Naspers Limited (OTCPK:NPSNY) Q2 2021 Results Conference Call November 23, 2020 10:00 AM ET
Eoin Ryan – Head, IR
Bob van Dijk – CEO
Basil Sgourdos – CFO
Larry Illg – CEO, Online Food Delivery & Ventures
Charles Searle – CEO, Internet Listed Assets
Martin Scheepbouwer – CEO, Classifieds
Laurent Le Moal – CEO Payments & Fintech
Conference Call Participants
Lisa Yang – Goldman Sachs
Will Packer – Exane BNPP
Ravi Jain – HSBC
Cesar Tiron – Bank of America
John Kim – UBS
Catherine O’Neill – Citi
Good day, ladies and gentlemen, and welcome to the Naspers and Prosus Results Call. All participants are currently in listen-only mode and there will be an opportunity to ask questions later during the conference. [Operator Instructions] Please also note that this event is being recorded.
I would now like to turn the conference over to Mr. Eoin Ryan. Please go ahead.
Thank you, Chris. Hello everyone and welcome to the Naspers and Prosus’s first half 2021 results call. On the call with me today is our CEO, Bob van Dijk; and our CFO, Basil Sgourdos. Bob and Basil will walk you through the operational and financial progress we made during the period, and then we’ll open up the call for questions. During that section of the call, we’ll have the broader management team available to answer questions.
As you know, Prosus is a subsidiary of Naspers and its financial results almost completely account for Naspers’ results. To ensure that shareholders of Prosus and Naspers are provided with the information simultaneously, we’re having one result call, focusing on processes results, but where necessary, we’ll highlight the impact on Naspers.
And with that, I will hand the call over to Bob. Bob?
Bob van Dijk
Thanks Eoin, and thanks everyone for joining the call today. The world continues to grapple with the effects of COVID-19 and many countries are heading back into lockdowns, and we remain in the fear of great uncertainty. And I wanted to start this call with my very best wishes to you wherever you are in the world and my hopes that you and your loved ones are keeping safe and healthy.
So on the call today, Basil and I will take you through the operational and financial progress of the group as we navigate the current operating environment as well as hit some of our key priorities for the coming year.
Ladies and gentlemen, apologies. Mr. Bob van Dijk’s line has disconnected. Please just remain on line. Our apologies for that, sir. You can continue here.
Bob van Dijk
That wasn’t great start. I hope you can hear me now. So, the first half of 2021 was challenging to operate in. And I’m proud of how we navigated the tough time that we saw. So overall, we performed well ahead of the expectations we had back in March when visibility was severely limited. So today, we’re eight months on, and we’re operating with a greater degree of clarity and our business has become fundamentally stronger. This has been the first by an acceleration of usage levels in consumer internet, and second by our business’s scale and our preparation strategies. So, I’m confident this will manage value for our shareholders over time.
So, let’s start on slide 5, by looking at the highlights of the strong period. We adapted very quickly to the new operating environment presented by COVID-19. So, our businesses are naturally positioned to benefit from the shift of consumer time, spend and habits to online, and this was the clear evidence during the period. So, as a group, we delivered a strongest set of results we delivered in quite some time with revenue and trading profit growth accelerating uniquely.
We closed some important transactions as well. We enhanced our market positions in key verticals and classifieds. We increased our exposure to digital remittances in payments and we made a more significant boost into the fast growing edtech space that has been transformed this year.
Importantly, as stock valuations expanded, we remain disciplined in deploying capital. We have roughly $10 billion in gross cash. And we have now built up the flexibility to invest across our segments and in our own stock when there’s an opportunity to create value. Three weeks ago, we’ve announced our intent to do just that and purchased $5 billion in share of Naspers and Prosus. As we continue to trade [indiscernible] on to our net asset value and confident to additionally create substantial value.
Let’s now turn to slide six, which summarizes our strong financial results. Basil will discuss it in more detail shortly. So, I’ll just highlight the more key points. So, group revenue grew 32%, driven both by Tencent and an impressive 51% growth from our e-commerce portfolio, which accelerated from 28% growth in financial year 2020. This acceleration in e-commerce growth was driven by very strong growth across food delivery, etail and ventures, as well as a strong recovery in the classifieds and payment segments in Q2. The trading profit and core headline earnings growth was also strong.
Turning on trading profit, we saw particularly significant improvement from businesses that we have been investing to scale ecosystems over the last few years, most notably in food where losses reduced by almost $100 million and in etail, which recorded its first ever period of profitability.
Turning to slide 7. The chart on the left hand side captures nicely what we have seen play out firsthand in operations and what I will rightly allude it to on this call. And that is a rapid and exponential adoption of online models over a very short period of time in 2020. So, this chart based off ONS and the U.S. Department of Commerce data, and it shows the equivalent of 7 years of gains in share of online retail in just one month, which is really stunning. And as we get close to back end of the year, it’s clear that these terms are continuing and becoming more structural. We’re seeing this in our own etail and food delivery businesses, where our platforms that provide new and vital demand for 3P sellers and for restaurants. For example, in Brazil, iFood became an absolutely essential platform for restaurants and have added 98,000 new restaurants on the base of 160,000 we have signed. So, seeing this strength play out in classifieds, online payments and also in Edtech, our investments have become significantly more valuable this year.
So, let’s move to our operating segments, starting with classifieds on slide 8. So, the OLX group had an eventful year and it’s making substantial progress. Over the last few months, we’ve completed the merger of OfferUp and letgo in U.S., and the merger of the dubizzle with EMPG in the Middle East. A few weeks ago, we also completed the acquisition of the leading real estate vertical in Brazil, Grupo Zap, and this is representing a major expansion into the real estate vertical, and it’s giving us access to 70% of online agents in Brazil.
We continue to focus on strengthening our presence in key verticals and rolling our new convenience models such as pay and ship, which already has good traction in Eastern Europe and another markets.
In Russia, retail has gone from strength-to-strength as a multi-vertical leader. This year, we ramped up marketing substantially to guide more share gains and enabled the business to grow. Within Europe, Poland is our largest market, and again, the focus here is on full virtualization into jobs, real estate, autos and general guidestones. The creation of OLX autos brings together our auto classifieds platforms, its transaction capabilities from the Frontier Car Group which we acquired last year. So, you should expect us to continue to expand OLX ecosystem to get closer to the transaction, to our partners and to end customers as the business develops into a highly profitable market leader.
So, in terms of growth, our food businesses had a breakout here as we show on slide 9. What we’ve seen 2020 confirmed our view that food delivery represents a massive opportunity, and overall growth has accelerated this year.
In the period our food delivery segment grew GMV by 69%, while trading loss improved 32% to 178 million — $187 million. Growth is driven by increased customer loyalty, through increased frequency of mobile orders, and by restaurant loyalty through reduced churn. Outside of our investments in Delivery Hero, which reports its results separately, our businesses have been impacted in very different ways. So, in Brazil, iFood’s results have been outstanding. So, iFood grew orders by an impressive 111% and revenue by more than 200%. Importantly, the iFood platform has provided the opportunity for many businesses to continue to operate during the pandemic. It’s provided them with much needed demand when the alternatives closed their doors.
For the first six months of the year, iFood added [Technical Difficulty] new restaurants on to the platform off the base of 160,000, which is great. It is now processing 44 million orders per month in Brazil.
The 1P delivery business has performed strongly and has increased its share of total orders to nearly 35%. This growth has translated into an almost $100 million improvement in profitability, driven by continued strong order growth, more effective marketing and more efficient driver routing.
iFood acquired SiteMercado in September, which is an online grocery platform in Brazil. This will help iFood to expand its product assortment and offer customers greater convenience.
Swiggy India brand was negatively impacted by severe lockdowns, which materially impacted the supply of restaurants from the platform. So, while the restrictions hit revenue, the management has used the opportunity to drive efficiency and to position itself for future growth, where trading losses improved by a meaningful 40%. The core of Swiggy business remains strong and encouragingly in recent months, Swiggy has been on a steady recovery. And at the end of September month — calendar month September, business was operating at approximately 90% restaurant capacity and at 80% to 85% of pre-COVID-19 order levels.
So, let me take you to slide 10, to payments and fintech. Overall, PayU reported strong results and grew revenue by 29% year-on-year, and that’s despite a very sharp start for the period in India due to the pandemic. So, overall revenue and total actually accelerated year-over-year, driven by a strong performance in Europe and in Latin America. Trading profit was flat all the year, and this is because we increase our stake and PaySense in December 2020, and with that came increased share of the business’s losses. This offset the growth and profitability from the core PSP business.
Regionally, our business in Europe and LatAm grew payment volumes by more than 50% as more transactions shifted online and local regulation supported digital purchases. This was particularly prevalent in Poland, Romania, Turkey, and in Colombia. India, which is the largest market was initially negatively impacted by our lower transaction in the travel and hospitality space. So, last year, travel generated 17% of TPV, it is roughly 3% this year. As a result, we only saw 5% year-on-year TPV growth in India in Q1. However, as lockdown regulations eased and new sectors like financial services and ecommerce saw increased rates of digital payment adoption, TPV growth in India bounced back to 43% in Q2 in local currency. This increased diversity and category will benefit us in the long-term, in particular when travel and hospitality recovers. In total, we have mentioned that Turkey was the fastest growing market after strengthening operations with the acquisition of iyzico last year.
In August, we also invested further $53 million into Remitly, which is our investment in cross-border remittances. During the period, Remitly saw a 200% increase in new customers, as consumers need to unlock remittances instead of offline.
In credit, during the period, we fared back the business in India as the regulator initially imposed the loan moratorium. Given the relatively small size of book, credit losses as a result of COVID-19 were not significant. We have now expanded our product offering, and we are optimistic about the credit opportunity in a more normalized environment.
If I can take you to slide 11, I think it’s worthwhile to spend some time on our Edtech portfolio. It’s another area where we’ve been early investors and an area which is growing significantly in value. So, including the recent investment in Skillsoft, which is due to close in the New Year, we invested $1.1 billion in trading businesses and we’re already seeing excellent results. So, this factor has strong momentum and our enthusiasm has increased this year. So, COVID-19 is really providing a generational tailwind for the segment.
In the last six months, a considerable amount has been brought forth and broader use of new tech emerged. The amount of progress in a short period of time is very stunning.
In August, we also had access in Eruditus Executive Education. It’s a company that offers postgraduate education by partnering with over 30 universities, including the likes of Harvard, MIT and Columbia. We’ve already launched 100 courses in 80 countries. We’ve now committed $500 million into Skillsoft, which is the world’s leading corporate digital learning company. We have 35 million learners across more than 70% of Fortune 1000 companies. We’ll expand users and the revenue and profit, once acquisition of Skillsoft by Churchill closes, and represents a very aggressive way to expand its leadership position by grabbing full consolidation in the industry.
On the right side of the slide, you can see the momentum for other investments. Udemy for example, saw more than 400% growth in enrollments and BYJU’s saw 180% growth in students on top very high growth rates over the last few years. Throughout pandemic, it’s becoming increasingly clear to us that all areas of schooling and professional life can and will be augmented by edtech as student dynamically [Technical Difficulty]. We’re really pleased with the progress in edtech. In a short period of time, we’ve learned a lot and have created a significant amount of value, and with the scales of investment edtech is on track to become a next segment.
Let’s now go to slide 12 for a look at how we’ve deployed capital so far this year, and our general priorities for capital allocation. To simply, we look to investment in growth assets operating in growth markets, where we can make a return for our investors far in excess of a cost of capital. And this philosophy drives our decision-making and applies to full potential investments, big or small. Our ambition and intent is to deploy capital across each of our core segments to enable and to scale profitably for years in position. In each of these segments we have already created substantially volume more than doubling our investments.
In the first half of financial year ’21, we invested close to $600 million, mainly classifieds, in payments and in edtech. There are a few additional deals still left to close and the M&A pipeline remains strong. We continue to stay discipline, which is a key to good returns and also to our ongoing ability to maintain impairment threats below concern. So, when valuations are high globally, we can take advantage of our financial flexibility to provide more value for shareholders to investing in ourselves. This is why we recently announced a $5 billion share repurchase program. The details are on slide 13.
So Prosus will buy back and cancel up to $1.4 billion worth of its own shares and Prosus will buy up to $3.6 billion shares in Naspers. These shares will be held in treasury by Naspers and excluded from Naspers per share financial metrics. And we see this as an excellent opportunity to create value for our shareholders. And buying back shares is an investment in a group to turn strong internet portfolio. It’s a good use of capital, given full market valuations of consumer tech and our sizable consolidated discount to net asset value.
So, we’re lucky to be in a position now where we can comfortably invest in our business and in our stock. I do believe this will generate a strong return. And I’m very pleased to coming into this position. It really reflects the evolution of the group and is made possible by continued operational improvements and the increased financial flexibility that Basil and the team have been working on for years.
So, we remain committed to reducing the consolidated discount and work is ongoing to do this. The work we are doing, we are seeing an impact and it maintains our long-term focus to invest and it will give good returns for our shareholders. Actually, that means they need to benefit Prosus’ and Naspers shareholders and limit friction cost for shareholders.
So, the buyback underscores our commitment to building digitalized value across the group of the long-term as we outlined on slide 14. Over the course of the past 10 years we’ve invested $13 billion across our businesses and portfolio is now worth more than 3 times that. We’ve worked hard to crystallize that value for shareholders over time. So, you can see we on the right have unlocked over $20 billion for shareholders. There remains a significant opportunity for us to create even more value.
You will see from the results today that our e-commerce business has continued to make exceptional progress with 51% overall revenue growth and a significant improvement in profitability and cash generation. It is essential to ensure that this is value is reflected in our share price, which today clearly is not the case. And we’re continuing to take sensible financial and structural steps where possible, such as share buyback, we can increasingly unlock this value.
So, with that, I’ll turn the call over to Basil. Basil, go ahead please.
Thank you, Bob. Hello, everyone and thanks for taking the time to join us today. I hope you’re all keeping well and staying healthy.
In a time of uncertainty and challenge, I’m very pleased with the strong performance we’ve seen. As Bob mentioned, we’ve adapted very well, and the group is operating with a great deal, more clarity than we had during the first phase of the pandemic. While forward visibility remains challenging with rising COVID-19 cases in some of our markets and the uncertainty of the longer term impact of the pandemic, I believe we emerged as a stronger company. The results are the strongest possible endorsement of the significant long-term value creation potential of the high-growth markets, business models and segments we’re invested in, a very important takeaway for you, our shareholders.
Before I dive in, as always, a quick reminder and a few housekeeping items. Both Naspers and Prosus have reported their results today. Naspers results reflect that of Prosus almost entirely. For that reason, we’ll be focusing on Prosus numbers.
We report revenue and trading profit on an economic interest basis, meaning they include our proportional share of the results of our associates and joint ventures. The results provide associates, Tencent, Mail.ru, Delivery Hero, Swiggy and others are reported on a three-month lag basis. It is particularly important when considering trends due to COVID-19. Importantly, free cash flow is a consolidate number and for associates and joint ventures, only taxes and dividends they pay us. And finally, as I look through the deck, I will focus on local currency growth, excluding the impact of M&A.
So, let’s keep going and if you could please turn to slide 16. Overall, we remained well and ended the first half yet with a strong financial performance and improvement across all financial metrics. Revenue for the period was $12.7 billion, growing 32% year-on-year. E-commerce revenues grew even faster at 51% year-on-year, supported by food delivery, etail and payments & fintech and our edtech businesses.
Trading profit grew 43%, driven by improved scale and unit economics in food delivery and by our etail business. Our share of Tencent’s revenue and trading profit grew 28% and 32% respectively. This reflects China’s early recovery from the pandemic and the strength and resilience of Tencent’s business model. We remain very excited about the Company’s future prospects.
Core headline earnings were $2.2 billion, growing 29% year-over-year, driven by improved profitability from our e-commerce units and Tencent. Finally, free cash flow improved meaningfully year-over-year with the group generating $370 million in free cash flow, which is a substantial improvement. We ended the period with a strong balance sheet with almost $10 billion in gross cash and net cash of approximately $4.5 billion. We have the financial flexibility to both invest across our asset portfolio and in our stock.
So, turning to Slide 17, you’ll see that e-commerce revenue grew significantly. Growth accelerated to 23 percentage points year-on-year. Food delivery etail and the quick payments business all did well. They executed well in difficult times to capture the opportunity created by the acceleration in consumer internet growth, which Bob covered well earlier.
Classifieds revenue declined as its business model is most affected by the pandemic. Our revenues declined on par with past years in the first quarter. However, as restrictions were relaxed in many of our markets by the second quarter, we continued to grow comfortably ahead of our peers.
If you turn to slide 18, you’ll see revenue growth flowed nicely to the bottom line, reflecting improving unit economics with scale. Trading losses improved by 26% from a loss of $416 million to a loss of $316 million, and $100 million improvement. That’s a healthy 10 percentage-point gain in trading margin. Food delivery was the standout for the period, with margins improving 61%, benefiting from scale and lower customer acquisition costs.
Etail reported a trading profit of $20 million compared to a $50 million loss in the prior period, which is just outstanding. It’s incredible to see how quickly the team organized that set gate for dramatic increase in demand for services, and also taken considerable action to support government pandemic efforts in their home markets as well as naming new third party sellers looking for a way to access customers online. COVID-19 negatively impacted classifieds trading profit. However, we’ve seen a good rise in profitability in recent months. In payments, we stepped up investment in longer term growth initiatives.
So, let’s turn to the financial performance of our segments, starting with classifieds on slide 19. Our classifieds segment was the most impacted by lockdown restrictions. The first quarter of the period bore the full grant in key markets but the business recovered strongly and steadily in the second quarter as lockdown restrictions were relaxed. Most recently, however, as COVID-19 cases have risen in some of the classifieds markets, we remain somewhat cautious on our outlook.
In our traditional classified business, revenues grew 4% for the six months. Classified revenues excluding transaction revenues dropped 8% in the first quarter, as traffic volume struck when markets went into lockdown. We supported our partners with targeted initiatives like extended listing duration, and discounted listing fee to help them through the crisis. These initiatives had a short-term negative impact on revenues and profits. We also invested behind innovation and find new ways for people to create on our platforms. We’ve invested in new services like payment, shipping capabilities, virtual real estate and car inspections, we’re also investing in enhancing the user experience and engagement.
The second quarter saw a steady recovery in revenue as support measures were phased out. Core classifieds revenue grew 16% in the second quarter. Avito performed well in a difficult environment, growing 10% year-on-year in the first half. Following the revenue decline of 4% in the first quarter, the business grew strongly by 23% in the second quarter. We are using the opportunity to invest incrementally to gain market share, particularly in key verticals. This had lower margins eventually but enables Avito to drive liquid volumes of user and cash from activity and gain market share. We’ll continue with this as long as it delivers sustainable long-term gains.
Poland, the Ukraine and Romania continued to gain momentum, building on a healthy ecosystem. Despite the impact of COVID-19, trading margins remained strong at 44%. Poland has also recovered well and continues to make good progress. We see opportunity to increase investments in our key verticals and capabilities, which is just beginning to show real traction. You will see a pick-up in the investment in the second half of the year.
OLX result was hard hit by the pandemic restrictions and consequently recorded a revenue decline of 5%. However, as Bob mentioned earlier, growth has now resumed, margins have improved to 20%. The real estate acquisition of Grupo Zap places us firmly in the number one spot in the underpenetrated online real estate classifieds segment.
Turning now to our transaction business, which was significantly hit hard by the pandemic. During lockdown restrictions in the first quarter, the majority of our inspection and retail transaction centers closed, resulting in 52% drop in the first quarter revenue. As lockdown restrictions lifted, transaction centers began to open and returned towards pre-COVID levels. The second quarter ended with approximately 90% of the transaction centers open again and revenue returning to higher levels. Losses for the transaction centers increased in aggregate during the period, reflecting our acquisition of controlling stake in Frontier Car Group. This means that we now include 100% of the losses from Frontier Car Group, compared to only 36% last year.
I’ve called out a couple of times on the slide that as you think about the remainder of the year, you will see an increase in our marketing and other investments. This is consistent with prior year trends, but it’s also doing by investments to build out our ecosystem. With the actions we’re taking in the classifieds segment and encouraging trends we are seeing, we remain confident that our business will continue to do well over the long term.
So, moving to food delivery on slide 20. While the impact of the pandemic differed by region, the segment was a real bright spot in the period, buoyed by our response of consumer trends that we believe will significantly benefit the industry long term. We provided [indiscernible] to tens of thousands of restaurants who are able to keep their doors open. It was hard to keep our employees and delivery partners safe, providing additional employment opportunities at a critical time for so many. For the period, our food delivery segment doubled revenue to $610 million and reduced losses by almost a $100 million to $187 million, an exceptional performance.
iFood continued the momentum. It has brought us prior to the pandemic with order frequency, order value and the key KPIs hitting record levels. This drove impressive revenue growth of 234%. Our decision to invest and build differentiated capabilities is at the core of the strong performance.
Delivery Hero also continued to execute incredibly well. Over six months ended 30 June, 2020, order volumes climbed 93% to $519 million, with revenues growing 87% year-over-year. We are also encouraged by Delivery Hero’s continued investment to build on the broader service offering. Previous performance was different as we have previously told you. During the crisis food delivery in India was hit hard by the lockdown. Since then, however, momentum picked and the trends are positive. The business has steadily recovered, and is nearly pre-COVID levels. As Swiggy is reported on the three months lag, we expect the impact of COVID to carry through into the second half of the year. Our shared service revenues grew 17% over the period. Trading loss contribution for the period improved meaningfully.
Management used to reinstate at the low activity creation to look at the entire business and take action that positions them well for the future and to drive growth. Looking forward, it’s important to note that as restrictions ease and in-restaurant dining normalizes, it will be difficult for the food segment to attain the rates of growth we have seen over the past six months. So, I expect revenue to continue to grow strongly, but pace of growth will decelerate somewhat. Consumer acquisition investments also increased as we continue to expand our ecosystem.
Moving on to payments and fintech on slide 21. The segment performance like food delivery differed by region, but was on balance another bright spot. Once again, we mobilized fast to capture an acceleration of consumer trend and manage to offset the sizable drop in verticals such as travel that has been hard hit by the pandemic.
Revenues grew 29% to $252 million, driven by transaction payment value growth of 37% with over 700 million transactions processed. Europe and Latin America making up our GPO business performed very well. Business grew strongly throughout the pandemic with revenue strongly up in the first quarter and remaining robust at 44% in the second quarter. Despite the lifting of lockdown restrictions in many markets, I expect growth rates to taper off in the second half but will remain strong.
In India, though we are number one in terms of online payments volume, we had a tough start to the year. Revenue fell 10% in the first quarter as activity levels dropped, particularly in travel. As restrictions eased and e-commerce in the resumed its rapid growth, the business recovered sharply and grew revenue 21% year-on-year in the second quarter. Overall, the core payments business improved margins by 7%. As you know, in recent years, we’ve been focused on broadening our fintech ecosystem in core markets such as India. In the full year 2020, we safeguard our investments to our controlling stake in PaySense, a fast growing online consumer lending business. This is what drove the larger year-on-year losses for the segment.
As you would expect, during the last six months, we’ve been cautious following the pandemic’s negative impact on the Indian economy and have held back on new loans. We’ll await more substantial signs of recovery before we again drive growth as we move forward.
Turning now to slide 22 where we unpack the increased contribution to central cash flows from our profitable e-commerce businesses. This is an important slide and demonstrates the cash flow generative ability of the group. Over 60% of our e-commerce revenue now comes from profitable businesses. This compares to 54% last year. Consolidated trading profit from these businesses increased 20% year-over-year, driven by etail and payments & fintech. This was partially offset by a lower contribution from classifieds, due to the effects of the pandemic. We fixed that direct to rapidly recover, boosting overall profit growth. Our share of Tencent’s dividend grew 21% to a sizeable $458 million. This continues to be a significant underpin of our increased financial flexibility.
Now, let’s dig deeper into the cash flows on slide 23. Free cash flow for the six months was an inflow of $370 million, a considerable improvement compared to the $14 million in the prior year. The progress is driven by e-commerce due to lower losses from food delivery, excellent working capital management, particularly in our etail segment and $81 million increase in Tencent delivered. Unlike last year, this year, we did not have one time transaction costs for the process listing.
Moving to the balance sheet on slide 24. Over the years, the group has worked hard to increase financial flexibility through both the portfolio of e-commerce assets with significant cash flow generating capabilities. We increased leverage and the average interest rate of our debt has declined steadily. And we remain good allocators of capital. Our balance sheet remains healthy with $4.5 billion of net cash and undrawn $2.5 billion revolver and the ability to raise additional debt. We remain committed to the investment grade rating. This increased financial flexibility allows us to execute on M&A, to enhance our core segments and invest in our stock.
Before I close, I will touch on the buyback we will be launching shortly. Bob has covered this extensively, but I wanted to cover some of the accounting aspects. Firstly, in the books of Prosus. The Prosus shares that are booked will be cancelled. Prosus with account with the Naspers’ purchased shares as an investment. Investment will be mark-to-market at every reporting period, and gains and losses will be taken through other comprehensive income in the Prosus results.
Secondly for Naspers, shares purchased by Prosus will sit in treasury shares. Naspers will execute these shares owned by Prosus in earnings per share ratios. We will execute this program in an optimal manner, focusing on creating value for you, our shareholders.
I also want to reiterate what Bob said. This repurchase program should not be used in isolation, and is not the solution to reducing the discount. Management and the Board remain committed to reducing consolidated discount through a variety of means, and we will discuss them with you in more detail as they come.
Finally, just a quick housekeeping item. As you know, we published a lot more detail on our website to help you understand the operations and to model the numbers. We have for the first time added an extra sheet. I know that many of you have asked for this in the past, and I hope you find it useful.
So, in closing, I’m very pleased with our results and our position as we enter the second half of the year. This has clearly been a very challenging time. As a group, we have met these challenges head on and have exceeded our expectations. As I said, we’re operating today with a great deal, more certainty than we had in March. We will continue on as we have operating with the close eye on our business and we need to take strategic action when necessary. The results are the strongest possible endorsement of the significant long-term value-creation potential of the high growth markets, business models and segments where we invested in. This is a very important takeaway for you as shareholders.
With that, I’ll hand the call back over to Bob to close this all.
Bob van Dijk
Before we have your questions, I’d like to summarize the key priorities when we look towards 2021 and beyond. So, that’s slide 26. So first, the fundamentals of our business are very strong and each business is actually well-positioned to benefit from the acceleration of secular trends driving the internet space.
The second is around that we remain focused on driving profitability and cash generation in our more-established e-commerce segments, while we are investing for growth in delivery and classified transactions, credit and edtech.
Third, our financial flexibility has improved and is enabling investments across our operations and our stock.
Fourth, we will continue to retool and improve the competitiveness of our platform by investing in product and technology and talent and by reinforcing our AI capabilities.
And fifth, there is significant amount of opportunity to create value through the growth of our business and by narrowing the discount to our net asset value, and we remain committed to both.
So with that, I want to thank you for your time so far, and let’s open the line for questions.
[Operator Instructions] Our first question is from Lisa Yang of Goldman Sachs.
I have three, if possible. The first one is on food delivery, where clearly the performance has been really impressive in H1. And you mentioned the improvement in profitability was driven by better operating leverage and lower marketing costs. So, I’m just wondering, like how you think that profitability — improving profitability trend is sustainable especially as the environment normalizes into H2? And I know you don’t give guidance, but do you think we’re now in a position to potentially break even sooner in the core food delivery business, let’s say on the one to two year view? That’s the first question.
The second one is eMAG. I mean, the business has turned profitable, as you said, and significant benefit from COVID. So just given your comments about tech valuations being high, I’m just wondering whether you could take advantage of that situation, and maybe crystallize evaluating of eMAG in the short-term? That’s a second one.
And third question is actually on the buyback. I mean, my understanding is that since I’ve seen a bit of a change in tone regarding the buyback, so, I’m just wondering, do you see the recent buyback announcement more as a one-off, or do you think it could be a more recurring part of your future capital allocation policy? And how would you rank that versus, for instance, deploying cash for M&A, or cash to invest organically in the future? Thank you very much.
Bob van Dijk
Thanks, Lisa. Thanks for your three questions. On the first one, maybe I’ll start and I’ll hand over to Larry to add color from more facility to operation. I can also speak briefly to eMAG. On buybacks, I will start and if Basil wants to continue — to chime in if feels so. So, on food delivery, indeed we’ve seen results improve. And it has helped profitability because of, as you say, leverage and these marketing costs. What is we will sustain, I think based on what I have seen so far, I think a lot of it will sustain. Because we’ve seen that customer groups who previously haven’t tried food delivery are now driving, or people have new in food delivery for different occasions that they like the. And the net promoter scores actually across the businesses are extremely strong. People are therefore having a great experience when they’re using these products. And if we look under the hood, I don’t think a — there’s no reason to believe why the sort of trial and sort of usage in different occasions is something that would go away completely. So, it’s hard to forecast exactly what the world will look like, but it looks that a big part of the shift that we have seen as a structural shift that we expect will actually sustain. But, maybe Larry, if you want to comment based on your observations.
Yes. I think, you covered most of it, Bob. The only point that I would add is, we have a pretty good lens on the consumer cohorts. And so, what we can see — and we are far enough into the pandemic, where many of the pandemic age cohorts are more than six months old. So, we can see how they’re performing versus historical cohorts. And this is speaking in very broad brushes across over 40 markets that we observe. Broadly speaking, the cohorts looked as good or better as the cohorts sort of pre-COVID. So, it speaks to what Bob mentioned, just the quality of users that have been brought in, remains strong. And if anything is giving us an advanced view on the future of the sector, and further growth opportunities in adjacent categories. So, it’s — I think, the consumer quality is quite high.
Bob van Dijk
And Lisa, the second part of your question, like, does this change, sort of our views on breakeven? Well, we don’t give guidance but we’ve seen in detail the profitability part of businesses do significantly improve based on what happened during COVID. It also has, frankly, given us confidence to invest further. So, I think, it’s been generally a very positive story.
And if I move on to eMAG, eMAG is an outstanding. And it has very clear user position in Romania and a number of other Eastern European countries, and it has excellent growth as well. And actually, one of the things that really excited me about eMAG is that how they build that initial position in etail, and as far as they — as a first party etailer but have built a great ecosystem where they empower other sellers. They’ve also really improved their offering by going into last mile logistics, they’re going into food delivery, and they are creating a great loyalty program. So, I would say, even though the numbers are incredibly impressive, I would say, the best of eMAG is yet to come. And there’s really clear strategic run way and have no current plans to miss, because I think actually it is a tremendous growth there from here as well.
Then, on the buyback, I think your question was, is this — should we see it as a one-off or continued. I think, the most important thing on the buyback is, the rationale behind it, right? The rationale is that we have the financial advancing to continue investing in our core assets, but also make use of this phenomenon where I think we — our efforts are based presently on [indiscernible]. So that in itself — that philosophy will hold for the future. The position we will be in, it’s hard to forecast the position. If we have the capital to invest in our business and to buy back shares at a good discount to net asset value, that will make sense at point in time. Basil, do you want to add to that?
I think, you hit the nail on the head. We’ve got $5 billion to deploy, and that’s going to take some time. Once we have done that, we can see where we’re at and then we’ll make the capital allocation decisions accordingly. The focus now is on growing the business and improving financial flexibility and gaining ourselves a room to be able to deploy across multiple capital allocation opportunities. So, that’s what we’re focused on.
Okay. That’s really helpful. Thank you.
Thank you. The next question is from Will Packer of Exane BNPP. Please proceed.
Hi, there. Thanks a lot of for taking my questions. I have a couple of topics I wanted to cover. Firstly, there’s been a lots of news flow on Chinese internet regulation, but it was one particular aspect I hope you could comment on. Some investors are concerned on the comments in the press that VIE structures maybe is focused. Are you concerned, or in fact, could it be a good thing that these structures have all regulated? And then, the second topic I wanted to go into was around online car dealing. We see lots of capital in the U.S., UK and elsewhere invested in the online car deal opportunity. Frontier Car Group is very strong positioned in C2B in many interesting markets and the nascent B2C position. How aggressively are you planning to roll out your B2C online car dealing offering? And what are the challenges in the markets you operate in, because your sort of geographic exposures are a little bit different? Thank you.
Bob van Dijk
Yes. Thanks for your questions, Will. I think [Technical difficulty]
Our apologies. Mr. Bob van Dijk’s line has dropped off again. We will be getting him back shortly.
I think, Charles, do you want to take the question on VIE?
I can certainly do. Is Bob back? Okay. Let me take that whilst Bob returns. Thanks very much for your question. As you rightly pointed out, there has been a lot of contrary in the press recently in relation, particularly in the context of the antitrust draft that came off. I think, maybe just to comment on that, I think, there’s been somewhat of a misunderstanding in relation to many of these press reports. The inclusion of VIE under the FEMA regulations that that came up, was really view this from a avoidance of draft perspective. Just to say that these new regarding antitrust sort of include all internet companies, and within that grouping, of course, should be those internet companies that operate under VIE structures.
So, there was some reports and some press reports that VIE had to obtain special approvals and the like. And it’s really nothing of the kind. That is rather erroneous reporting in that respect. And so far the VIE is concerned overall, I mean, as you are well aware, VIEs have been around for a long time, and it’s over 20 years right now. They’re very widely used and they have worked well during that time. It’s fully understood by the Chinese authorities. And as you know, anytime there is a listing that is required, as an example, the approvals of the authorities and the Chinese regulatory authorities are required for that. So, they’ve worked well during this time, and we see no reason for this to change.
Is Bob back?
Bob van Dijk
Yes. I’m back. And so maybe, could you mind speaking to the online car dealer opportunity and Frontier Car Group business?
Yes. Thank you for your question, Will. So, you’re right that we essentially, at both the C2B, we buy cars from consumers, sell to dealers; and B2C, we facilitate offloading dealer inventory towards consumers already under our umbrella, and both have their merits. What we’re doing nowadays is on top of that building, what’s we then call a C2B2C business where we manage the entire value chain from a consumer willing to sell a car to us and then after that refurbishment, we sell the car on to another consumer, preferably with suite of supporting products like finance, insurance, transfer, warranty, and so on.
And the reason we do that is it that most consumers want that fundamentally want more transparency, trust and some convenience in the process. And it gives us access to new revenue, profit pools. And yes, this part of the business is still fairly nascent. It’s most in Chile, but building out works to more scalable markets like India.
With regards to the main challenges there, the mostly execution, and there’s no doubt that this is something consumers want, strong, nearer companies in form of [indiscernible] to show the business model has lots of runway. But there’s a number of things need to do — to build that the infrastructure, both in software and in on the ground presence. And that takes some time and that’s why we’re doing that diligently and to make sure we allocate capital efficiently.
The next question is from Ravi Jain of HSBC.
I have two quick ones. The first one is just overall when I look at the capital allocation and the pace of investments, nowadays the size of your NAV is probably north of $250 billion. And when I look at the total investments, on an average in a year is maybe somewhere between $2 billion to $3 billion. Do you think, it makes sense or would you consider maybe increasing the pace of these investments, maybe via more transactions or higher ticket to kind of maybe move the needle more every year?
And the second one is a follow-up to an earlier question, where if the valuation is pretty attractive today, generally in the public markets, and it’s clearly not reflected in your stock, do you consider maybe even listing assets rather than selling, but listing it, like for example, eMAG Avito, or potentially even OLX? Thank you.
Bob van Dijk
Yes. Thanks, Ravi. I’ll give you an answer, and if Basil add to that, more than welcome. So, when it comes to increasing the pace of investment, it’s really important to fix the fact there, and we have periods of time where we’ve invested more and we have periods of times where we’ve invested less. I think, it’s actually essential part of when we evaluate investments that we think they have to make strategic sense and we want to actually make ensure we can deliver value to shareholders. And that’s depending on what you then get into the pipeline that is really what decides whether we invest or no.
So, I think, if you — let’s say, we want to substantially increase the pace of investment, we cannot let go our strategic framework. And we certainly see — that is something that we understand we even create synergies, and then we need to deliver business for our shareholders. Because otherwise, we are investing and creating and creating business that we don’t want to create.
So, could you see us increase there? Yes, if we run into the right opportunities that with the great return profiles that enhance business we have. But we’re not going to spend more money for the sake of spending money faster. I think, that [Technical Difficulty] in the recent past, and they’re probably not necessarily looking back with the great sense of pride.
And the second question on this in essence, I think, that’s a fair point. We have actually over the years listed many efforts of these investments. And I think that is definitely sort of narrowing our quiver that we will deploy when we think the time is right. But again, I think, the most important thing for us is we do that when we want to crystallize value and we think that’s the best option for certain business, not to react to in the market. So, it would be my view?
Basil do you want to add?
Only one thing, Bob. So, we also have some fantastic companies and some really big markets. And there’s an opportunity to plug on too what those businesses do and build the ecosystems. And we’ve demonstrated that we can build great businesses that grow fast and become profitable, so. And we should be very comfortable deploying capital organically. And given that we’re still in the very early stages of the segments we’re in and the sizable markets we’re in, those are going to create meaningful value. Bob told you earlier, we’ve tripled our capital investment from $13 billion to $30 billion. There is no reason why we can’t keep doing that, and with organic investments too.
Thank you, sir . The next question is from Cesar Tiron of Bank of America.
I have three questions. Sorry about that. The first one would be on, if you can give some examples of operational changes you’ve made during COVID. So, we all have seen the tailwinds or the headwinds faced by these different businesses. But just wanted to ask if there’s any specific changes you have made to these businesses over the past six months, which would allow them to set them up for faster growth when these COVID tailwinds end, or for classifieds maybe to allow them for a higher profitability when the headwinds end?
And then, I think that the next question would be on online education. So, you’ve been investing quite significantly in the past year and increased a little bit your disclosure on these assets? So, there my question would be to understand what prevents you to make it officially one of your verticals and if there’s scope for consolidations among these assets? And then, finally, last question on iFood, I think, this is the second time in a row where revenue growth was ahead of GMV. So, I suspect that last time, this is really driven by subsidies which are decreasing. Can you please discuss the dynamics there and whether there is scope for the subsidies to decrease without necessarily impacting GMV growth going forward? Thank you so much.
Bob van Dijk
Thanks Cesar. And maybe I can start on the last one, because there are to be simple answer. Maybe Larry, if you can talk maybe about consolidation in FX. And then, I think there are several examples of changes to the business and that anybody who wants to chime in can do so. I have certain issues on. But, I think, the main reason for the revenue growing faster than GMV in iFood is actually the shift from 2P to 1P, that’s really the story there. As you see, the one, 1P percentage grow of cars quickly and that drives revenue much, much faster than it GMV. It’s actually the fact you see there. But maybe Larry, do you want to say a little bit about consolidation in assets? I know you speak ineloquently about that.
Yes. I can’t vouch for the eloquence of the answer. I think, it would be pretty straightforward though. I think with edtech, — and it’s a multifaceted sector. So, I don’t want to paint with too broad of a brush. But generically speaking, we have a lot of companies that are really coming of age as a result of the pandemic and bringing demand forward by years. And I think that gets a lot of the companies and investors in the space excited about what the future holds. And as part of that, I think consolidation is just natural. And we’re seeing more and more investment activity alongside the consumer activity in the last couple of months. And as is true of most sectors, consolidation will be pursued when it makes sense. Yes, and certainly see more activity there.
Bob van Dijk
Yes. And the other part of the question there on [Technical Difficulty] what prevents us from [Technical Difficulty]. I think, in terms of the investment thesis, it’s become clear, we’re deploying more capital over time, I think, we will transition into a segment. We’re working through the details on when that is the right time. But, I think that’s actually the direction of travel.
And on specific examples of changes in the market, I mean, clearly there is quite a few examples that come to my mind are for example, I mean Martin maybe can talk to virtual inspections of cars. I think, in food delivery, I think, we’ve seen a lot more partnerships with restaurants, integration of restaurant systems and we are the only customer, the main source of customers of restaurants. If you create a more sort of natural partnership that is actually further integration, that Martin, Larry, Laurent if you do chime in, how we see structural change and the business that will help you going forward?
Yes. Can I start, Bob. So, thank you for pointing that out. And indeed there’s been a number of adjustments, I will say to product priorities during COVID. Those all geared towards meeting new or change customer requirements quite obviously. So, people could not leave their homes. So, we made sure they could order on OLX or detail from the couch and organize for last mile delivery where that was not yet possible, such as in Russia. We also allow people to virtually see houses they might want to buy or rent. So, software to enable that was basically either created or given more priority.
Bob and Basel had referred to the impact of social distancing on the ability to operate physical car inspection centers, at the tough very few were still allowed to be open. Now they’re back up to a large degree, but capacity is still somewhat limited due to all the health and safety measures. That’s why we have put particular emphasis on alternative ways to evaluate the value and the condition of cars we purchased to home inspectors, to self inspection, and so on. And I think that’s positive. I think ultimately, anything that makes the business more efficient and more customer-centric is a good thing in the long run. And in the meantime, we were also prudent on hiring, on marketing and so on, which gave us some profitability benefits in the short run. But, I suspect Basil already alluded to reverse that when — if and when opportunities arise to investigate behind growth opportunities. But, yes, the impact of accelerated innovation and customer simplicity I think is a positive one already now and also in future.
And I guess, I’m happy to go next quickly on food. So, I think, in general, our teams responded very quickly to address safety and business sustainability. That was early stages of pandemic. And that allowed them to shift, once they sort of got a read of the landscape to shift towards the operational transformation. And, a handful of examples that I can call out quickly, and some examples that would mean moving more quickly towards online transactions, removing cash increasingly from the transactions, the opening up of new kinds of order engagement. So, we saw our businesses move towards restaurant takeout versus formal delivery in some cases. And the last mile point out is, you have these businesses, especially as they skew towards first party that have an unbelievable reach and driver network. And you can use that infrastructure and those consumer relationships in high NPS to open up new sectors that might be in demand as a result of the pandemic. I think the one that’s most prominent in most folks’ minds would be things like grocery. So, again, get the situation under control, and then leverage that reach and operational infrastructure to do new things.
Bob van Dijk
Well, I think grocery is a great example, Larry. But, maybe in the interest of time, those are good examples, and I suggest we move on to give some others chance to questions up.
Thank you, sir. The next question is from John Kim of UBS.
Two questions, please. Last time around the listing of Prosus, call it a year plus ago, I think, the team intimated that there were certain restructurings or optimizations that team Prosus wanted to engage in before potentially moving down, but between — below a 70% ownership level for Naspers. Question on the progress of that kind of restructuring or reorganization, is that largely done? And then, if I could ask Larry and Bob to speak to extension into grocery, how we should think about that? Do you see it as a logical extension of the retail platform, or are the margins too competitive? Thanks.
Bob van Dijk
Thanks John for both questions. I think, Basil, I’ll ask you to talk a little bit around the sort of the follow-on steps on Prosus separation. A lot of you’re waiting hours on that. On grocery, I think, we talk about it for an hour, and Larry will say more sensible things. But, I think, if you have the infrastructure to deliver in urban areas from many, many locations in a time critical way with a half an hour delivery window that is an unbelievable asset to others into further user needs. That will be my short answer to how I think about grocery. Larry, maybe you want to add?
Yes. I think it’s — John a good question in extension of retail, I think starting point matters. So, it’s — obviously from a top-down perspective, grocery is interesting, but really the bottoms-up view matters. Bob, to your point, what’s our starting point? Do we just have consumer reach? Do we have a central warehouse? Do we have a driver network? And depending on our starting point and also what the consumer needs are, different models might make sense that are more convenience model, a marketplace, central warehouse kind of model. So, I think, from — at least from my perspective, we look at it in both ways. Top-down is compelling in a given situation. And then, do we have a right play and what’s the right approach to play.
Bob van Dijk
Then, John, to your first question, so as we went into the pandemic, a couple of things happened. Our business started to recover fast, internet value started to go up, and we began to see outperformance which I see. And afterwards was coming, I saw that we were going to rapidly add to our market cap and that ends our waiting. And we moved very quickly and we pulled the team together and we started working hard and that was continued. We want to be very, very conservative. So, we looked at many options. We don’t want to exclude anything. And we’ve had our own ideas, we’ve heard ideas, and we have done fundamental work on all of those. And we are honing in on a couple that are interesting but they require more work. It’s not a simple thing. It’s not just about cash. It’s fit for shareholders, there is regulation, there’s a whole bunch of other things that need to come into play. And what I want everyone to take back from this is we’re working as hard on this as we are on the business. It’s important to us. It’s important for our shareholders and we want to make progress. And when we’re ready, we’ll come back and say that’s where this is.
Thank you. The next question is from Catherine O’Neill of Citibank. Please go ahead.
Mostly questions answered. One on classifieds, I just wanted to see if there has been any impacts from lockdown 2.0 I guess in some markets or more restrictions in terms of whether you have to offer any discounts again? And given your comment on investment plans in second half for classifieds, should we expect trading profit or loss to be a loss for the year? Second question is on, iFood and the merger in Colombia and what your plans are in terms of how aggressive you want to be, given position you have in the market and whether you see any other opportunities within that time or whether your focus is mainly on Brazil and now Colombia as well? And then, finally, on the payment side of things, I think, you mentioned that the credit lending has sort of credit stopped for the moment or the plans for credit lending are slow. But, you’ve been investing in growth initiatives in payments and steps of those investments. Could you maybe talk about some of these other growth initiatives within the payments area that you’ve been investing in and plan to invest further in?
Bob van Dijk
Yes. Thanks Catherine for your questions. I think the question is naturally distributed. So, Martin, if you wouldn’t mind talking about classified. And Larry, I’m sure you can speak to Colombia merger, and then, Laurent, the payments question is yours. So, maybe Martin, you want to go first?
Absolutely. Yes. So, as you’ve been able to see, the trading profit in the first half was almost $12 million, considering the inclusion of the full FCG and the impacts we initially saw on the lockdown that we are very, very happy with. And yes, going forward for us, we live in an uncertain world and it’ll largely be crystal balling. But for now, we haven’t yet had to give discounts to the bank professionals or any of our large platforms. We do see activity in job and in cars meaningfully impacted by the second wave in many countries as car dealers hesitant stock up and companies are — with supply constraint, companies are hesitant to hire. So, some uncertainty to remain, but overall, the trajectory of recovery has been very steep, and that continues to this moment. But, what is important to note is that what we’ve always done is we like to go oil fire. So, when things work, we push ahead and do not hesitate to benefit from an opportunity to drive growth or gain market share, which we’ll continue to do also in the second half. So, especially in Russia and in Poland we see those opportunities, this will continue to drive. But then on the back of what I think will be much better economics than we saw a few months ago.
I’m happy to go next on LatAm. I think, to your question, Catherine, Brazil is clearly in focus. And we’re excited about the potential of iFood in that market. But, we’re not blind for the broader LatAm opportunity. We’re very excited about the opportunity for a combined entity between iFood and Domicilios, as in most cases consolidation makes sense, of course, pending regulatory review. But, when we’re on the other side of that, we’ll see a business that has the largest footprint in Colombia with over 12,000 restaurants and operates in over 30 cities across the country, and consistent with our other food delivery platforms, truly becomes a platform to be used to not only build that own food delivery business, but other adjacent businesses on the back of it.
Laurent Le Moal
And regarding payments, it’s Laurent here. So, I can think of three big initiatives that we have going on at the moment. One is around the growth for the small and medium business segment, in our business. Most of the growth that we see is coming from e-commerce, but not just large merchants, but also the growth, truly SMB accelerating their plans to sell online. So actually, we’ve invested quite a lot to automate all the onboarding of these SMBs. And this is true across all of our markets from LatAm, Central Europe to India. So, that’s what the growth of SMB.
The second one is specifically to India, we serve three types of customers, merchants, of course, with our payment, gateway; consumers with our credit business; and then, banking partners. And about a year ago, we acquired a company called Wibmo, which is now fully integrated into our business. And actually, we are invested in terms of money for the platform, but also people to actually accelerate the plans to serve the banks with our platform to actually process for the payments for them. And we are in a position where we manage most of the car transactions in terms of security, which is an added value services for all the banking sector in India. So, we believe that this will give us a very strong position actually to reinforce our position in the banks in the market.
And the third one is actually regarding credit is what we have done there is effectively stopped the issuance of personal loans to new customers because we didn’t have a good read on the risk in the market, but actually, we are continuing to serve our existing customers with our buy now, pay later product, which is called LazyPay. And actually, that product has continued to grow. We serve right now about 1.5 million customers every month, with a very high repeat rate of 90%. So actually, we’ve stopped the issuance of personal loans continue on BNPL and actually, what the team has done is continue to innovate to bring new product, like installments using the UPI platform.
So, when we are ready to go back to the market, we will add actually add a new set of product to offer. So these are the three initiatives.
Thank you. Ladies and gentlemen we have time for one more question. The question is from [indiscernible].
Just two questions from my side, please. The first question is on pay and ship. If you could maybe give us a bit more color through the COVID crisis? Has your strategic outlook for this particular product class changed, specifically in Central Eastern Europe and Russia? And what are your thoughts on pay and ship in the U.S. mobile classifieds market? Do you see an opportunity there? And then, the second question is on online food. Given that you scaled up your 1P business in Brazil, could you maybe give us a bit more color on what the contribution margins are for 1P versus 3P, specifically in the Brazilian market at this stage, and how you see it evolving? Thank you.
Bob van Dijk
I think, Larry, the second question is certainly in your — in your camp. I think, the trends are generally quite positive. And Martin, maybe you want to talk us through your views on pricing for pay and ship and the outlook you have for different markets.
Absolutely. So, thanks for taking that, because pay and ship, as you point out, I think has gained a strategic importance over the lockdown. As I pointed out earlier, it was always a solution for distance trade between cities when people have difficulties meeting up in person. But, it has more widely spread over the lockdown for two reasons. One is that people want to order from the comfort of their own home; and second, a lot of small businesses that had to close their physical store over — saw declining food traffic, moved online and every one of the channels they can use. So, we’ve invested significantly to improve the experience and the speed of delivery in the network, especially in Russia, where we already were active but extended, say the service levels. And we accelerated the rollout in Poland and in Brazil. And we pretty much continued what we had in — which is a bit more mature in Ukraine and a few other places. And going forward, I think we’ll do more of this. And I think that’s one of the main — one of the major, let’s say, growth pillars under the — especially the European side of the business.
In the U.S., I also think there is potential. We are minority in the OfferUp letgo combination. So, we’re not driving all initiatives. But that is one of the things that the team is looking at, because believe or not, but even though companies have alternatives in U.S., they don’t have elsewhere with Amazon and eBay and many other channels at their disposal. The strength of us now, after induction of letgo is so significant that for many such SMEs, it’s become a channel force. And similar to other markets, we want them to facilitate that with a pay and ship solution. And as we see results come in, we’ll share them with you.
Sorry, I could just hop in on the iFood profitability. As Bob said, the trends are positive. And it gives us a view into the future in a COVID context, and you can see what it — what food delivery looks like, especially on the first party side at further scale. No surprise to folks on this call as the business benefits from ongoing leverage as a predominantly logistics model. And what we can see, not just for iFood but I think globally that first party can be run profitably. And while on a percentage basis, it’s hard to see how it will ever be as high as a third-party marketplace in terms of percent profitability, but we can see contribution coming from the space, we’re seeing it now. And it’s especially important as we can see that the future growth in the category will predominantly be 1P. So, it’s nice to see that the profitability that that side of the business can generate.
Thank you very much, sir. Ladies and gentlemen, we have no further questions at the moment. I’d like to hand the call back to Mr. van Dijk for final comments.
Bob van Dijk
Yes. Thanks very much. And sorry, I started closing calls a bit early. But, I wanted to thank everybody for many great questions asked. And I hope you share our excitement about these results, but actually, more importantly about I think the potential on the growth for the businesses that we discussed for the time ahead, I think that you also look forward to and we look forward to talking to you about it in about six months. And thanks very much, everybody.
Thank you very much, sir. Ladies and gentlemen, that does conclude this event. And you may now disconnect.