17th Mar 2022 15:28
(Alliance News) - Deliveroo PLC shares were on the up on Thursday after the takeaway delivery platform predicted it is roughly two years away from breakeven.
The "path to profitability" is not likely to be an easy ride, however. Consumers are facing rampant inflation and takeaways could be a luxury that some cannot afford.
"For now it does appear that some pandemic habits are sticking around, with restaurant deliveries staying popular, on-call groceries increasingly in demand and a growing source of revenue for Deliveroo. But the cost-of-living squeeze is intensifying and as savings are eaten away, there may be less appetite to pay for an easier life," Hargreaves Lansdown analyst Susannah Streeter commented.
In the UK, the Bank of England predicted the annual inflation rate could heat up to 8% in the second quarter of 2022.
"With many supermarkets and restaurants set to pass on the cost of higher commodity prices, more consumers may begin to trim budgets by starting with little luxuries like take outs, and that still could puncture Deliveroo's ambition to break even in two years," Streeter added.
For 2021, Deliveroo's revenue was GBP1.82 billion, up 57% from GBP1.16 billion in 2020, but its pretax loss widened to GBP298.2 million from GBP212.6 million.
Administrative expenses surged 43% to GBP785.9 million.
Deliveroo expects to reach adjusted adjusted earnings before interest, tax, depreciation and amortisation breakeven at some point in the second half of 2023 or first half of 2024. It would represent a "key milestone on the path to achieving its longer-term profit ambitions".
Deliveroo shares were 6.1% higher at 123.65 pence each in London on Thursday afternoon.
AJ Bell analyst Russ Mould commented: "For now shareholders seem encouraged by the company's ambition and the greater the scale, the better the business should perform."
"However, there is a danger that the cost of living crisis pushes ordering in from an affordable treat for most households to something only more affluent families can afford to do regularly, putting pressure on Deliveroo's growth."
In 2021, Deliveroo's gross transaction value rose 67% to GBP6.63 billion.
Looking ahead, Deliveroo guides for 15% to 25% growth in GTV at constant currency in 2022, with a higher growth rate in the second half than in first half, due to a stronger comparative for the first half.
By Eric Cunha; [email protected]
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