19th Jan 2023 14:46
(Alliance News) - Deliveroo PLC on Thursday said it delivered "significant" improvements toward profitability during 2022, but analysts warned that the company still has a long way to go amid cost-of-living troubles.
For the full year, the London-based food delivery services firm said gross transaction value increased to GBP7.08 billion for all operations, including results from Australia and the Netherlands until operations there ended in November 2022.
This represented year-on-year growth of 7% in reported currency and 5% in constant currency.
Excluding operations in Australia and the Netherlands, the business saw 9% growth, or 7% in constant currency, to GBP6.85 billion.
As a result, Deliveroo said now expects to report an adjusted earnings before interest, tax, depreciation and amortisation margin as percentage of gross transaction value of negative 1.0%.
This is better than previous guidance of between negative 1.2% to negative 1.5% and also improved from 2.0% in 2021.
For Russ Mould at AJ Bell, the numbers showed the company was "at least...travelling in the right direction" but acknowledged it "still has a long way to go before it makes any big money".
Mould added that cynics may simply regard the adjusted Ebitda measure as a firm attempting to rely on "earnings before bad stuff" in an attempt to portray a positive picture.
"No-one should be under any illusions. Deliveroo is still losing money and, using officially recognised accounting benchmarks rather than self-adjusted ones, analysts do not expect the company to turn a profit until 2025 at the earliest," he said.
Cost-of-living crisis pressures were a major theme of concern among analysts looking at Deliveroo's chances to finally making into the black.
"Deliveroo has been punished by the cost-of-living crisis as consumers look for way to slim down their budgets, cutting back on discretionary spending such as on takeaways and other deliveries," said interactive investor's Victoria Scholar.
Scholar pointed to declining order volumes during the year as evidence of these consumer pressures.
Overall order numbers declined by 2% year-on-year, though inflation-linked price adjustments offset that to keep gross transaction value moving higher. While the number of orders in the fourth quarter, excluding Australia and the Netherlands, fell to 75.1 million from 76.8 million a year before, GTV per order rose to GBP23.9 from GBP21.5.
AJ Bell's Russ Mould warned that if this goes into reverse over the coming months, then Deliveroo will suffer.
"Deliveroo benefits from higher-priced meals as it takes a cut of the order value, but many consumers will no longer be able to afford to get a curry or pizza sent to their house instead of cooking themselves," he explained.
ii's Victoria Scholar noted, in addition to current cost-of-living pressures, the delivery business was already a "notoriously tricky sector" with slim margins, high costs, and the onslaught of competitors such as Just Eat Takeaway.com NV and Uber Technologies Inc's Uber Eats.
AJ Bell's Mould agreed, adding that restaurant chains also have their own delivery services and hungry consumers will always still have the option to eat out or buy food from a supermarket or local store and cook it themselves.
Nonetheless, Russell Pointon, director of consumer at Edison Group, was cautiously optimistic for Deliveroo. He argued that if the firm can keep the balance between offsetting costs and retaining its market share, its results "may well turn out to be slightly better than expected".
Shares in Deliveroo were up 0.9% at 92.93 pence on Thursday afternoon in London. Over the past 12-months, the stock is down 45%.
By Heather Rydings, Alliance News senior economics reporter
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