Q3 2019 Rocket Internet SE Earnings Call
BERLIN Nov 29, 2019 (Thomson StreetEvents) — Edited Transcript of Rocket Internet SE earnings conference call or presentation Tuesday, November 26, 2019 at 9:00:00am GMT
TEXT version of Transcript
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Corporate Participants
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* Bettina Curtze
Rocket Internet SE – SVP of Finance & Investment
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Conference Call Participants
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* Nikolas Mauder
Kepler Cheuvreux, Research Division – Junior Equity Research Analyst
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Presentation
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Operator [1]
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Dear ladies and gentlemen, welcome to the Analyst Call 9 Months 2019 Results for Rocket Internet SE. At our customers’ request, this conference will be recorded. (Operator Instructions)
May I now hand you over to Mrs. Curtze, who will lead you through this conference. Please go ahead.
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Bettina Curtze, Rocket Internet SE – SVP of Finance & Investment [2]
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Good morning, everybody, and welcome to our 9 Months 2019 Results Call for Rocket Internet and its selected companies. My name is Bettina Curtze, and I will walk you through the results today.
We have posted, as usual, our 9-month results presentation on the Investor Relations section of the website. So if you please turn to Page 4 of the presentation. As in prior quarters, we are providing you with our economic ownership percentages for the selected companies. These are as of November 8, and we were holding 11% of Jumia, 11% stake in home24, and we had an 18% stake in Global Fashion Group. All 3 of these companies are now publicly listed.
In the first 9 months of 2019, Global Fashion Group grew revenue by 17% on a constant FX basis, and Jumia achieved 54% gross merchandise value — volume growth. home24 also reported results this morning, and therefore, we haven’t included their numbers yet in the presentation.
Both Global Fashion Group and Jumia improved their adjusted EBITDA margins. For the first 9 months of 2019, Global Fashion Group had a negative 4% adjusted EBITDA margin, and Jumia’s improved to minus 16%, measured as a percentage of gross merchandise volume.
Looking at the companies individually. Global Fashion Group grew revenue by 16% to EUR 928 million in the first 9 months of 2019 driven by strong number of order growth of 24%. In Q3 2019, the CIS region in particular was a strong contributor to NMV growth, which was up by 31% compared to Q3 2018. Also, the gross profit margin strongly improved by nearly 10 percentage points to 42% in Q3 2019.
Looking at Jumia, one of the key performance indicators is marketplace revenue, which strongly increased by 77% to EUR 52 million in the first 9 months 2019. One of the growth drivers is the number of active consumers on the platform, which reached 5.5 million at the end of Q3 2019, a 56% increase over 12 months ago. The recent launch of Jumia Mall further enhances the value proposition for brands and consumers. The platform’s relevance to consumers has increased by the wide range of everyday products, thereby increasing total orders and also order frequency. In Q3 2019, JumiaPay was used to pay for already 31% of the transactions on the platform, which is not just orders for goods and electronics but also includes mobile top-up and bill pay for utilities. JumiaPay forms the basis for Jumia’s financial services marketplace, connecting both sellers and consumers to financial institutions.
And then taking a quick look for you also for the home24 results that they just released. 9-month revenue increased by 19% for the 9-month period 2019 over 2018 and reached EUR 262 million. And there, a particularly strong contributor was the LatAm region with 35% growth. The adjusted EBITDA margin stayed constant for the 9-month period at 12%, but Q3 saw marked improvement from minus 19% to minus 9%, looking just at Q3 2019 versus Q3 2018.
Rocket Internet itself incubated 20 new business models since January 2018. And these are distributed around the globe, so we have some in Europe, some in Southeast Asia and also some in Latin America. And as you will appreciate, these are still very young companies, and we won’t be reporting any detail on them until they have reached a certain scale.
Rocket Internet network of companies encompasses more than 200 private companies. The total cost base as of September 30, 2019, is around EUR 400 million. The internally ascribed fair value for this based on IFRS fair value methodology is EUR 1.2 billion. Please note, however, that valuations are subject to significant limitations and should not be read as an indication for the price that a third party would be willing to pay in a future round, a potential trade sale or a potential initial public offering.
Taking a look at the Rocket IFRS consolidated results. On Page 13, you’ll find the income statement. And Rocket in the 9-month period generated EUR 48 million of revenues and the consolidated profit for the period of EUR 285 million, which resulted in EUR 1.92 of earnings per share. The main components of the consolidated profit are the share of the profit and loss of associates and the JVs of EUR 190 million and the financial result of EUR 112 million.
On the balance sheet, the most notable item are the decline in investments in associates from EUR 820 million to EUR 354 million, and this is due to companies going public. IFRS cash increased from EUR 1.7 billion to EUR 2.5 billion at the end of Q3.
On the next page, we are giving you the adjusted net cash balance as of November 8, 2019, which was EUR 2.6 billion. The total value for all publicly listed companies is EUR 600 million. And there’s also an additional loans granted of roughly EUR 300 million.
And just for reference, we are providing you with the financial calendar also for 2020.
And operator, if you can please open up the lines for any questions. Thank you.
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Questions and Answers
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Operator [1]
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(Operator Instructions) The first question is from Nikolas Mauder, Kepler Cheuvreux.
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Nikolas Mauder, Kepler Cheuvreux, Research Division – Junior Equity Research Analyst [2]
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Two questions from my side. First one, on the total cost basis of your other private companies compared to what you reported at the CMD, the number has risen by EUR 100 million. Does this — do I understand correctly that this implies that you invested about EUR 100 million in the scope of a few months? And is this like a market improvement in your ability to find suitable investment target, or is this just one investment? How should we look at this?
And the second one, I am wondering to what extent you’re willing to let us in on your thinking around the investments into Westwing, United Internet and Tele Columbus. If you’re not willing to let us in on United Internet and Tele Columbus, what happened with the Westwing stake, which disappeared and now reappeared?
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Bettina Curtze, Rocket Internet SE – SVP of Finance & Investment [3]
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Sure. Happy to take those questions. Regarding the cost base, we are continuously making investments in new companies as well as making follow-on rounds in our existing portfolio. So there is not one investment in particular that I think I want to point out to with regards to the cost base increase, but it’s the sum total of many investments.
And since you’re reporting at EUR 100 million increment at some point, you’re rounding up and sort of getting to the next — from EUR 300 million to EUR 400 million.
With regards to the public companies, I mean we’ve been investing also in public companies now for some period of time. United Internet, we do find attractive based on the 5G spectrum that they have, the licenses and their ability to offer services around that also in the future. So we thought it was an interesting opportunity. Similarly for Tele Columbus, we saw some interesting opportunities in the German cable market. And Westwing is a company we obviously know quite well, a company that also had significantly decreased in terms of market valuation and that we decided to reinvest in that.
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Nikolas Mauder, Kepler Cheuvreux, Research Division – Junior Equity Research Analyst [4]
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Okay. So we should look at these as opportunistic investments, probably a bit value-driven?
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Bettina Curtze, Rocket Internet SE – SVP of Finance & Investment [5]
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Yes. I mean, look, we have very broad network of companies and participations, right? We invest across the whole capital structure from private investments, which is the main focus. We do some debt and also some public investments. And we just see them as part of overall network of companies. Yes.
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Operator [6]
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At the moment, there are no further questions. (Operator Instructions)
As we have no further questions, I would like to hand back to you, Mrs. Curtze.
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Bettina Curtze, Rocket Internet SE – SVP of Finance & Investment [7]
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Well, thank you very much, everybody, for joining us for the 9-month results call this morning. We will be reporting full year results on April 2, 2020.
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Operator [8]
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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.