Jumia’s road to profitability steady as gross profit rises 22% to €92.8m in FY20
February 25, 20211.2K views0 comments
By Charles Abuede
- Gross profit increased by 12% y/y
- Adjusted EBITDA loss decreased by 47% y/y
Nigeria and Africa’s eCommerce giant, Jumia Technologies AG, listed on the New York Stock Exchange (NYSE), has announced a 22.3 per cent year-on-year increase in its gross profit to €92.8 million in FY 2020 from €75.9 million in FY 2019. The online marketplace also recorded a 12.5 per cent rise to €27.9 million in gross profit during the final three months of 2020 from €24.8 million recorded in the corresponding quarter of 2019.
Jumia Technologies AG, in its financial results for the fourth quarter and full-year ended December 31, 2020, revealed that the revenue increase was as a result of the increase in Marketplace revenue and the significant improvements in the profitability of its first-party business which posted an increase in gross profit in the fourth quarter of 2020 compared to the same period the previous year, despite a 41 per cent decline in first-party revenue.
2020 was a promising outing for the eCommerce giant, popularly regarded as the Amazon of Africa, as the company continues its gradual drive towards profitability. However, its growth in the year 2020, which was laden with the global health crisis and several lockdown rules and guidelines, was much slower than it recorded in the prior year.
According to the financial result accessed by Business A.M, Jumia’s gross merchandise volume (GMV) during the fourth quarter of 2020 rose from the 2019 figures by 23 per cent to reach €231 million and the growth was majorly driven by the Black Friday Campaign which had more than 41,500 sellers participating in the event. Thus, during the 2020 edition of the sales galore, Jumia recorded 141 per cent growth in items sold.
A deeper look at financials shows growth but slower than expected when compared to 2019. The report from Jumia revealed that annual active consumers increased by 12 per cent from 6.1 million in 2019 to 6.8 million in 2020. This presents a weaker performance when compared to the 54 per cent growth in total consumers gained by the company in 2019. Fascinatingly, orders dropped by 3 per cent from 8.3 million in 2019, to 8.1 million in 2020. Though the company claims orders on the platform were stable, and the decrease in orders was due to a 14 per cent decrease in digital services transactions on the Jumia pay app. But it then means that the 700 thousand consumers gained were unable to cover up for this shortfall in digital services transactions.
Commenting on the result, Jeremy Hodara, co-chief executive officer of Jumia, said, “We continued to make significant strides towards breakeven during the fourth quarter of 2020. Gross profit after fulfillment expense reached a record €8.4 million during the quarter. In parallel, efficiencies across the full cost structure allowed us to decrease Fulfillment, Sales & Advertising and General and Administrative expenses (excluding share-based compensation) by 18 per cent, 34 per cent and 36 per cent respectively, year-over-year. As a result, Adjusted EBITDA loss contracted by 47 per cent year-over-year, reaching €28.3 million.”
Also, Sacha Poignonnec, co-chief executive officer, said: “While 2020 has been a challenging year operationally with COVID-19 related supply and logistics disruption, [it] has been a transformative one for our economic model, as we firmly put the business on track towards breakeven. In addition, we raised approximately €203 million in a primary offering in December 2020. This strengthened our balance sheet, enhanced our unit economics and overall, positioned Jumia to scale efficiently towards profitability. Beyond the near-term objective of breakeven, our long-term focus remains on fueling the growth of our e-commerce and payment platforms in Africa for decades to come.”
The financial statement, filed with the New York bourse, also shows its sales & advertising expense dwindled by 34 per cent from €15.5 million in the fourth quarter of 2019 to €10.2 million in the fourth quarter of 2020, driving strong marketing efficiency with sales and advertising expense per order falling by 33 per cent, from €1.9 per order in the fourth quarter of 2019 to €1.3 in the fourth quarter of 2020.
Meanwhile, Jumia partly attributed the development to its continued enhancements in 2020 to the performance marketing strategy across search and social media channels, notably through more granular segmentation of its target market with differentiated campaigns and content for each segment.
Also, there was a 36 per cent year on year decrease in the company’s general and administrative expense to €21.8 million as a result of staff costs savings coming from portfolio optimization and headcount rationalization initiatives, which was launched in the final three months of 2019 along with a fall in professional fees, including legal expenses.
Jumia’s operating loss for the last quarter of 2020 was €40 million while its adjusted EBITDA loss was €28.3 million, decreasing by 35 per cent and 47 per cent on a year-over-year basis respectively. This signifies meaningful progress on the company’s path to profitability.
Meanwhile, at the close of the year (December 31, 2020), Jumia had a total of €304.9 million in cash on the balance sheet. The amount includes about €203 million of gross proceeds from the offering completed in December 2020. Meanwhile, JumiaPay TPV reached €59.3 million, increasing by 30 per cent year-over-year; while on-platform TPV penetration increased from 15.6 per cent of GMV in the fourth quarter of 2019 to 25.7 per cent of GMV in the fourth quarter of 2020.
The company, however, ruled that the development of the pandemic remains a fluid situation and it expects the pandemic as a factor, to drive the continued operating environment uncertainty. Also, it expects the economic challenges induced by the pandemic to negatively impact consumer sentiment and spending power.