughts for the future and look forward to your questions.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [5]

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Thanks, Basil. So to summarize, let's go to Slide 30. So to conclude today's presentation, I'd like to share some thoughts on how we look into the future. So we are looking to drive further the scale and profitability in classifieds, in payments and in B2C, which all made excellent progress during the last year. We also want to use the flexibility on our balance sheet to pursue our growth ambitions, again, in classifieds, food delivery and payments and in fintech. We will continue to invest significantly into our food operations where the opportunity is considerably larger than we previously thought, particularly in Brazil and in India. We will continue to focus to embed AI and machine learning to enhance our products and service offerings as well as our operations. And we aim to unlock value for our shareholders through our listing on Euronext Amsterdam, and we will continue to evaluate further steps to address the discount.

So with that, I want to thank you for your time so far and

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Operator [6]

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Ladies and gentleman, please remain online, the main speakers will rejoin us shortly. Please do remain online, we will -- they will rejoin us shortly.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [7]

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So with that, I want to thank you for your time so far and

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Operator [8]

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Ladies and gentleman, again, please do remain online, we will resume the conference call shortly. Ladies and gentleman, we have been rejoined by Mr. -- by the speakers. Just go ahead, sir.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [9]

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I'm sorry, Chris, where did we leave off there?

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Operator [10]

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You were just finishing with your final comments, sir.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [11]

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Okay. Yes, perfect. So let me just -- yes, I think you actually heard me conclude. So I think we'll just go straight into questions. Chris, if you wouldn't mind opening lines up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Cesar Tiron of Bank of America Merrill Lynch.

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Cesar Adrian Tiron, BofA Merrill Lynch, Research Division - Research Analyst [2]

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I've 3 questions, if that's okay. The first one would be on the slight slowdown in the revenue growth in payments and food delivery. So first on growth that -- I'm looking at the local currency growth in 2H '19 on a year-on-year basis. And besides the higher base, can you please help us understand what drove this, especially for payments since it doesn't seem to be driven by India? The second question would be on classifieds. Can you please help quantify the additional costs you mentioned for 2H '19? And just wanted to check if those costs should be considered as once-off or recurring? And then on the -- third question would be on the cash flow improvement. And obviously there was a significant improvement from 2018 to 2019. Do you think that in 2020, you will be in a position where the $0.10 dividend and the cash flow from classifieds will cover the losses from other e-commerce businesses?

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Bob van Dijk, Naspers Limited - CEO & Executive Director [3]

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Yes, thanks, Cesar. I will ask Basil to answer your first questions -- first question and second questions. On the third point, Cesar, on the cash flow improvement, will we basically be able to do that. I think it's important that we don't give guidance, and I think we don't do it either. I think the direction of travel is positive, right? I think we see the classifieds business has the potential to increase its profitability as does the payments business, but we're also investing. So I think it's hard to call, and we don't give guidance. But I think some of the positive trends you've seen in those core businesses are the correct ones to focus on.

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Vasileios Sgourdos, Naspers Limited - CFO, Financial Director & Executive Director [4]

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Thanks, Bob. Thanks, Cesar. Just on your first question, so actually the slowdown in first half versus second half is due to a couple of the associates. Actually, the core payment business itself has actually accelerated in the second half of the year, particularly in India. And you will recall that we mentioned in the first half of the year that we impaired one of the businesses, and in fact, that's the one that slowed down. So that's the key driver there. Then in food delivery, in fact, order growth has accelerated in the second half of the year. But what we do from an accounting perspective is, we don't record gross revenues. We also offset coupons that we use to drive adoption of the model, right? So we first got to shape behavior, and once we shape behavior, we start to see that organic growth. So that's why it looks like it slowed down, but in fact it hasn't. In the second half of the year, we've actually seen an acceleration of order growth in iFood and continued sustained growth in Swiggy.

And then on your second question in terms of the step-up in investment in classifieds in the second half of the year. So we have, over a staggered basis, rolled out additional markets on our Panamera platform. And once that completes and it settles, we then tend to step-up investment. Now we've done quite a few markets, but there's still a couple to come. And if those settle well, we'll probably step-up investment thereafter as the interest starts. So it's very hard to sort of predict exactly how that is. And as Bob says, I don't want to provide it in much detail.

Secondly, the underlying growth in the convenient transaction models that we're [pushing up] here is actually very strong. And the long-term economics look very good. So we'll continue to invest behind that model. It will sustain growth over a longer period, but it will also sustain profit and cash generation. That all said, we expect that profitability in classifieds will continue to grow strongly in the year ahead.

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Operator [5]

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The next question is from David Ferguson of Renaissance Capital.

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David Ferguson, Renaissance Capital, Research Division - Deputy Head of Research & Equity Research Analyst [6]

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I've got 2 questions, please, the first on food delivery. I think you've been very clear about the level of investment required by iFood over the next 2 to 3 years. Can you talk about the scale of the investment required by Swiggy over the medium term? So that's question number one. And then similar question on letgo, where would you say that business is in the investment cycle? Is it reasonable to expect the losses to continue to fall at a similar rate to 2019 with breakeven in the next sort of 2 to 3 years? Or a more substantial level of investment over a longer period of time is likely to be required?

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Bob van Dijk, Naspers Limited - CEO & Executive Director [7]

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Thanks, David, and I'll ask Larry who is here as well to answer your first question on Swiggy and then Basil to cover your second question.

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Larry Illg, Naspers Limited - CEO of Online Food Delivery & Ventures [8]

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Yes, on Swiggy, frankly, it's a little bit hard to call. The market is very nascent and growing rapidly. At the same time, the company is expanding its geographic reach and adding new lines of business. So it's hard to call at this stage how much incremental investment is required. But again, we're betting behind solid progress and a strong consumer experience and a share lead. So it's -- again, it's hard to call at this stage how much more will be required.

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Vasileios Sgourdos, Naspers Limited - CFO, Financial Director & Executive Director [9]

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It's Basil here. Just to deal with letgo and what happens in the year ahead. So as I called out in my call, letgo has actually improved its profitability by 35% year-on-year. And our ambition is to keep driving strong a user experience, which will then create the opportunity for further monetization, which will then create the opportunity for the losses to continue to come down. And of course, our ambition is to drive letgo to profitability in some years, but I won't guide specifically when. As you know, we don't give guidance.

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Operator [10]

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The next question is from JP Davids of JPMorgan.

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John-Paul Davids, JP Morgan Chase & Co, Research Division - Head of South African TMT Equity Research [11]

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Two questions from my side, please. Firstly, on the classifieds space, you've flagged the investment in the tech platform for the OLX Group. I was hoping you could expand a little bit on this, and specifically, whether this signals a bit of a shift from a local marketing-driven business to one that will be more tech-enabled going forward. And then switching gear, just following up on Swiggy. I wonder if you can provide some sort of estimate around its current population coverage with 130 cities that you've already built out. And I guess, if possible, any prospect for population coverage in FY '20?

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Bob van Dijk, Naspers Limited - CEO & Executive Director [12]

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Thanks, JP. We have Martin here in the room, who'll answer your first question, and Larry will answer to your coverage question of Swiggy.

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Martin Scheepbouwer, Naspers Limited - CEO of Classifieds [13]

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Yes, it's Martin here. Thank you for your question. Yes, you're right, classifieds as an industry has been [of maturity] to, let's say, transform from a sort of primarily local marketing business -- marketing-driven business to a tech-driven one, which increasingly operates at a scale larger than any individual country. We've had it for several years now. And the Panamera platform that was referred to earlier is one of the manifestations where we, over time, centralize a number of countries on a shared tech platform, which allows us to innovate faster and with higher quality than anything we do locally.

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Larry Illg, Naspers Limited - CEO of Online Food Delivery & Ventures [14]

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Yes, and this is Larry. To your question on Swiggy, for the 130 cities that you referred to, our best estimate shows that, that addresses about 200 million, 220 million people. And the mix of cities is a mix of the largest ones as well as some of the smaller large cities that are showing good traction and show that the model can extend to -- I think as Bob and Basil teed up earlier, that the model extends much more broadly than we thought when we first invested a few years ago.

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Operator [15]

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And the next question is from Richard Kramer of Arete Research.

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Richard Alan Kramer, Arete Research Services LLP - Senior Analyst [16]

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Two simple questions, please. First of all, it'd be great if you could lay out your philosophy, since I know you're being very cagey about the guidance, on both classifieds and food, where you're consolidating a minority economic interest. So on the one hand, it's kind of hard to accept the idea of you getting your operating synergies across the group unless you are planning to assume control. And likewise, if you're not planning to assume control, is it possible to ensure that you get those synergies? And then along those lines, if you look at the scale of yourselves and other classifieds players, you're now sort of all on a fairly similar footing as you sort of improve the profitability with a more emerging market footprint. Do you see a logic there for asset swaps? Or are you going to stick to your footprint, which is mostly emerging markets, maybe with the exception of letgo? How should we think about the direction in which you're going to take that classifieds business?

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Bob van Dijk, Naspers Limited - CEO & Executive Director [17]

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All right. Thanks a lot for your questions. I'll cover the first one and ask Martin to come back on your second question. So I think the situation in classifieds, I think, is a good illustration of sort of the final chapter of the playbook, if you will, all right? So I think we started in classifieds very much like we started in food delivery with stakes in different companies that we mainly had tremendous advantage from by learning, right? We learned what works in every place. We learned what good looks like, and it allowed us to build very quickly a portfolio of winners. And when we had those winners, we actually expanded into new markets and used the insights we had to build the footprint we have today. And now you get not only sort of knowledge synergies and strategic synergies, but also very significant operating synergies.

I think with food, we are in a different stage of the cycle. We are basically in a stage where we've made a number of investments. And as I mentioned in my part of the discussion, we've learned a lot, right? We now know what good looks like, that allows us to invest in the winner. We have invested in winners in many parts of the world. We couldn't have done that without having the previous experiences. And actually whether you have the minority stake or majority stake doesn't matter in how much you learn strategically from that. It also doesn't matter in how much actually knowledge synergies you bring to bear. So if we have a great innovation in our Indian business, you'll see it appear in Brazil a month later. So I think the question is whether we -- will we also consolidate and have the last set of synergies, the operational synergies. I think we will see if that's possible. And if it's something we can do while creating value, we'll do so. But I think a lot of the synergies happen actually at the strategic phase or at the knowledge phase of the business. And Martin, maybe you can cover the second question.

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Martin Scheepbouwer, Naspers Limited - CEO of Classifieds [18]

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Absolutely. Yes, thank you for your question. So in classifieds, as Bob and Basil explained, the vast majority of what we do operationally is organic growth, and that's the plan that we invest behind provided -- providing it generates healthy returns. In addition, you've seen how we've deployed another $3 billion of capital in, let's say, in honoring puts rights and new acquisitions. So we -- yes, we're a bit pragmatic and explored that avenue of growth as well. But then in current environment with several global and local developments in classifieds, yes, we keep an open mind. And if we can strengthen our business with targeted investments, we will do so as we've always done.

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Operator [19]

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The next question is from Lisa Yang of Goldman Sachs.

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [20]

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I have a couple of questions, please. Firstly, in classifieds, would it be possible to have an update, given the number of markets which are not profitable. And which are the main markets that are closer to reaching profitability? I also feel that there could a couple of unprofitable markets. So I'm just wondering if there is scope for further exits. Secondly, still in classifieds, just wondering how this move towards these convenient transactions could change the profitability of the segment. Or you don't think it's going to be that meaningful? And thirdly, is it possible to have a bit of a color around the trading loss that you expect for 2020? I mean 2019 is the second year where the trading losses have been reducing. So I'm just wondering whether that could further reduce in 2020, given the investment in food. And finally, if I may, in relation to the spin-off of Prosus, I think you mentioned...

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Bob van Dijk, Naspers Limited - CEO & Executive Director [21]

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Sorry to interrupt, the line is actually a little bit poor on your end, because we couldn't understood the previous question for this well, but we -- I lost you. You asked for like what is the profitability impact of more convenient transactions, that I got. Everything you asked -- you said after I lost, so can you repeat that?

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [22]

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Okay, sorry about that. So the third question was on trading losses, which have been reducing for the second consecutive year. Just wondering, with obviously the exceptional investment in food in 2020, would you expect further reduction in the trading loss, or should it increase? And the last question is related to the spin-off of Prosus. I think you mentioned you couldn't go below 70% ownership of the NewCo due to tax reasons, and I'm just wondering what you could do to be able to cross that 30% ownership threshold and what's the timing of that.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [23]

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Sorry, the line is really quite bad. I got your third question now, but the fourth I actually still didn't fully get. Can you repeat the last question on Prosus, around the 30% ownership?

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [24]

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Right. No. So you said you couldn't go down below the 70% NewCo ownership in the short term due to tax reasons. I'm just wondering like what's the timing and what you could to be able to go below that 30%.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [25]

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Okay. Now I got it. Sorry, now the line is -- there's a little bit noise, and I think I now have all of your questions written down. I'll cover the third and the fourth, and I'll ask actually Basil to cover the first and Martin to cover the second. So you've got lots of people taking care of your questions. So the fourth question, so there's no hard barrier around the 30%. But what actually happens, if Naspers would own less than 70% when we do corporate restructurings, capital gains will be taxable, while they are exempt if Naspers is at 70% or above. So I think there might be structuring ways to reduce that exposure, but it does guide us to be mindful of that. So there's no tax event that's triggered, but rather a taxability that would occur on future corporate restructurings.

Then on the losses, excluding food, yes, the direction of travel there is, I think, quite clear. I think Basil mentioned, we expect classifieds to continue on a very positive trajectory and payments as well. So I think in aggregate -- and even actually our etail business is also improving quite nicely. So I think that direction of travel is correct. And Martin, we're going to go in reverse order if you mind answering?

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Martin Scheepbouwer, Naspers Limited - CEO of Classifieds [26]

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Absolutely. Well, thank you for your question on the convenient transactions. The way we look at that is anything that helps the customers solve a problem buying with any one of our platforms, that we historically would not -- would [not] help out with. So they come in very different forms. It is payment and delivery in Russia and Ukraine. It is a [class] inspection report in Russia. It's car inspection and direct purchasing in a number of countries.

What these have in common, it's deeply ingrained locally and [by the] local teams, and it has an offline component to it. And what we like most is that it is really valued by our customers that we help them out in this way. So NPS on this product is typically extremely high. Some of them we -- let's say, we charge for at cost. Others are in investment cycle. I think what you'll see us do more of is build these as part of a broader ecosystem of different products -- product formats, especially in our most important countries. And as always and as Basil alluded to, we'll [see] what works and we'll be strict about what's still being [brought], we'll definitely generate [customer attraction].

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Vasileios Sgourdos, Naspers Limited - CFO, Financial Director & Executive Director [27]

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It's Basil here. Welcome back. So Lisa, on your first question, as Martin outlined, we're moving increasingly to this sort of centralized product and tech platform. So -- and then you start getting into allocating cost and [funny] money. So we don't really look at it market-by-market. We look at overall profitability. I called out some key metrics. So we've seen Avito at 57%, so that's a stand-alone business. It doesn't sit on this core platform. And then Brazil has moved to profitability and that has its own platform.

But we've also seen within the core several markets display 50%-plus, 60%-plus margins. Which markets have yet to get to profitability and which ones are going to drive that longer-term growth? Well, India is one for sure. Brazil has only just turned profitable, so there's lot of upside there. And then there's some less-developed markets that will take a bit longer like Indonesia and a couple of Latin American markets. But overall, we expect profitability to continue to grow nicely and overall profit margins to expand and get closer to the benchmarks that we've seen in some of our more mature peers.

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Operator [28]

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Next question is from Andrew Ross of Barclays.

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Andrew Geoffrey Ross, Barclays Bank PLC, Research Division - Research Analyst [29]

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I've got 4 left if I can squeeze them in. First one is maybe one for Martin on letgo. Can you give us a bit more of a sense exactly how you're monetizing letgo? And what it is that gets you most excited there as you've been doing your tests and perhaps a target of how monetized you think that could be longer term?

Second question is on MakeMyTrip. Perhaps you can give us a sense as to your thinking as to why you exited that stake? And I guess alongside that, what your thinking is on Ctrip longer term?

Third question is on Brazil and iFood. Can you just give a comment on the competitive environment there and how that plays into your thinking on investment levels? And I guess I'm thinking in the context of Rappi raising a lot of money a few weeks ago.

And then last question, in your remarks on the listing of Prosus, you said that, that creates a significant optionality to reduce the discounts both at Prosus and at Naspers. Could you elaborate on what those options are at the Naspers' line if the discount doesn't close on the Naspers' line for a level that you think is acceptable?

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Bob van Dijk, Naspers Limited - CEO & Executive Director [30]

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Okay. Thanks for your 4 questions. So I think I'll kick us off on the fourth question. Then I'll ask Larry to cover iFood and Martin to cover letgo. Actually, he can also comment on the MakeMyTrip one. So I think with Prosus, you can use your own fantasy, but I think our first priority is to make sure that listing lands well. I think it's an incredibly attractive portfolio of assets. We're targeting very significant new pools of capital. We're seeing tremendous interest in the listing. So we want to make sure we execute it well, we land it well and the company trades well. We'll take it from there.

On the MakeMyTrip, Ctrip, I think we -- what we've seen is like innovation and scale is really essential in online travel. And I think Ctrip has demonstrated -- and we've gotten to know each other as co-shareholders as well in MakeMyTrip to actually build that scale globally. And it's doing a tremendous job at actually extending everything it's learned in the Chinese market, which is a very tough one, into building a great position outside. And we felt that actually for MakeMyTrip to be part of that ecosystem would create a tremendous amount of value. We wanted to make that happen and be part of that. So that was the rationale between that listing. And then maybe Larry can cover the iFood competition question.

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Larry Illg, Naspers Limited - CEO of Online Food Delivery & Ventures [31]

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Yes, it's a great question. If you look back, call it, 2 years ago or maybe not even quite that long ago, what we had with iFood in Brazil was the leading food marketplace, but it was fundamentally subscale between what we were -- and are still pleased with how the business is performing. There was an exposed [flame], namely in the first-party business. So we increased investment there. What we've seen since, we have the highest NPS in the market. And in a relatively short period of time, we built a logistics business that is frankly bigger than the competitors combined. So we're happy with the progress there. Recognize that other people are going to be able to raise money because Brazilian food, as Bob alluded to earlier in the presentation, is a big opportunity. But we're happy with our business and its performance.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [32]

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And I think what you said, Larry, it's important to stress just the 1P part of iFood is actually larger than all the 1P activities of all competitors combined. So I think that's an important takeaway. Martin, would you like to comment on letgo monetization?

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Martin Scheepbouwer, Naspers Limited - CEO of Classifieds [33]

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Yes, so thank you for that question. So as I think I've mentioned before, letgo was mainly unique in the way it approached the market entry strategy in the U.S. and Turkey by going truly mobile first and with heavy marketing spend at the beginning. And now we've reached a phase where much of the work Alec and his team are doing look very similar to what we are doing in other markets with OLX, which is, as Basil already commented on, focused around product innovation and building out commercial proposition deployed in market by local commercial teams. And -- yes, the revenue stream therefore -- letgo operates similar to the ones at OLX. So there's an expedite -- third-party expediting component, especially strong in the U.S. There is optional extra exposure features for everyone and there is a business line targeted at car dealers in both U.S. and Turkey. And going forward, I expect that to broaden further as the product matures.

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Operator [34]

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The next question is from Kevin Mattison of Avior.

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Kevin Stirling Mattison, Avior Capital Markets (Pty) Ltd. - MD & Executive Director [35]

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A few questions. The first one is that it seems that as you're investing more in our classified businesses, particularly cash for cars, that maybe your capital intensity is changing. And if we could also put the same thing through to you on the food delivery business, as you mentioned 3 key businesses, the 1P businesses. Are you finding you have to invest more in terms of hard assets in order to generate rates of return?

And then the second question, you noted a couple of times in the presentation today that over the last 4 reporting periods, your earnings have grown faster than Tencent's in constant currencies. Do you expect that trend to continue?

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Bob van Dijk, Naspers Limited - CEO & Executive Director [36]

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Kevin, thanks for your questions. I'll cover the first one as it sort of covers several segments. And then Basil can comment on your second question. So I think you're right in observing that there'll be -- you'll see, in convenient transactions as well as in food, the real world playing a bigger role in our proposition. And I would want to say that strategically, I think that there's a secular trend that is not just only happening in our business, right? So if we look at the first 20 years of the Internet, it was all about sort of [like] models being disrupted. Think about digital content, think about advertising, they were very easily and quickly disrupted. And I think the next sort of major phase of growth in the world that's driven by technology will necessarily have a larger offline component.

I think the main conclusion for us is, as we look at that in our strategy extensively, is actually opportunity is bigger. I would say that the opportunity in value creation in sort of the next wave of technology touching the real world and bringing offline experience to online is a larger opportunity. And I think food is the best illustration, right, where we say, wow, just connecting customers with restaurants was a great thing. Now if you actually play a bigger role in disrupting the ecosystem, it's just a much, much bigger business opportunity than we previously thought. And similarly for convenient transactions and classifieds. So I think the observation is correct. It actually is an illustration of much further potential. I think it also makes these business models actually very locally defensible because it's a -- if you are integrated with the real world and you do it well and customers like it, it becomes a "not very easy to disrupt" model. So I think you're correct, I think it illustrates a larger opportunity. And finally, I think it makes for a very defensible and attractive local business model.

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Vasileios Sgourdos, Naspers Limited - CFO, Financial Director & Executive Director [37]

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Yes, thanks. And Kevin, to your question around relative earnings growth, so we've done this now for a couple of years. As Bob mentioned earlier, ex food delivery, we expect our core segments to continue to grow fast. And Tencent is delivering well. And they're also investing to build new segments. So if those things start to pick up and deliver well, which I hope they will in a period of time, we could see a pickup there, too. So I don't want to give you guidance again because that's not what we do, but overall, we're happy with the trajectory across both sets of assets, and we think they'll create significant value for shareholders over time.

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Operator [38]

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Next question is from John Kim of UBS.

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John Kim, UBS Investment Bank, Research Division - Research Analyst [39]

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Two questions, actually. When we look at online classifieds and we think on a 3- to 5-year view, will most of the revenue growth come from those core markets that you've highlighted? Are there expansion markets that could be sizeable again on a multiyear view? Follow-on question to classifieds. Is there any meaningful change in the revenue mix, i.e., advertising versus transactional? Second big question on food delivery. Can you give us a bit of color context on India? I'd like to know if there's been any change to competitive intensity/rationality from Zomato post its sale of the UAE assets.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [40]

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Thanks. So I'll -- maybe, Martin, you can go first and talk about classifieds and then Larry can answer your question on India.

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Martin Scheepbouwer, Naspers Limited - CEO of Classifieds [41]

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Certainly happy to clarify. So yes, so our top 5 markets in classifieds are Russia, Poland, Brazil, India and U.S. And that indeed is driving the majority of revenues and profit today and will be for a few years to come, especially on the profit side. Of course, long-term scalable markets like India will play an increasing role in profitability as well, but that is much -- still much earlier in the development cycle. The observation about change in revenue mix is also correct, and that's why we do actually split it out for you to say, well, okay, which part is convenient transaction revenues and which part -- which comes at much lower profitability and which part is sort of what we call core classifieds revenues that, in mature market, generates very high profitability. Both are necessarily as part of the ecosystem, but indeed very different financial profile.

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Larry Illg, Naspers Limited - CEO of Online Food Delivery & Ventures [42]

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Sorry, cut you off there. Then to your question on Swiggy, or the Indian market, I think the market itself is still very nascent. So we're focused on our own business, and as evident from the results, continues to grow nicely. We've got the highest NPS in the category. We're expanding the city reach, expanding the product portfolio. So we're excited about our business. Just note that the market is early.

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Eoin Ryan, Naspers Limited - Head of IR [43]

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I think we have time for 2 more questions, please.

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Operator [44]

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Next question then is from Catherine O'Neill of Citi.

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Catherine T O'Neill, Citigroup Inc, Research Division - Director, VP and Analyst [45]

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I've got a couple of questions. One on food delivery, you were talking about how it's a locally defensible business and building out first-party obviously involves capital intensity, et cetera. I just wondered, longer term, how do you think about the benefit of global ownership and consolidation within food delivery relative to how we thought about classifieds and you building out that global tech backbone in classifieds at the moment. And the other question was on Swiggy again. I think as Martin had recently said, they're seeing some local market turning profitable and an improvement in unit economics. I wonder if you were seeing anything similar with Swiggy with some of the markets where you -- or where Swiggy is better established rather than the newer markets.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [46]

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Yes, so thank you for the questions. We love food and we love talking about food. So spot on. So I think the -- what we've seen in food delivery is that a very large part of the strength is local. I would say it's one of the most local business models that I have come across, I think even much more so than classifieds is. And I think also -- so I think that the kind of benefits that Martin gets from sort of, if you will, the third kind of synergy, right? I talk about strategic synergies, knowledge synergies and then operational synergies. I think that is very -- that we can bring strategic and knowledge synergies to the businesses. The number of operational synergies between the business at this point in time, I think, is very limited. Now will that change over time? I'm not sure. I think even if you go 10 years forward, the local elements of this business, if you add first-party delivery, cloud kitchens, private-label brands, it is a very, very local business. So I think it's, in that sense, different from classifieds. And maybe, Larry, you can speak to the second question.

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Larry Illg, Naspers Limited - CEO of Online Food Delivery & Ventures [47]

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Yes. And actually it's going to build on what Bob just emphasized. These are very, very local businesses and the unit economics indeed improve, as you teed up in your question, as you develop more local scale and local density, right? You get benefits on being able to spread marketing dollars over a wider base of users. You get density from logistics with a unique benefit to the first-party business. And then you teed up in the context of Swiggy, you can -- they're doing a lot of experimentation on rolling out new products. And again, it's all in that local environment, but you definitely see improving economics as you scale locally.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [48]

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Yes. And I think one of the slides that Larry put in, in our presentation, which is around showing actually that Swiggy 7 -- some 7 -- out of their 7 priority markets, actually 2 years ago, some of them were unit economics positive already. I think it's another illustration of that notion.

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Catherine T O'Neill, Citigroup Inc, Research Division - Director, VP and Analyst [49]

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Actually on payments, sorry, would you mind maybe talking about how you think about expansion there? Because there's been a bit more activity recently in terms of M&A. And I feel that it's an area that is not talked about as much, maybe a few deliveries. It would be great to just get a sense of where in that whole sort of that payment value chain you're sort of focused on and most excited about, beyond your sort of core merchant payment processing platform.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [50]

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Yes, and so I can briefly answer. And Laurent, if you are -- I think you are on the phone, you can maybe add. I think the payments has been, I think, one those segments where we've gotten in, we liked what we saw, we've prioritized the best assets and grown them organically quite substantially. And I think now Laurent and team have worked on putting sort of that global single API access to it and allows us to actually continue organic growth, but also to think about other areas for M&A-driven growth. And I think you saw that with iyzico. I think iyzico is a fantastic example of a very strong local business that we can now integrate on our global platform offering.

So now we can offer Turkey one of the best payment options and best success rates in Turkey to the entire world. And I think that's exciting about the iyzico transaction and we like -- what we like about where -- the position we're in with PayU today. I think in addition also, the team has this very strong payments core that allows you to expand into a higher-margin financial service, and credit is a good example, where we doing that, for example, in India at ever-increasing scale. We use that data asset that we're building up through our payments business and extend that into a higher-margin credit business. I think you'll see both of those dimensions of growth going forward. You'll see that really strong platform where you can add traditional businesses too and offer a broader footprint to your global merchants, but also extending ourselves into higher-margin financial services.

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Operator [51]

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Ladies and gentlemen, our final question is from Ziyad Joosub of HSBC.

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Ziyad Joosub, HSBC, Research Division - Analyst [52]

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First question is on iFood. The business has scaled quite significantly. I was wondering, do you have any idea at this stage what the commission structure difference would be between 1P and 3P for iFood in Brazil? And if possible, do you have any insight on what cloud or dark kitchen commission structures would be compared to, let's call it, the historic 3P model? Also just quickly a question on payments. There was a Moneycontrol article, which stated that they were looking at disbursing USD 1 billion of credit within 3 years. And given the run rate we've seen since you've got your license, and you're already at $20 million a month, it does seem feasible. But we've also seen a lot of activity in the consumer credit space in India by competitors. I think PayTm as well as Ola have tied up with local and domestic banks and launched credit cards. Is the business that they're following through credit cards different to the consumer credit loans that you're offering? Or is the space becoming very competitive and will it end up being very fragmented?

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Bob van Dijk, Naspers Limited - CEO & Executive Director [53]

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Yes, and I can start answering the second question, and after which, I'll ask Larry to talk about your first. And Laurent, I think you're on, so you can add. I'll give a brief answer and you can add some color to what I say. So I would say that credit is one of the most underserved opportunities out there in India. So if you look at the number of individuals that have access to credit opportunities, they're a tiny, tiny, sliver of society. So I think the underserved demand is huge. And I think you'll see that demand be served by a variety of products. It can indeed start from a credit card. It can be a very short-term loan like we do with LazyPay or it could be on personal credit or it could be on the financing of online purchases. I think you'll see all those models grow tremendously because mainly it starts from such a low point where most of you have no access to any form of credit whatsoever.

So I think that's actually why you see so much activity because everybody sees that tremendous opportunity. I think within that, we are in a very blessed position where we have, I think, a stronger data asset than anybody else does in market because of our payment service provider business. And generally, our sort of presence in the portfolio of different online properties in India is second to none. So I think we're well positioned there. But Laurent, maybe you want to add to that if you're on?

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Laurent Le Moal, Naspers Limited - CEO of Payments & Fintech [54]

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Yes. So actually if I look at credit in India, over the past couple of years, there's been a huge penetration in bank accounts. However, this has not followed by an equal increase in the credit cards. And the reason for that is very simple. It's actually a lot of the new consumers, especially the middle class, and we're talking about 300 million people coming to the market, don't have any bank or credit history, which means it's extremely difficult for the incumbents to actually serve them. This is why the opportunity is huge for start-ups like PaySense [or MoneySense] or even ourselves, like with our LazyPay product, to go after these new consumers. But to do that, you need 2 things. The first one is you need to have access to data to do a better job at doing credit scoring with these consumers. And that's what we have as an advantage.

The second thing you need is distribution. And here, the game for us is not to get into a market and start issuing credit cards. The game for us is actually to use data, credit scoring and leverage of merchants, the Flipkarts of this world, of which we power 40% of their volumes, and go to them and start building with them the credit solutions to offer at the point-of-sale on the checkout page. And so today, what it means is basically we've started 18 months ago, building own product, LazyPay. And as of last month, May, we did $8 million of new loans every month with 90% [repeats]. And that's a very [poor] loan, right? It's really buy now, pay later.

And from that, we've started to go into installments. So basically, the future for us is, one, continue to leverage payments data and actually double down on AI. So actually build in even more AI capabilities to do these on behalf of all the merchants that, number two, leverage your distribution; and three, we're in the unique position where actually 2 of the leading companies when it comes to installments are PaySense and [Vest], and we are the largest shareholder there. So if we combine their product with our own product, LazyPay, which [means] buy now, pay later, then actually we have the best proposition in the market. So we'll continue to work on that in the next 12 months. The market is growing very fast. But again, credit is not like payments. You need to be very careful on how you build your own loan book. That's what we're working on.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [55]

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Many thanks, Laurent. And Larry, if you can -- yes, thanks. And if you -- Larry, if you could briefly comment on the iFood question and then actually wrap up.

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Larry Illg, Naspers Limited - CEO of Online Food Delivery & Ventures [56]

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Yes, and I'll answer that quickly hopefully. The -- as Bob teed up earlier -- well, you asked about sort of take rate differences and the -- indeed, we do notice the difference in take rates between first party and third party just as a function of the differential nature of the business. These are fundamentally different activities that we're engaging in. But what we can tell you is that both the -- both first party and third party can be done at good margins. The key with first party is that it dramatically increases the size of the addressable market. So while it is different, we expand the size of the market dramatically.

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Bob van Dijk, Naspers Limited - CEO & Executive Director [57]

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It makes perfect sense, Larry. And I think if you take into cloud kitchens, you take that one step further, right? Even higher take rates, even higher addressable markets. So I think that is -- that bodes well for, I think, all our assets that we're actively pushing in that direction. So first of all, thanks, everybody, for joining, and thanks for asking many questions. I really appreciate the level of insight and the thinking that went into your questions. I hope we answered them well. And thanks a lot for your time. And hope we'll speak soon. We're done. Thank you.

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Operator [58]

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Thank you very much, sir. Ladies and gentlemen, that concludes this conference call, and you may now disconnect your lines.