Just Eat posts revenue surge of 52 per cent but struggles to turn a profit in fight for market share
Strong demand for food delivery amid the last of the Covid restrictions persisted in the first half of the year and boosted Just Eat Takeaway’s revenue, but efforts to increase its share of the crowded market impacted profitability.
Revenue in the first six months of the year grew to €2.6 bn (£2.2bn) – a 52 per cent increase on the same period a year earlier, when the company made €1.8 bn (£1.5bn).
But the company’s spending drowned out gains, as it plummeted to a €71m (£60.6m) underlying pre-tax loss in the UK, from a €127m (£108m) profit in the same period last year.
Just Eat Takeaway.com’s adjusted earnings before tax stood at minus €190m, representing an adjusted margin of minus 1.3 per cent of gross transaction value.
It comes after a rocky year for the delivery company’s share price as it struggled to fend off a series of profit warnings, which will likely be on investors’ minds despite its strong sales figures and focus on increasing its market share in the crowded food delivery space.
“Eventually, shareholders will want to see those investments pay off. Until Just Eat starts meeting shareholder’s profit expectations, its share price will continue to disappoint,” said Mark Crouch, analyst at multi-asset investment platform eToro.
Just Eat cited its “significant investment efforts” in its legacy markets as the reason for its losses, as the firm focused on increasing its market share in the long-term through expanding its delivery services, focusing on marketing activities and competitive delivery prices.
The delivery company added a plethora of 90 new restaurant brands during the first half of the year, including Leon and Le Pain Quotidien, as lockdown restrictions drove a switch to deliveries.
The company’s online share gains in the UK, where Just Eat saw a record number of 58 million orders to 135 million orders – what it said represented the “highest absolute order growth in the sector.”
Just Eat said: “This significant growth was driven by our investment programme in marketing and delivery, increasing brand visibility and targeting a period of aggressive price leadership and the expansion of restaurant supply.”
Just Eat finally completed its $7.3bn (£5.75bn) acquisition of US food delivery rival Grubhub in the period, representing the company’s entry into the US online food delivery market midway through June, a year after the deal was agreeed.
Grubhub’s order growth rate of 27 per cent in the first half of the year represented a “very promising” performance for Just Eat’s new business segment, the company said.
Just Eat’s order growth excluding Grubhub surged 45 per cent year-on-year, and reported a strong performance in the UK, where 135m orders were processed to June 30 – a growth rate of 76 per cent compared with the same period last year.
The London market, in which the company has endured a historically low market share in recent years with Londoners favouring Deliveroo or Uber Eats, has swelled. It enjoyed a triple-digit order growth in the first half of 2021 compared to 2020.
Overall UK orders for the first six months also grew 700 per cent compared to the same period last year, as Just Eat’s marketing activities began to pay off – a pattern it hopes to replicate in its other markets.
“Our consumer base, restaurant selection and order frequency have strongly increased, which will lead to improved profitability going forward,” said Jitse Groen, CEO of Just Eat.
“The investment in delivery and extensive brand marketing is a long-term market share play but will serve to crimp margins, especially if delivery volumes cannibalise marketplace orders which are significantly more profitable overall,” said Dan Thomas, assistant vice president at investment research company Third Bridge.
“Competition in Germany, Just Eat Takeaway’s second highest margin region in H2, will also be a concern. Where Takeaway’s Lieferando brand had previously dominated the market, Delivery Hero’s re-entry will reignite the fight for market share in the country.”
Just Eat’s shares were up 2.3 per cent at midday after the release of their results.