Deliveroo’s underlying earnings hit breakeven levels amongst all divisions
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Deliveroo is approaching break-even on margins as higher average order costs offset drop in total deliveries
- The adjusted profit margin is expected to be approximately minus 1% of GTV for 2022
- Orders on Deliveroo’s website rose 5% last year to nearly 300 million
- Deliveroo has not turned a profit since it was founded ten years ago
Deliveroo’s underlying profit reached break-even levels across all businesses in the second half of last year, helping the company improve on full-year expectations.
The food delivery giant’s adjusted profit margin is now expected to be around -1 percent of gross transaction value for 2022, due to better cost management and improved gross profit margins.
This is the second time in recent months that the London-based company has revised its full-year earnings forecast, having previously raised its outlook to between -1.2 and -1.5 percent in October.
Expectations: The food delivery giant said its adjusted profit margin is now expected to be about minus 1 percent of gross transaction value for 2022
Despite a more challenging economic backdrop and the relative absence of Covid-19 restrictions, orders on the company’s website continued to grow, rising 5 percent to just under 300 million.
They were down 2% year-on-year in the last three months of the period, but higher prices and consumer fees increased gross transaction value (GTV) – the total value of orders processed on the platform – by £145 million to around £1. 8 billion.
Growth was stronger in the UK and Ireland, while the international segment was impacted by the decision to exit Australia and the Netherlands due to the cost of future investments and the associated impact on profitability.
Since its inception a decade ago, Deliveroo has failed to turn a profit despite the pandemic sparking a surge in orders for takeaway apps as catering establishments around the world have been forced to temporarily close.
Will Shu, founder and CEO of Deliveroo, told investors: “As always, we remain focused on strengthening our offering for every side of our market through a hyperlocal lens.
“Amid an uncertain outlook for 2023, we remain confident in our ability to adjust financially and make further progress on our path to profitability.”
The London-listed company has spent significant amounts of money on marketing, technology and hiring new employees to compete with rival delivery groups such as Just Eat and Uber Eats.
While it has cut costs and expects earnings to improve further, heightened economic uncertainty and pressure on consumer incomes threaten expansion.
Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, commented: ‘Deliveroo is optimistic in its ability to remain financially flexible.’
However, she cautioned: “At some point, customers will find it difficult to tolerate further price increases, especially as their budgets face severe tightness elsewhere.”
Deliveroo shares rose 0.3 percent to 92.3 pence during late Thursday morning, but their value remains more than three-quarters below the initial public offering price.
The company’s latest trading update comes a day after Just Eat also stated that second-half profits were up on rising prices and delivery costs, as well as lower operating costs, even though overall orders fell.
The Amsterdam-based operator reported a better forecast adjusted profit of €16 million in 2022, following a loss of €350 million last year.