Deliveroo shares slip despite revenue soaring and lockdown orders doubling
Lockdown favourite Deliveroo revenue jumped 82 per cent to £922m in the first half of the year, results out this morning showed.
The number of orders doubled to shy of 150m in the first half of 2021 compared with 75m during the same period last year when the first national lockdown was introduced.
Deliveroo said the results, which were “materially ahead” of expectations, reflected its strong engagement with customers who continued to order from the delivery company even as lockdown restrictions eased.
The average number of customers using the merchant increased to 7.8m in the second quarter of 2021 compared to 4.3m last year.
Gross transaction value was up 102 per cent to £3.4bn compared to last year. In the UK and Ireland it was even higher, at 110 per cent, leading Deliveroo to observe “no material impact from UK reopening milestones during Q2 2021.”
Susannah Streeter, a senior investment analyst at Hargreaves Lansdowne, observed that “investors appeared to have lost a little appetite for shares in early trading.”
In spite of the strong results Deliveroo shares fell by 3.9 per cent this morning.
“Despite the surge in revenue,” Streeter explained, “the company still doesn’t make a profit – although its pre-tax losses have narrowed again to £104.8 million against £128.4 million a year earlier.”
Streeter did however accede that Deliveroo’s business model had been given a vote of confidence after its German rival, Delivery Hero, purchased a £300m stake in the company this week – pushing up Deliveroo shares by 10 per cent to its highest level since it began trading.
By offering more higher end restaurant options than some of its rivals and applying a hyper-localised delivery approach, Deliveroo has been able to differentiate itself from its competitors, Streeter said.
“There is speculation growing that Deliveroo could potentially be a target for takeover given the rush of acquisitions in the British market,” she added.
AJ Bell financial analyst Danni Hewson agreed that “the need for scale, fierce competition and significant costs associated with the takeaway sector means further consolidation could be on the cards.”
“Hopes that the Delivery Hero stake-building might be a precursor to a full bid look premature however,” he added, “given Deliveroo founder Will Shu has a controlling position under the company’s dual class structure which would allow him to rebuff any deal for the next three years.”
Founder and CEO Will Shu said: “We are seeing strong growth and engagement across our marketplace as lockdowns continue to ease. Demand has been high amongst consumers. We have widened our consumer base, seen people continuing to order frequently and we now work with more food merchants than any other platform in the UK.”
The online food delivery company reiterated its upgraded full year guidance, updated on 8 July, for gross transaction value to increase by 50-60 per cent for the whole of 2021.