Rocket Internet’s Growth Days Are Behind It

As we have seen with Global Fashion Group a few days ago, Rocket Internet has presented financial numbers today for the first half of this year that hint at the same two things, which are actually just one:

  • Cutting costs is the name of the game these days.
  • Growth is mainly over.

Here is the amusing summary of Rocket Internet’s press release, using ‘key portfolio companies’ (formerly known as ‘proven winners’) to distract from the aggregate number:

Aggregate net revenues of key portfolio companies grow by 32% to EUR 1,043 million H1 2016 vs. H1 2015 // • Aggregate adjusted EBITDA margin of key portfolio companies improves from -32% in H1 2015 to -17% in H1 2016

And later:

As announced on September 1st, 2016, special items, in particular impairments at GFG, weighed on the consolidated IFRS results of Rocket Internet in the first half of 2016. Overall, the consolidated loss for the first half of 2016 was EUR 617 million. As a result of deconsolidation effects, group revenues in the first half of 2016 decreased to EUR 29 million compared to EUR 71 million in first half of 2015.

The one remaining big growth story is HelloFresh with net revenue improving by 159%.

Rocket Internet

Reuters:

German e-commerce investor Rocket Internet (RKET.DE) reported progress on Thursday in cutting losses at its main start-ups with three set to generate profits by the end of 2017, while its shares were lifted by a plan to buy back convertible bonds.

Rocket Internet shares, which have been hit by concerns about mounting losses and cuts to the valuation of some of its leading start-ups, were up 2.7 percent by 0731 GMT (03:31 a.m. EDT), but were still down 30 percent on the year.

Finance chief Peter Kimpel said Rocket was still working toward a goal of a public listing for one of its 10 main start-ups in food delivery, fashion and home furnishings in the coming months, but said timing would depend on market conditions.

The most obvious (and maybe only suitable) candidates for that IPO are HelloFresh and DeliveryHero, which Rocket Internet holds a stake in as well. (The latter would be a cop-out as it is not a company built by Rocket Internet.)

Here are the HelloFresh numbers:

Hello Fresh

HelloFresh had planned an IPO for Q4 of 2015 but withdrew after it couldn’t get the desired valuation.

Some more context by Tech in Asia:

Namshi, Rocket’s fashion ecommerce store for the Middle East, actually posted a slender profit of US$1.8 million this year, with net revenue increasing by 50 percent. Zalora, however, remains a fair distance away from this goal. Rocket clubbed it together with The Iconic, its equivalent in Australia, and announced a loss of US$35 million.

But it’s not all doom and gloom at the well-funded German incubator. Online food delivery startup Foodpanda witnessed a 72 percent increase in net revenue compared to the corresponding period last year. It announced a gross profit of US$23 million, an increase of 72.5 percent.

Overall, Foodpanda still registered a net loss of US$31 million, but that figure is down sharply from last year when it posted a loss of US$43.6 million.

Rocket Internet, which has recently set up a honey pot for gathering new business models from naive founders, has published the detailed results for H1 2016 here (PDF) and here is the presentation. (PDF)

To get a sense on the cost cutting, here is a good data point: Rocket Internet has lost 37% of its staff over the last months. Down from 1.496 to 937. (via, German)

A holding cutting down its own core organisation like that is as good a canary as any.

At the end of the day, Rocket Internet remains a holding building companies in difficult markets around the globe with no consumer facing scale effects of its own. It is becoming increasingly clear that this is not going to be a winning strategy.1

In fact, the main question investors should raise is wether Rocket Internet even has an overall long-term strategy.

More on this topic:


  1. On an amusing, or sad, side note: Rocket’s Africa Internet Group gets rebranded into Jumia for all of Africa, to gain brand advantages and ‘significant operating advantages’. Maybe that would have made sense right from the start? 

5 comments

  1. It also seems like there best businesses, delivery hero and hello fresh, have a high probability of being bested by Uber or Amazon?

    What is your perspective on Rocket’s investments in SE Asia eCommerce? Money pit or golden opportunity. It seems payment and logistical challenges require a to. Of cash to be sunk into the business.

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