Deliveroo share price rises despite higher losses

Trying to pick the bottom in the Deliveroo share price has proved to be a thankless task over the last 12 months, with the shares dropping below 100p in May in the aftermath of their Q1 numbers, pushing the shares even further away from their IPO price of 390p back in April 2021.

Today’s H1 numbers appear to have done little to reverse that trend, although there is some evidence that they might be near a base.

It's been a tough few quarters for the sector with sector peers Just Eat Takeaway writing down the value of its US business, while Uber Eats has been eating into market share. 

The company has continued to grow over the last 15 months, and in its full year numbers back in March, revenues rose 57% to £1.82bn.

Losses also increased to £298m from £213m in 2020, with a decline in margins from 8.7% to 7.5%, as market and overhead spend rose by 75% to £628.7m.

On the guidance the company said it hoped to break even by 2024 on a full year basis and that on medium term Gross Transaction Value (GTV) it expected to grow at circa 20% a year.

Deliveroo has made great strides in recent months in signing deals with Amazon and Waitrose, helping to push GTV in Q1 up to £1.79bn, a rise of 11% from the same period a year before.

At the time the company appeared confident of delivering GTV guidance of 15% to 25% for the year, with H2 expected to be stronger than H1.

Deliveroo was forced to lower this a few weeks ago to between 4% and 12%, although EBITDA guidance was kept unchanged, while it also added McDonalds, as well as non-food in the form of WHSmith and Lloyds Pharmacy to its platform.

Despite this the outlook remains challenging with today’s H1 numbers seeing GTV rise 7% to £3.6bn, within its revised guidance, pushing revenues to just over £1.01bn, and gross profits up by 16% to £300.9m.

When marketing overheads were added this wiped the profits out with the company posting a £68m EBITDA loss for H1. Compared to a year ago marketing costs were 29% higher, and while the company said that it had taken steps to reduce these costs as a percentage of GTV it is still higher than a year ago at 10.4%.

Deliveroo still remains on course to deliver revenues of over £2bn this year, with the company maintaining its full year EBITDA guidance.

The company also announced a share buyback program of £75m.