JUMIA Q1 2019 Conference Call; Take Aways As Firm Responds to CITRON, Citi Bank Research Report

Proshare

Monday, May 13, 2019    / 09:30PM / Teslim Shitta-Bey, Managing Editor


Highlights

Y-o-Y Gross Merchandise Volume (GMV) growth was 58% between Q1 2018 and Q1 2019. This figure, however, clearly hid the GMV decline of -22.8% between Q4 2018 and Q1 2019. The company’s active consumers, nevertheless, climbed up a notch from 3m in Q1 2018 to 4.3m in Q1 2019, representing a rise of 43% Y-o-Y. On a Q-o-Q basis active consumers grew from 4m in Q4 2018 to 4.3m in Q1 2019.



Chart 1 JUMIA GMV 2018Q1-2019Q1 (Euros ’m)


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Source: JUMIA Q1 Conference Call Presentation

 


Chart 2 JUMIA Active Customers 2018Q1-2019Q1

 Proshare Nigeria Pvt. Ltd.

Source: JUMIA Q1 Conference Call Presentation



  • Increased Monetisation of the order-to-delivery process was a robust 102%. Market place revenue rose from Euros 7.9m to Euros 16m in absolute terms.
  • Y-o-Y adjusted EBITDA (a measure of the company’s underlying profitability in its core business lines) as a % of GMV settled at 3.35%
  • Gross Profit margin as a percentage of GMV increased from 5.6% in Q1 2018 to 6.5% in Q1 2019, as a result of the increased GMV monetization rate. Jumia’s Gross Profit also exceeded Fulfillment expense in Q1 2019.
  • Leveraging on its brand awareness and localized marketing approach, Jumia was able to achieve an improved 2.05% of marketing efficiency in Q1 2019, bringing the Sales & Advertising expense own from 7.2% of GMV in Q1 2018 to 5.1% in the Q1 2019. Going forward this should assist in chiseling down the company’s EBITDA loss in FY 2019.
  • Adjusted EBITDA loss as a percentage of GMV improved from -19.8% in the first quarter of 2018 -16.4% in Q1 2019.



Breaking Down revenue

Despite recent concerns by analysts about the sustainability of the company’s business model and its revenue, Jumia’s Q1 2019 performance seems to suggest that its gross merchandise volume and revenues are on an incline and are likely to gradually pull down negative operating earnings (EBITDA) in the course of the year. 



Table1 Jumia’s Q1 2019 revenue breakdown

                                                                                            

For Three Months ended March 31st (Euros m)

 

2018

2019

Y-o-Y Change           (%)

Market place revenue

7.9

16

+102.3%

Commissions

2.8

5.5

+116.1%

Marketing

0.3

0.9

+200.7%

Value Added Services

2.5

4.6

+85.8%

First Party Revenue

19.8

15.6

-21.20%

Platform Revenue

27.7

31.7

+14.1%

Non-platform Revenue

0.6

0.2

-68.10%

Revenue

28.3

31.8

+12.3%

Source: JUMIA Press Release Q1 2019


Jumia’s Q1 2019 revenue breakdown was of the order of:

The company’s market place revenue went up 102% from Euros 7.9m in Q1 2018 to Euros 16m in Q1 2019. Brand recognition and gradual migration of Nigerian consumers to digital shopping has improved revenue and merchandising volume. The problem that still makes the books sour is the persistence of cash purchases which Co-Founder, Sacha Poignonnec in today’s Conference Call insists the company is addressing frontally in 2019 by more transactions being concluded digitally to reduce the incidence of returned items and purchase cancellation.


With revenues rising sales commissions also went up by 116% from Euros 2.8m in Q1 2018 to Euros 5,5m in Q1 2019. Nevertheless, the commissions have become an item of concern as some analysts (including short-trader, Citron who wrote a scathing review of the company’s recent IPO) pointed out as a major area of trouble, especially in respect of its retail consultants JForce who apparently have engaged in allegedly dodgy reporting of sales and commissions due. Jumai says it has started a detailed audit process that is dealing with this issue.


Jumia’s marketing costs Y-o-Y went up by 201%, a point analysts believe should be treated urgently by the company. Even though market penetration by Jumai is still relatively narrow, marketing costs could eat deeply into revenues if not kept under control and tied to faster revenue growth. Analysts note that Jumia must keep Sales, General and Administrative (SG&A) expenses as tight as possible to squeeze economic value from the business, as retail trading tends to be large volume and low margins in nature. This fact shows up in the drop in First Party Revenue from Euros 19.8m in Q1 2018 to Euros 15.6 in Q1 2019, representing a decline of -21.2%.   



The Citron, Citi Bank Review

In the course of last week the Citron Research and Citi Bank Plc’s review of Jumia’s operations and 2019 IPO document caused quite a stir amongst investors with Jumia’s share price taking a knock. Proshare will be releasing its own independent analysis of the online retailer’s financial performance, corporate governance framework and likely forward earnings guidance in the course of the week after a meeting with Jumia Nigeria’s management on Wednesday May 15, 2019. 

 

 

 

Chart 3 JUMIA Share Price Movement April-May. 2019

Proshare Nigeria Pvt. Ltd.


Source: NYSE



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