UK food-delivery service Deliveroo Plc reported that annual sales rose 14% last year when inflation and economic headwinds hit customers.
(Bloomberg) — UK food-delivery service Deliveroo Plc reported that annual sales rose 14% last year when inflation and economic headwinds hit customers.
Revenue rose to £1.97 billion ($2.4 billion) and its operating loss was £245.6 million last year, the company said in a statement Thursday.
Shares fell 3% to 86.88 pence at 10:11 a.m. in London.
The company said it reached a key milestone of profitability in the second half of 2022, posting positive adjusted earnings before interest, taxes, depreciation and amortization sooner than its earlier guidance.
Chief Executive Officer Will Shu attributed this to slimmer marketing and a nascent in-app advertising business, which Deliveroo began growing last year.
“It was a really tough consumer environment,” Shu said in an interview. “As we look forward this year, we are cautiously optimistic.”
Food delivery companies have shifted strategies to focus on their bottom line as inflation and a return to dine-in restaurants after the pandemic-era restrictions hurt their business. Deliveroo significantly scaled back operations last year, exiting from Spain, Australia and the Netherlands. In February, it announced plans to cut 9% of its workforce.
What Bloomberg Intelligence Says:
Deliveroo’s defiant 2023 adjusted Ebitda target, 47% above the 28-day consensus, implies sharp upgrades while growth disappointed. The goal is feasible after the Australia exit, job cuts and stricter marketing spending, but the latter impairs a client-growth recovery which is ultimately needed to halt cash burn. As delivery prices are already dissuading some orders, Deliveroo depends on steady demand from a core base, which is skewed toward the more affluent in contrast with Just Eat.
— Diana Gomes, BI retail industry analyst
Shu said that the company doesn’t plan to expand into new markets currently. He also said he didn’t expect any further job cuts.
Adjusted earnings before interest, taxes, depreciation and amortization will be £20 million to £50 million, weighted toward the second half of this year, the company said. It reported many of its key 2022 figures in a trading update in January.
“The macro environment layered on top of a pandemic comp and the need to monetize is making top line challenging for the whole industry,” Barclays analyst Andrew Ross said in a note. “But Deliveroo continues to gain share in the key UK market (amongst others) and is heading in the right direction profit wise.”
Deliveroo also announced a share buyback of as much as £50 million, following its recently completed £75 million share purchase program.
After Deliveroo’s initial public offering in March 2021, the business has struggled to contain widening losses in the competitive delivery market. The stock has dropped 78% since it debuted as a darling of the UK technology sector.
(Updates with analyst comment in tenth paragraph. A previous version of this story was corrected to remove an analyst estimate that wasn’t comparable to results.)
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