516% valuation of shares leads Farfetch to losses of 3.3 billion in 2020 – Companies

Luxury fashion online retailer led by Portuguese José Neves reported annual losses of $ 3.3 billion ($ 9.75 per share) [66 cêntimos por ação numa base ajustada]), against a loss of 373.6 million a year earlier.

In the fourth quarter, Farfetch reported a loss of 2.28 billion, when in the same period of 2019 it recorded a negative net result of 110.1 million dollars.

To justify these losses is, to a large extent (more than 90%, the rest being due to impairments), the valuation of the shares – which must be reflected in the accounting due to the convertible obligations with which the company is financed and also the payments share-based payments (the so-called share-based payments that are attributed to employees).

“The reported loss after tax of $ 2.3 billion in the fourth quarter and $ 3.3 billion in the year reflects the non-monetary impact of convertible notes,” stresses Elliot Jordan, the company’s CFO.

In 2020, Farfetch obtained financing of $ 1.2 billion at low or non-existent interest rates, through convertible bonds. “This financing allowed us to invest in the business and execute our vision for the platform. As with any financing operation, we made an assessment of the return on investment and we believe that the value created by these investments for shareholders far exceeds the cost. for the business “, he adds.

Elliot Jordan also points out that the Farfetch share price has risen “significantly in 2020”. “As the company’s market valuation increases, so does the value of bonds and the cost associated with them, albeit at a reduced fraction compared to market valuation. The reverse would also be true – a devaluation of the stock’s value would represent a reduction in the value of convertible bonds “.

Revenues increase and there are profits at the EBITDA level

The company’s revenues were 1.67 billion in 2020, an increase of 64% compared to 1.02 billion in 2019. In the fourth quarter they amounted to 540.1 million, 41% more than the 383.2 million obtained between October and December of the previous year.

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Another positive highlight of the last quarter of 2020 is the fact that the company achieved profits at the level of adjusted EBITDA for the first time.

“We are very pleased with Farfetch’s financial performance in the last year. And the appreciation of the share price over the last year shows that the company has enabled significant value creation for holders of convertible bonds, as well as for our shareholders. shareholders, “says Elliot Jordan.

José Neves pointed out, in this presentation of the accounts, that 2020 put the Farfetch platform to the test but that, “thanks to our robust capabilities, resilient operations and the maximum perseverance of the more than 5,000 Farfetchers, we were up to the challenge, allowing the our close to 1,400 Marketplace sellers and customers of the Farfetch Platform Solutions continually serve millions of luxury consumers worldwide. “

With the entry into 2021, the founder, CEO and chairman of Farfetch says he feels more energy than ever “with the prospect of leveraging the incredible achievements achieved so far and the unique capabilities of the platform to go after the significant growth opportunities we see in our goal of being a digital enabler that connects creators, curators and consumers in the global luxury industry, both online and offline – an opportunity of approximately $ 300 billion “.

The shares of the company, based in London and listed since September 2018 on the New York Stock Exchange, shot up 516.5% in 2020, having started the year worth $ 11.11 and ended at $ 63.81 – and having reached trading in the $ 70 range.

Now, bonds continue to fall 7.87% to $ 58.79 in the “after hours” of the New York market.

(news updated at 21:57)