20th Apr 2022 10:03
(Alliance News) - Just Eat Takeaway.com NV shares reacted positively to news the firm is mulling the sale of recently acquired Grubhub Inc, with investors hoping the divestment is part of a push to prioritise profitability over market share.
Just Eat Takeaway.com on Wednesday said its fortunes at the start of 2022 stacked up well against the Covid-19 boosted first quarter of 2021, though it slightly tweaked annual guidance.
The company added that it expects profit to "gradually" improve as the year drags on. The takeaway delivery company targets profit at an earnings before interest, tax, depreciation and amortisation level in 2023.
Total orders for the first quarter of 2022 were 264.1 million, down 1.1% year-on-year from 267.1 million. However, gross transaction value increased 3.9% annually to EUR7.24 billion from EUR6.96 billion.
The average transaction value was higher this time, Just Eat Takeaway.com said.
For 2022, it lowered gross transaction value guidance. It expects gross transaction value to rise by mid-single digits. It had previously targeted growth in the "mid-teens".
But the adjusted Ebitda margin is now expected to sit in the range of minus 0.5% to minus 0.7%. This is a slight improvement from previous guidance of minus 0.6% and minus 0.8%. In 2021, the adjusted Ebitda margin was minus 1.2%.
Enhancing profitability is one of the firm's "highest priorities" in 2022, with a focus on increasing revenue and lowering courier costs per order.
These comments are a far cry from Just Eat Takeaway.com's update for the first quarter of 2021, when it said it would "continue to invest heavily and prioritise market share over adjusted Ebitda".
Alongside Wednesday's trading update, the takeaway delivery company said it and its advisers are exploring options for Grubhub. This could include introducing a "strategic partner" in order to sell a stake, or even all of its holding in Grubhub, which it agreed to purchase back in June 2020 for USD7.3 billion. The Grubhub deal only completed in June 2021.
Shares in Just Eat Takeaway.com were up 3.3% at2,242.00 pence in London on Wednesday morning - though remain 72% below where they stood a year ago.
Mulling a sale of Grubhub sounds like bad news given how recently it was acquired, said Hargreaves Lansdown Select fund manager Steve Clayton, but investors seem optimistic that it will lead to a focus on "profitability rather than expansion at any price".
"With the food delivery sector changing fast, as firms move into grocery deliveries alongside their existing services, JET is reviewing how it needs to be structured for the years ahead. That means that despite spending over USD7bn to acquire Grubhub, one of North America's leading delivery platforms, JET is already contemplating whether it has a future in the group," said Clayton.
A tougher backdrop for food takeaway platforms has been widely reported since the ending of Covid lockdowns, with consumers eager to catch up on missed months of dining out.
Just Eat peer Deliveroo PLC last week reported a rise in orders in the first quarter of 2022, but average spend per order decreased. Fewer, larger orders are more profitable for Deliveroo because its largest cost is its workforce of gig-economy riders.
Deliveroo Founder & Chief Executive Will Shu has repeatedly cautioned that consumer behaviour may "moderate" in the coming months following a pandemic-driven boom period.
AJ Bell's Russ Mould said: "Just Eat shares have struggled for months as it has lost customers gained during the pandemic as consumer habits shift back to dining out rather than booking a takeaway. Key to success in this highly competitive market is scale, however selling Grubhub could give Just Eat Takeaway the resources necessary to dominate in Europe."
Grubhub's price tag will be closely watched, as any figure below the USD7 billion it paid for the US platform could be embarrassing for Just Eat Takeaway.com.
"However, sparing management's blushes should not be the priority and if this is the right decision for the future of the business then it seems logical for Just Eat to press ahead with a sale," said Bell.
By Lucy Heming; [email protected]
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