Jumia shrugs off short-seller report

By Sasha Planting 15 May 2019

umia staffs work at a customer care call centre at the Jumia Food Kenya offices in Nairobi, Kenya, 15 April 2019. EPA-EFE/Daniel Irungu

Shares in e-commerce company Jumia, otherwise dubbed Africa’s Amazon, have plateaued after a week that saw the share price plunge after the publication of a report from short-seller Citron Research that suggested the company was not what it appeared to be.

Jumia, the e-commerce company headquartered in Dubai, with operations in 14 African countries, categorically denied that it had provided investors with false or misleading information, either ahead of or subsequent to its recent listing on the New York Stock Exchange.

The allegations were published in a report from short-seller firm Citron Research, and carried by Business Maverick here.

Following the publication of the report, half a dozen US law firms jumped into the fray, promising to investigate the claims and inviting investors who may have lost money to contact them.

Jumia, in which JSE-listed MTN holds a 30% stake, did not respond to the report directly. However, it did bring its first-quarter results announcement forward, releasing results for the quarter to the end of March on Monday instead of Thursday.

During a call with investors, CEO and co-founder Sacha Poignonnec explained the reason for not responding to the report.

We live in a world where people can say a lot of things. We don’t want to feed those types of organisations or people.”

As a result, he said, the company would not publish a detailed rebuttal of Citron’s claims. But he stressed that Jumia “completely stands by its prospectus”, and promised analysts that he was accessible and available to answer any future questions that they may have.

In the meantime, he said, “our near-term focus is to continue scaling up our existing business within existing markets and taking the company to profitability by leveraging the powerful platform that we have built”.

This appears to be paying off. In Jumia’s first results release since it listed in April, the company noted that it had grown GMV (gross merchandise volume) by 58% when compared with the first quarter of 2018, leading to a 102% increase in marketplace revenue when compared with the same period in 2018.

Marketplace revenue, says Poignonnec, includes commission (the fee charged to third-party sellers who use the platform); fulfilment (the delivery fee charged to consumers, and value-added services, which includes logistics, packaging and marketing and advertising.

We are pleased with this diversity, which we think is healthy,” he says.

Gross profit, as a percentage of GMV, increased from 5.6% in Q1 2018 to 6.5% in Q1 2019.

This demonstrates our ability to monetise our platform,” he says.

One highlight, he adds, is that Jumia’s gross profit of €15.7-million covered total fulfilment costs of €15.2-million, which hadn’t been the case in the previous year when gross profits of €8.6-million did not cover fulfilment costs of €9.6-million.

Jumia’s first-quarter loss widened from €34.2-million a year earlier to €45.4-million in the quarter to March 2019.

The balance sheet is in better shape following the listing, the strategic partnership with Mastercard which invested €50-million into Jumia, the issuance of anti-dilution shares to certain shareholders and the exercise by the underwriters of their option to purchase additional ADRs.

This added $280.2-million to cash, bringing total cash and cash equivalents to €412.4-million. DM


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