‘Jumia stakes present for future gains’

Our Reporter

The Jumia Group last week released its 2019 Quarter 4 (Q4)/Full Year Report. Except for the gross profit after fulfilment expense index which a lay man could say was a meagre 1million euros, considering that this is actually a unicorn company, that is,  a private start-up company valued at over $1 billion, all the other financial indices therein contained in the report were not only good but very promising and reassuring., the firm said at the weekend.

Unfortunately, profit is where many people, especially the shareholders and other investors are mostly interested in while assessing whether a company is doing well or struggling. The question is, can a company outlook be promising and yet report so little in ‘gross profit’ and a net loss?

The main reason for setting up any business is to earn a profit, which in turn could form returns on investment for the investor, who must have committed part of his or her limited resources, human and material, into the business venture. The products and services that the businesses offer to their consumers are all in the effort to generate enough sales that will make for profit. In reality, however, businesses don’t always earn a profit as there could be some factors that may make their profit margin grow slim, or they put them outrightly in a loss situation.

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These factors could be internal like wrong decisions on the part of the managers of the business, start-up periods when the business may be encountering the usual teething problems, or external like during a period of economic downturn, harsh regulatory and social environments etc.

An informed look at the Jumia Q4 2019/Full Year report would reveal that the ‘operational loss’ reported in the Q4 operations of the company is not a loss in that sense of the word as it does not, in any way, point to a bad financial outing of the company for the period under review. Being a start-up business that is yet to get to a break-even point due to the initial huge capital investment that is needed at this set up stage for the necessary operational infrastructure and other marketing initiatives, highly skilled personnel etc, the ‘loss’ as seen in the report is normal and expected.

A look at the just released report shows an average improvement of 64 percent in the Marketplace revenue breakdown across the various revenue streams over the same period the previous year. The report also shows robust growth drivers for the period under review. The Gross Merchandise Value (GMV), a major measure of growth in the e-commerce business that indicates the total volume of sales made by the e-commerce companies, dropped from 311 in Q4 2018 to 301.2 in Q4 2019 a meagre three percent decrease over the last one year. The annual active customers on the Jumia platform rose from 4.0 million a year ago to 6.1 million, a 54 per cent increase, while the number of orders rose from 5.5 million to 8.3 million, a 49 per cent increase over the same period.

Ezedi Udom, Business and Communications anaylyst writes from Lagos