Rocket Internet expects profit from three start-ups

The tech incubator Rocket Internet expects three of its start-ups to become profitable by the end of next year, with the Middle Eastern online fashion retailer Namshi among the companies singled out for its progress over the past year.

The German company said yesterday that its major portfolio companies experienced an average revenue growth of 69.4 per cent last year, posting an average improvement in adjusted earnings before interest, tax, depreciation and amortization (Ebitda) margin of 6 per cent.

The market took a dim view of such numbers, however, the company’s shares falling by about 6.5 per cent in early trading on the Frankfurt stock exchange.

Namshi, founded in Dubai in 2011, demonstrated “great progress on the path to profitabil­ity” during the fourth quarter of last year, according to Rocket Internet, posting an adjusted Ebitda market of negative 2.1 per cent for the three-month period, compared with negative 7.9 for the same period in 2015.

The retailer’s annual revenues rose to Dh439 million during last year, a year-on-year increase of 161.8 per cent.

Rocket Internet’s other Middle Eastern start-ups, which fall under its Middle East Internet Group joint venture with South Africa’s MTN, include the taxi booking app Easy Taxi, online retailer and online household services platform Helping.

The German company’s chief executive, Oliver Samwer, said that last year losses peaked among its major portfolio companies, with their financial situation expected to improve in 2016.

“We have already seen some good progress this year,” said Mr Samwer, reiterating the company’s focus on helping its portfolio companies to achieve profitability.

“To achieve this, growth is more important than profitability in the early years of a company. That is why Rocket Internet invested strongly in the growth of its companies in 2015.”

This week, the company announced the sale of a 9.1 per cent stake in the South East Asian online retailer Lazada Group to Alibaba for US$137m.

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