United Internet Still Believes in Rocket Despite Writedown
(Bloomberg) — United Internet AG, the third-biggest shareholder in Rocket Internet SE, said it still believes in the German startup factory even after a writedown of its investment pulled quarterly results into a loss.
The non-cash impairment charge had a 156.7 million-euro ($176.8 million) impact on first-quarter earnings before taxes, United Internet said Tuesday in a statement. That lowered earnings per share by 77 euro cents, to an overall loss of 27 euro cents a share.
READ MORE: United Internet Acquires Stake in Venture Capital Firm Rocket Internet
The impairment doesn’t affect United Internet’s dividend policy or its guidance for the year, the company said. United Internet holds 8.3 percent in Rocket, a stake valued at about 278 million euros, according to Bloomberg data.
“The development of Rocket companies is advancing and many things already work well, but it naturally takes time,” United Internet Chief Executive Officer Ralph Dommermuth said in a phone interview. “While the share price could be more positive, I’m convinced that investments in Internet companies like Rocket will pay off in the medium and long-term.”
Drag on Stock
Shares of United Internet rose as much as 4.1 percent as the company reported first-quarter sales and profit from its operating results that beat estimates, after signing up 270,000 new customers.
The second quarter started “very well” when it comes to user gains and the company may potentially raise its customer development guidance if the trend continues in the coming months, Dommermuth said. The company, which competes with Deutsche Telekom AG and Vodafone Group Plc selling telephone and Internet access and services, is open to buying international web-hosting companies and possibly more city-owned telecommunications networks, he said.
United Internet’s results would have been better without the Rocket investment. Rocket shares have declined about 28 percent this year as the company faces pressure to prove its investments will pay off. The company, which helps guide a stable of startups such as HelloFresh, Westwing and Delivery Hero, showed little progress reducing losses at several of them last year.
Many of its companies were still in the growth phase and needed investments in 2015, CEO Oliver Samwer said earlier this year, vowing to show “significant” improvements in profitability this year and next.
Investment AB Kinnevik, the second-biggest shareholder in Rocket, will evaluate its stake once the holdings will mature in two to three years, CEO Lorenzo Grabau told Dagens Nyheter. The Samwers still are the biggest shareholder in Rocket.
By Stefan Nicola
Source: TheWHIR