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Deliveroo has upgraded its profit guidance for the year despite falling order numbers amid “challenging macroeconomic conditions”.
The takeaway group posted a 3% rise in gross transaction value in the first half of its financial year (1% in constant currency), with revenues was up 5% (3% in constant currency).
It said this represented a “resilient” performance in the context of the market backdrop of high food price inflation putting pressure on consumer spending power and affecting demand for food delivery.
Additionally, Covid-related restrictions in Asian markets in early 2022 created a tougher comparison base, especially during Q1 2023.
Overall growth was driven by pricing, with order numbers down 6% and GTC per order up 10% in the period.
Despite the challenging macroeconomic environment, adjusted EBITDA increased to £39.4m from £6.6m in the second half of 2022 and a £51.6m loss in the comparable period last year.
EBITDA margin reached 1.1% in H1 2023, an improvement of 260 basis points versus the same period last year, driven by expanded gross margin.
Deliveroo said the measures it took in 2022 to optimise consumer fees (ensuring that delivery fees appropriately reflect delivery distance and adjusting the balance between delivery fees and service fees) and the increasing contribution of advertising boosted the revenue take rate and profitability.
Marketing and overheads decreased further to £325.7m from £348.3m year on year, driven by cost efficiencies, with benefits from headcount reduction measures being realised slightly earlier than projected.
As a result, the group upgraded its adjusted EBITDA guidance upgraded to a range of £60m-£80m from previous guidance range of £20m-£50m.
However, 2023 GTV growth guidance narrowed to lower single digits percentage growth in constant currency from previous guidance of low-to mid- single digits growth.
“We have delivered a strong financial performance despite challenging macroeconomic conditions,” said founder and CEO Will Shu. “This has been achieved alongside continued improvements to our proposition for consumers, riders and merchants. In particular, for consumers we have continued to innovate, for example now offering a more personalised in-app experience and enabling consumers to top up their restaurant orders with grocery items.
“Over the last 18 months, Deliveroo has reached adjusted EBITDA profitability ahead of plan, and we are progressing towards our goal of generating consistent positive free cash flow. The industry is large and still early in its maturity, and we are excited by the growth opportunities ahead of us - whether this is daily incremental improvements to the consumer value proposition, or expanding in verticals such as grocery and non-food retail. Against this backdrop of strategic progress and growth opportunity, the Board has considered our strong capital position and is proposing an additional £250m capital return to shareholders.
“Looking ahead, we will continue to adapt to the evolving market conditions and execute against our strategy. We remain excited about the number of opportunities we have to drive further growth in the medium and longer-term, and we have the team and resources to capture these opportunities.”
Deliveroo shares are up 3.2% to 127.4p so far this morning on the news.
Morning update
Delivery group HelloFresh achieved its highest ever quarterly adjusted EBITDA in its second quarter, predominantly driven by continued strong margin expansion.
EBITDA was up to of €191.9m in the quarter from €145.9m in the same quarter last year.
The group said operational efficiencies on both procurement and fulfillment expenses drove a “very substantial” margin uplift by to 28.4% from 25.6% in the same period last year as percentage of revenue.
Margin has expanded year on year for the past four quarters in a row, aided by a disciplined approach to marketing spend, where some budget has been reallocated to the seasonally important autumn period.
In terms of revenue growth, HelloFresh reached €1.92bn a 1% increase on a constant currency basis.
Strong average order rates of 4.1 (up from 4.0) and a 8.4% increase in average order value of €63.6 more than offset a decline in quarterly active customers.
The company expects growth to re-accelerate in the second half of 2023, which will be supported by the production capacity expansion for its ready-to-eat brand Factor and the roll out of a number of product enhancements, as well as comparatively easier benchmarks.
“While being faced with an overall soft consumer environment in the second quarter of 2023, we remain laser focused on providing our customers with a superior product. We have made continuous progress with regards to the level of convenience, choice and flexibility and I am proud of our teams for going the extra mile”, said Dominik Richter, CEO and co-founder of HelloFresh.
“Profitable growth remains our top priority going into 2024 and we expect to take advantage of opportunities as they arise. We are excited to de-bottleneck the capacity constraints in our ready-to-eat business, which we believe will drive further significant growth to our business. Given our diversified portfolio of brands in the world’s most desirable food markets, our unique physical and technological infrastructure and our globally leading direct-to-consumer capabilities, we are well positioned to become the world’s leading integrated food solutions group.”
Based on its first-half performance, the company has narrowed its revenue growth outlook for the fiscal year 2023 down to 2%-8% from 2%-10%.
It has also narrowed its outlook regarding the adjusted EBITDA for the HelloFresh Group for the fiscal year 2023 from previously between €460m-€540m to €470m-€540m.
On the markets this morning, the FTSE 100 has edged up 0.1% to 7,592pts.
Along with Deliveroo, risers include Virgin Wines, up 4.1% to 38p, THG, up 2.8% to 106.9p and Ocado, up 2% to 860p.
The day’s fallers include PayPoint, down 2.9% to 559.2p, Glanbia, down 2.2% to €14.11 and Haleon, down 1.9% to 330p.
Yesterday in the City
The FTSE 100 reversed a couple of days of decline, rising 0.8% to 7,587.3pts yesterday.
Risers included Bakkavor, up 5.5% to 105.5p, PayPoint, up 5.5% to 576p, Kerry Group, up 4.8% to €92.10, Greencore, up 3.2% to 92.3p, Domino’s Pizza Group, up 3% to 424.6p and Deliveroo, up 2% to 123.5p.
Fallers included McBride, down 3.6% to 40.5p, Fever-Tree Drinks, down 1.4% to 1,326p, Nichols, down 1.2% to 1,000p, Tate & Lyle, down 1.2% to 726.5p and Cranswick, down 1% to 3,302p.
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