Financial market “Revolution”: EMAG defines a new type of result: Profit&Loss, both together!

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The latest financial result can be used depending on the interested parties – as Profit for Stakeholders and Loss for Tax purpose

Reporter Finweek: In other words – if it’s about giving money to others, e.g.: State Authorities – you can use the Loss part; but if it’s about receiving money, why not impress the Stakeholders (such as Investors etc.) with a Profit result.

Because the “fish” is made by…numbers, influenced by creative accounting.

Today’s inspiration: HERE. 

As a summary, we can “learn” from this financial analysis, that use let’s say more “magic” rather than knowledge, that this group – EMAG is a LOSS maker, in amount of USD 34 million, but meanwhile it is also on “PROFIT” in amount of USD 17 million, which represent half of the LOSS amount.

Which one of the above scenarios represent the truth?

Do you think that we will soon tick, as in gender’s case, a new option like this for the financial part?

Dr. Kristine Bago: First of all, I would like to define the correct time frame.

The title mentions “Results for the financial year 2022, ended in March“, and here we are talking about the period related to 01.04.2021 – 31.03.2022, because the remaining part for 2022, falls under the scope of the financial year 2023, in this case.

Reporter Finweek: Oh, I understand, so we are speaking more about the year 2021 that just ended, not the year 2022 …

But let’s see what the famous Prosus Report (the main EMAG’s shareholder) reveals to us…

 Dr. Kristine Bago: For a better understanding I would like to first define who is Prosus.

 Prosus N.V. is a public limited liability company established under Dutch law with its registered office located in Amsterdam. (Trade Register No.: 34099856).

Prosus represents a subsidiary of Naspers limited (Naspers), a company established in South Africa.

In 2019, Prosus was listed on the Amsterdam Euronext Stock Exchange, with a secondary listing on the JSE Limited Stock Exchange and South African A2X markets.

Prosus is a global investment group that invests and operates in sectors and markets with long-term growth potential, being among the largest technology investors in the world.

The group focuses on building significant businesses in sectors such as online ads, payments and fintech, food delivery and educational technology in markets such as Europe, India, Russia and Brazil.

 Through its project team, Prosus is actively seeking for new opportunities to collaborate with exceptional entrepreneurs who use technology to meet the big needs of the society.

Every day, millions of people use the products and services of the companies in which Prosus has invested, purchased or built.

The Group operates and collaborates with a number of leading internet businesses in USA, Africa, Central and Eastern Europe and Asia in sectors such as online ads, food delivery, payments and fintech, edtech, health, retail and social and internet platforms.

The Prosus N.V. Group belongs to the South African-owned group Naspers, the largest e-commerce group in Europe and one of the largest in the world, namely the third after Amazon and Alibaba.

The multinational media group Naspers was established in 1915 and is listed on the Johannesburg and London Stock Exchange.

Naspers Group is also present in Romania, being represented by Autovit, PayU, OLX, Fashion Days and EMAG.

EMAG is legally represented by Dante International S.A. which also includes Fashion Days Romania and sales for EMAG Bulgaria & EMAG Hungary, i.e. the entire spectrum of EMAG.

Returning to the Prosus Report, as we may notice in the printscreen below, on page 123, we can see that EMAG is a LOSS maker of USD 34 million – in the financial year 2022, BUT WITHOUT the extension as in the above Romanian financial analysis title regarding the “Profit” part.

Source: HERE.

Or at the beginning of the Report – Page 5.

As you can see, there is NO PROFIT amount mentioned in Prosus’ Annual Report for 2022 regarding the EMAG Group, beside the LOSS of USD 34 million.

Then, if we look for Dante International SA on the website of the Romanian Ministry of Finance, we have again the same “SURPRISE”, the LOSS amount appears, is recorded and mentioned everywhere, BUT the “magic” PROFIT does not appear ANYWHERE.

Reporter Finweek: Probably the people trained by the Ministry of Finance, don’t know about this “profit” and this “option”…

 Dr. Kristine Bago: As per database from:

  1. Romanian Finance Minister as at 31.12.2021: 

Net Turnover = 7,346,114,540 LEI (1,469,222,908 EUR) 

Net LOSS = 181,871,136 LEI (36,374,227 EUR) 

  1. Prosus’ Annual Report for 2022: 

Turnover = 2,300,000,0000 EUR 

LOSS = 34,000,000 EUR 

The difference between the 2 sources mentioned above, are mainly due to the reporting period: 

On the Romanian Reporting Framework we have the financiar year from 01.01.-31.12.2021, while in the Prosus’s Annual Report for 2022 we have the period related to 01.04.2021-31.03.2022. 

Although there are still 12 months, the calendar period is different and for the nature of EMAG’s business, this fact can influence the resultsBUT NOT in a MATERIAL way.

Reporter Finweek: I see that the figures are similar – LOSS in amount of EUR 34 million according to Prosus’ Report vs. LOSS in amount of EUR 36 million according to Romanian Financial Statements.

Dr. Kristine Bago: Yes, and we are talking about an error of the assumption made above of 6%, which is obviously something NOT material, in relation to the volume and object of activity of EMAG.

Returning to the “magic” profit, which emerged from nothing; that in the financial analysis performed in the link above and mentioned by you was somehow offsetted by the investments performed, I quote:

The core business of the eMAG Group delivered a PROFIT from operations of $17 million, but based on investments performed, the FINAL RESULT was a LOSS of $34 million, the report shows. Given the additional investments, overall eMAG’s reported LOSS from operations for FY 2022 is in amount of $34 million.”

I would like to point out the following:

  • any investment is subject to amortization / depreciation process
  • investments does not affect directly and/or negatively the profitability of a company

If the facts mentioned in the source above were true – that the investments have a negative impact on profit amount, then no one would invest and the meaning of any business would be lost. 

Reporter Finweek: This result seems to be performed by the Marketing Department, rather than the Financial one…

Dr. Kristine Bago: Vive Le marketing!

In every fact, there is also a good part – even if you don’t have good results as per Financial Department, there is always a second chance…

It’s called MARKETING.

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