- Adjusted EBITDA losses surge 261% as it piles money into groceries
- ‘Worst IPO in London’s history’, stock down nearly 75% in a year
- Rider strikes on cards as workforce unionises
Meals and groceries drop-off platform Deliveroo (ROO) continues to struggle to make its business model work. The faster it grows, the larger its losses, not a good combination for the shares price, investors or the firm’s long-run prospects.
Illustrating the point, first-half revenues rose 12%, outpacing GTV (gross transaction value, the whole amount of money going over its platform) thanks to increased consumer fees and commission revenues. Yet losses ballooned, soaring 261% from a £26 million deficit a year ago to £68 million in the six months to 30 June 2022, on an adjusted EBITDA basis (earnings before interest, tax, depreciation and amortisation).
Sure, it is still investing in growth, attacking the home-delivered groceries space with gusto, with supermarkets such as Waitrose, Sainsbury’s (SBRY), Co-Op and Asda all now onboard.
So tough is competition in this market that Deliveroo is close to throwing in the towel in the Netherlands (albeit, a small market worth just 1% of GTV). So much for European domination. Marketing costs continue to soar, up from £286.2 million a year ago to £368.8 million, or from 8.6% of GTV to 10.4%.
FROM PILLAR TO POST AS PIGGY IN THE MIDDLE
Like its UK-listed peer Just Eat Takeaway (JET), Deliveroo remains uncomfortably squeezed. There are limits to what customers will pay for home delivered meals and shopping essentials, so its charging is capped. At the same time, riders want a bigger slice of the pie with higher wages to compensate for a cost-of-living pinch being felt nationwide.
This latter point will only get worse with riders now able to unionise under the GMB banner, as the swathe of trade union strikes hitting the UK about pay hints at.
The shares are down nearly 75% over the past year to 94.64p, although the stock rallied 4% today, suggesting equity markets are still willing to cling on to hope.
Billed by the FT as London’s worst ever IPO, after £2 billion was wiped off its float valuation in a day, it’s been all down hill since. Great for riders, not at all welcome for investors.
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