Just Eat shares fall on 2019 outlook despite jumps in profit and revenue
Just Eat scored huge boosts to profit and revenue in 2018 to relieve shareholder pressure to merge with a rival, it revealed today, but warned losses will impact 2019 earnings.
The figures
Profit before tax rose to £101.7m after a loss of £76m in 2017.
Revenue rose 43 per cent year on year to £779.5m, while cashflow slipped six per cent to £157.3m as it snapped up rival Hungry House.
Basic earnings per share soared from a loss of 15.2p in 2017 to 12.1p last year.
Read more: Uber Eats cuts app fees to compete with rivals Just Eat and Deliveroo
Why it's interesting
Shares fell 4.4 per cent to 746.2p in early morning trading despite the strong results, as investors reacted to news of a challenging 2019.
While Just Eat has guided to £1bn of revenue this year, almost half of underlying earnings of between £185m and £205m will be wiped out by losses in Mexico and Brazil.
“That compares with the £174m it has just unveiled for 2018 and shows how hard it is to become consistently profitable in this cut-throat business with heavy up-front investment demands,” said Tom Stevenson, investment director at Fidelity Personal Investing’s share dealing service.
“Shareholders are pressing for a merger to create scale in a winner-takes-all game.”
It comes after 1.9 per cent shareholder Cat Rock Capital urged the food delivery business to merge with a rival to find strong leadership after the departure of former boss Peter Plumb, who had no online delivery experience.
Plumb left abruptly in January after shareholders reacted angrily to an investment drive that hit earnings growth as he built up a delivery service to compete with Deliveroo and Uber Eats.
Cat Rock subsequently called for a tie-up – rather than a new chief executive – “particularly given the board’s poor record of chief executive selection”.
Begbies Traynor partner Julie Palmer warned that the business now faces one of its most challenging years to date, pointing to Uber Eats' push to allow restaurants to deliver and cutting fees for listing.
“Just Eat will need to be wary of this threat and continue to listen to the needs of not only consumers, but its customers too,” she said.
“Moreover, the government’s new digital tax will be an unwelcome addition to the menu as businesses will have more fiscal red tape to comply with.
“With increased competition and greater fiscal red tape, Just Eat will need to get the ingredients just right if it’s to continue to enjoy a sizeable slice of the market share.”
What Just Eat said
Interim chief executive Peter Duffy said: “We are creating a leading hybrid offering founded on our unrivalled marketplace, combined with the targeted roll-out of delivery. This gives our growing customer base access to the greatest choice of restaurants and drives even more orders to our restaurant partners, ultimately strengthening the network effects of our business.
Read more: Just Eat faces pressure as Cat Rock says investors back calls for merger
“We have a clear plan for the year ahead as our highly experienced team works hard to accelerate the execution of our strategy and we remain focused on long-term returns for shareholders.”
Chair Mike Evans added: “The strategy set out last year is working and already delivering strong results. Our experienced management team, led by Peter Duffy, is working to accelerate the implementation of that strategy.
“Our leading hybrid marketplace gives Just Eat a real competitive advantage and we are pleased with the speed at which this is now being rolled out. The board's search to identify Just Eat's next permanent chief executive is underway and we will provide a further update when a decision has been taken.”