Deliveroo shares were up on Thursday as the delivery giant moved closer to breaking even, but concerns persist over its ability to meet demanding growth forecasts amid cuts to marketing.

The UK-listed takeaway delivery group said it experienced a “resilient year of growth given macroeconomic conditions”. Gross profit was up 13% and revenue and GTV (gross transaction value) up 3%. Those measures were up 2% and 3% respectively on a constant currency basis.

The growth trend improved in the second half, when GTV rose 5% year on year. Order numbers recovered through the year to be flat year on year by the end of its fourth quarter.

Most notably, the group made significant progress on profitability. It posted adjusted EBITDA of £85m, up from a loss of £45m in the previous year. Profit improvement levers included efficiencies in the delivery network, optimisation of marketing spend, overheads savings and a higher advertising contribution.

As a result of improved margins, gross profit margin (as percentage of GTV) rose to 10.3% from 9.4%. Deliveroo cut its headline loss for the period from £294.1m to £34.8m.

Despite prioritising continued bottom line improvement, the group pledged continued investment and innovation in its consumer value proposition, with enhanced selection and in-app experience, premium delivery, top-up grocery orders and launch of a retail proposition.

In particular it identified “strong levers for profitability and cashflow”, including reducing rider wait time and smarter order stacking, increased marketing efficiency, and greater automation.

In the medium term it is targeting a mid-teens percentage growth per annum in constant currency GTV, while it is aiming for an adjusted EBITDA margin of 4% by 2026.

For 2024, GTV growth (in constant currency) is anticipated to be in the range of 5% to 9%. Growth is expected to improve through the year, with adjusted EBITDA in the range of £110m-£130m.

AJ Bell commented: “If Deliveroo can truly deliver positive cash flow in 2024 as it expects then it will be a very significant milestone for a business which came to market racking up losses as it battled Uber Eats and Just Eat Takeaway for supremacy in the food delivery market… This feels like a market where being the leader brings with it real benefits and further consolidation in the space cannot be ruled out.”

Jefferies cautioned: “The big challenge here is that the GMV guidance is back-end weighted and there is a need to inflect customer and order growth materially in the second half to achieve guidance.”

Shore Capital also noted: “GTV growth guidance not particularly supportive of the meaningful market share gains required to reach number one status in key markets… we believe marketing cost reductions are at risk of reversing as the group is still not a clear leader in its key markets.”

Deliveroo shares rose 2.2% to 117p by Thursday lunchtime and are now up by almost 25% year-on-year.

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