14th Mar 2024 16:03
(Alliance News) - While a "fiscally responsible" approach seems to have set Deliveroo on the right path, the food delivery firm still has a way to go if it wants to be number one, suggested analyst consensus on Thursday.
For the year ended December 31, the London-based takeaway and grocery delivery firm posted a pretax loss of GBP10.9 million, narrowed from GBP230.6 million in 2022.
Adjusted earnings before interest, tax, depreciation and amortisation swung to GBP85.4 million from a loss of GBP45.0 million a year prior, while revenue rose 2.8% to GBP2.03 billion from GBP1.97 billion.
Gross transaction value was 3.1% higher at GBP7.06 billion from GBP6.85 billion.
Deliveroo faced some challenges during the first half, with several markets struggling with the impact of "persistent high food price inflation", but as this declined, GTV improved, said Edison Group's Russell Pointon.
Accordingly, GTV growth went from 1% in the first half of the year to 5% in the second half, on a constant currency basis. The UK & Ireland enjoyed 7% growth, while Deliveroo's international business saw a 3% GTV decline.
After entering the market, Deliveroo found itself something of a third fiddle to peers Uber Eats and Just Eat Takeaway. According to analysts, the firm has managed to get itself back on the right foot, in part, because of tight cost management.
Central costs were "well controlled" over the year, said Shore Capital's Bradley Hughes and Greg Johnson. These fell 7% to GBP641 million from GBP688 million, "driven by a reduction in marketing spend and people expenses".
However, what this "tight control of the purse strings demonstrated", with marketing expenditure materially lower, "has come at a bit of a cost", said AJ Bell's Russ Mould.
"Order numbers were down across 2023 as a whole, hinting at households feeling more constrained in treating themselves to a takeaway and that there may be a price to paid for Deliveroo's more fiscally responsible approach," Mould explained.
For 2024, Deliveroo expects an adjusted Ebitda in the range of GBP110 million to GBP130 million. It predicts it will be free cash flow positive this year, after reducing its outflow to GBP38 million in 2023, from GBP243 million in 2022.
According to Edison's Pointon, Deliveroo seems "to be on a good trajectory" moving into this year and beyond. Nevertheless, the delivery firm still has quite a hill to climb if it wants to reach the top.
"[Deliveroo's] results and guidance [appear] in-line to slightly softer than consensus expectations with GTV growth guidance not particularly supportive of the meaningful market share gains required, in our view, to reach number one status in key markets," said Shore's Hughes and Johnson.
"We believe marketing cost reductions are at risk of reversing as the group is still not a clear number one player in its key markets and is introducing new nascent supply verticals (retail) required to build the ramp to medium term guidance for teens GTV growth," they added.
And, as AJ Bell's Mould emphasised, Deliveroo is trading in "a market where being the leader brings with it real benefits".
"The shares still languish a long way below their IPO levels, suggesting the company has work to do to convince the market it can prevail against its rivals," Mould said.
Deliveroo shares were up 117.20 pence each in London on Thursday afternoon.
Shares have risen 19% over the past 12 months. The stock is languishing 71% below its March 2021 initial public offering price of 390p, however.
By Holly Beveridge, Alliance News reporter
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