Deliveroo [ROO] this morning reported that its half-year revenue grew 12% year-on-year to £1.01bn, driven by a 10% increase in orders, as gross transaction value (GTV) grew 7% to £3.6bn. However, the delivery company's loss before tax also grew, coming in at £147m for the first half of 2022, compared to a loss of £95m in the year-ago period, as selling more resulted in losing more.
Looking ahead, the company maintained its guidance for full-year GTV growth to be in the range of 4% to 12%. This news, alongside increased revenue, market share gains in the UK and expansion of its restaurant, grocery and non-food delivery categories, appeared to satisfy investors, with Deliveroo shares up 2.4% from yesterday's closing price of 91.24p, as of 8:15 this morning. By 9am, those gains had extended to 3%.
Deliveroo shares still way down on IPO price
Gauging whether the Deliveroo share price has bottomed out has been an almost impossible task over the last 12 months. The shares have plummeted more than 70% in the past year, dropping below 100p in May after the Q1 numbers were released, before briefly falling below 80p in June.
Despite rising back above 94p this morning, the shares remain a long way off last April's IPO price of 390p. Nevertheless, today's half-year results suggest that the shares might be finding a base.
It's been a tough few quarters for the food delivery sector, with Deliveroo rival Just Eat writing down the value of its US business, while Uber Eats has been providing competition.
Deliveroo continuing to grow
The company is still growing, as today's announcement of a 12% increase in half-year revenue demonstrates. These latest results build on the full-year numbers for 2021, released in March, which showed that revenue had increased 57% to £1.82bn. Losses last year also increased, rising to £298m from £213m in 2020, while margins tightened to 7.5% last year, down from 8.7% a year earlier, as marketing and overheads spend rose by 75% to £628.7m.
Looking forward, the company said it hoped to break even by 2024 on a full-year basis. On medium-term Gross Transaction Value (GTV), bosses expect to see growth at around 20% a year. But a few weeks ago, Deliveroo lowered its GTV guidance for the current year to between 4% and 12%. That said, guidance on EBITDA was kept unchanged.
The company has recently added McDonalds and non-food stores, such as WHSmith and Lloyds Pharmacy, to its platform. Deliveroo has also signed deals with Amazon and Waitrose, which helped to push Q1 GTV up 11% year-on-year to £1.79bn.
Challenging outlook
Despite the company's growth, the cost of living crisis presents challenges, as takeaways may be high on the list of potential savings when households make cutbacks.
Marketing spend is also denting hopes of profitability Although the half-year results showed that gross profit was up 16% year-on-year at £300.9m, marketing and overheads wiped out these gains, leaving the company to post adjusted EBITDA of negative £68m for the first half of the year. Compared to a year ago, marketing and overheads costs were 29% higher. While the company said that it had taken steps to reduce these costs, marketing and overheads as a percentage of GTV were higher than a year ago at 10.4%.
In more encouraging news for shareholders, Deliveroo remains on course to post revenue of over £2bn this year, as the company maintained its full-year EBITDA guidance. The company also announced a share buyback programme of £75m.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
