Rocket Internet faces down unhappy investors as it pushes back profit target

​German ecommerce investor Rocket Internet pushed back its goal of turning a profit at some of its leading start-ups, as its chief executive faced calls on Thursday to return more cash to shareholders or even go private.


Global Fashion Group, an emerging markets fashion retailer set up by Rocket and Swedish investor Kinnevik, reported a smaller third-quarter operating loss and a 19 percent rise in net revenue. - Global Fashion Group


Rocket, which invests in businesses from fashion and furniture e-commerce to food delivery, reported some progress in reining in losses in the third quarter. But finance chief Peter Kimpel told journalists that the company’s aim to have three of its start-ups profitable by the end of 2017 may slip “by a couple of quarters”.

That sent Rocket’s shares down 4 percent, adding pressure on the stock which has been volatile even though the company listed its biggest companies HelloFresh and Delivery Hero this year.

CEO Oliver Samwer, a serial entrepreneur who has become one of Germany’s richest men through his savvy investments in online companies, sought to defend his strategy in the face of hostile questions from investors at a meeting in London.

“Fundamentally, we believe that technology is still at the very beginning,” Samwer said. “There is no firm in Europe that has roughly 3.8 billion euros ($4.5 billion) to invest in new internet companies.”

Several analysts and investors suggested Rocket should consider returning more of that cash to shareholders or even go private, as its share price is almost half the level it listed at three years ago.

Samwer said he had taken on board the comments but said the likelihood that Rocket Internet would pay future dividends was low, although it would continue to buy back shares under a 100 million euro programme announced in August.

“Our interest is not to trade at a discount,” he said. “We remain very, very confident. Has that been reflected in the stock price? No.”

Samwer said he did not expect to make large investments in the next six months, but said he saw big opportunities in the next five to 10 years, adding he could also imagine using spare cash to take a stake in a public company.

BURNING CASH

Rocket, which started out with a focus on ecommerce, has expanded into online travel and food and is now moving into new areas like finance and property as well as logistics.

Rocket Internet reported aggregate nine-month sales rose 28 percent in the first nine months to 1.85 billion euros at its top five start-ups, while they cut their aggregate losses by 16 percent to 250 million.

Home furnishings site Westwing moved closer to profitability in the quarter, Kimpel noted. However, Rocket’s other furniture site Home24 might need to explore raising more funds.

African ecommerce business Jumia is also still burning through cash, losing 28.5 million in the quarter on turnover up 19 percent to 20 million euros.

HelloFresh and Delivery Hero had already reported quarterly figures, with Delivery Hero reiterating a goal to break even in 2018 and turn a profit in 2019, while HelloFresh narrowed its adjusted loss to 17 million euros.

Global Fashion Group, an emerging markets fashion retailer set up by Rocket and Swedish investor Kinnevik, reported a smaller third-quarter operating loss and a 19 percent rise in net revenue.

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