promising progress

Rocket Gets Real

ARCHIV - Rocket-Internet-Chef Oliver Samwer spricht am 08.06.2016 in Berlin bei der Internet-Konferenz NOAH. Foto: Britta Pedersen/dpa (zu dpa "Wertverlust bei Modehändlern drückt Rocket Internet tief ins Minus" vom 02.09.2016) +++(c) dpa - Bildfunk+++
It's a rocky road for Rocket.
  • Why it matters

    Why it matters

    Rocket Internet has cut jobs and written down the value of some of its holding and postponed some of its targets in a more realistic assessment of its business.

  • Facts


    • Rocket Internet is an incubator of online startups with holdings in fashion, food delivery and home furnishings.
    • Rocket has struggled since its IPO in 2014 which raised €1.4 billion and earlier this year announced losses due to writedowns of its online shopping retail cluster, Global Fashion Group, and other operations.
    • Rocket Internet wrote down the book value of its holding in Home24 by more than half a billion euros in five months.
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Rocket Internet is doing its best to keep up with the hype – even if it’s not making any money. The startup incubator on Thursday said it remains on target for its ambitious goals, though some have been pushed further into the future as it continues to work on its profitability and transparency.

Rocket, based in Berlin, is a startup incubator with 10 main companies in food delivery, fashion and home furnishings. It’s best known for creating Zalando as a startup in 2008 that has since become Germany’s biggest online retailer worth more than €9 billion.

On Thursday, Rocket reported its first half-financial results and provided more information about the value of some of its main holdings.

While Rocket announced a half-billion euro loss – mainly due to writedowns on its Global Fashion group holding – it reported some good news too, for example on the value of Hello Fresh, its food delivery service.

The writedowns of its businesses have been rough, however. In the last quarter, Rocket corrected the Global Fashion Group’s book value from €3 billion to €1 billion. Likewise Rocket wrote down the value of furniture store Home24 by almost half. The startup, once seen as a unicorn, as startups worth €1 billion and more are called, now has a book value of less than half a billion.

The Global Fashion Group reported a 34-percent increase in sales in the first half to €456 million. But expenditure on advertising was high, meaning that the company reported a loss of €67 million in earnings before interest, taxes, depreciation and amortization – down from €120 million in the same period one year earlier.

Peter Kipel, Rocket’s chief financial officer, however said that each individual company has significantly improved its EBITDA margin. He stressed that Namshi, the Zalando of the Middle East, is operating profitably, for example.

Further successes came from Hello Fresh, the Berlin-based startup which supplies food boxes that contain all the ingredients for a home-cooked meal, plus the recipe to cook it.

The food delivery service retained its valuation of €2.6 billion after a financing round in April in which the company gained €91 million, Christian Gärtner, its finance chief, confirmed to Handelsblatt. Of this, €21 million came from current investors such as Rocket and Baillie Gifford, a Scottish investment fund. The remaining €70 million came in credit lines, with €20 million from a bank and €50 million from its majority shareholder Rocket.

This is what enabled Hello Fresh, which sells meal kits in the United States and Europe, to report a €132-million in earnings despite a half-year operating loss of €46 million. Hello Fresh improved its EBITDA margin slightly from minus 19 percent to minus 16 percent. The food box company’s rapid growth has slowed down significantly: sales in the second quarter from April to June only rose by €8.7 million to €150.1 million. In the same period one year before, sales had grown by more than €20 million.

Rocket was also unable to name a date for the next IPO of its ecommerce holdings.

“In the next 18 months, we will launch one of our startups on the stock market,” Mr. Samwer said one year ago. On Thursday, Mr. Kimpel was more cautious, saying that the company would look how the markets were doing, but that the company wouldn’t do anything that didn’t make sense business-wise.

Rocket may be keen to consolidate some of the companies it owns before aiming for further IPOs. In the last six months, Rocket’s main holdings have together made a loss of €300 million, coming on top of a €200-million loss in the same period one year ago.

For 2016, Mr. Samwer was aiming to improve profitability by improving processes and streamlining structures. Rocket this year has also reduced its headcount in what could be called a rendezvous with reality.

Despite the loss, Rocket’s share price rose 12 percent to a four-month high on the results. Since the start of the year, the shares have lost around a quarter of their value. The gain was partly thanks to the announcement that Rocket will spend €85 million more on convertible buybacks by September 30, 2017.

The company will stick to its course. Mr. Kimpel said Rocket would also focus on improving profitability in 2017. The company wants three of its companies to be profitable by the end of next year – and it wants to keep at least one of these promises.


Miriam Schröder writes about the startup scene in Berlin for Handelsblatt. Alexander Demling writes about tech companies and startups. To contact the authors:,

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