Deliveroo approaches margin breakeven as higher average order costs offset lower overall deliveries
- Adjusted profit margin is expected to be around minus 1% of GTV for 2022
- Orders on Deliveroo’s website rose 5% to almost 300 million last year
- Since its creation ten years ago, Deliveroo has not recorded a profit
Deliveroo’s underlying profit reached break-even levels across all operations in the second half of last year, helping the company raise its full-year guidance.
The food delivery giant’s adjusted profit margin is now expected to be around -1% of gross transaction value for 2022, due to better cost management and improved gross profit margins.
It is the second time in recent months that the London-based company has raised its profit forecast for the full year, after raising its outlook to between -1.2% and -1.5% in October. .
Expectations: The food delivery giant said its adjusted profit margin should now be around minus 1% of gross transaction value for 2022.
Despite tougher economic times and a relative lack of Covid-19 restrictions, orders on the company’s website continued to surge, rising 5% to just under 300 million.
They were down 2% year-on-year in the last three months of the period, but rising prices and consumer fees boosted gross transaction value (GTV) – the total value of orders processed on its platform. form – from £145million to around £1.8billion.
Growth was strongest in the UK and Ireland, while the international segment was impacted by the decision to exit Australia and the Netherlands due to cost of future investments and impact on profitability ensuing.
Since its inception a decade ago, Deliveroo has failed to make a profit despite the pandemic leading to a surge in app-to-go orders as hospitality venues around the world were forced to temporarily close.
Will Shu, Founder and Managing Director of Deliveroo, told investors: “As always, we continue to focus on strengthening our offering for every side of our market through a hyperlocal lens.
“In an uncertain environment for 2023, we remain confident in our ability to adapt financially and to continue our progress on the path to profitability.”
The London-listed company has spent huge sums on marketing, technology and hiring new staff to compete with rival delivery groups like Just Eat and Uber Eats.
While it has cut costs and expects further improvement in profits, elevated economic uncertainty and pressure on consumer incomes threaten its expansion.
Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, remarked: “Deliveroo is optimistic in its ability to remain financially flexible.”
However, she warned: ‘At some point, customers will find it hard to stomach further price increases, especially as their budgets face a severe squeeze elsewhere.’
Shares of Deliveroo rose 0.3% to 92.3p late Thursday morning, but are still more than three-quarters below their initial public offering price.
The company’s latest business update comes a day after Just Eat also said its second-half profit rose on higher prices and delivery costs, as well as lower business expenses, even if the order total had dropped.
The Amsterdam-based operator announced a better-than-expected adjusted profit of 16 million euros in 2022, after recording a loss of 350 million euros the previous year.
