Deliveroo raises sales forecast after strong first half of 2021

  • 7/8/2021
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The takeaway delivery company Deliveroo has raised its forecast for sales this year after strong growth during the first six months of 2021, a period that included its rocky stock market listing. Deliveroo said on Thursday it expected the value of transactions through its platform during 2021 to be between 50% and 60% higher than in 2020, suggesting total transactions could be worth well over £6bn for the year. The company’s fortunes have been transformed since the start of the coronavirus pandemic. In April 2020 Deliveroo warned there had been a “significant decline in revenues” when UK governments imposed national lockdowns. Yet by the end of the year it was preparing to float its shares on the London Stock Exchange as repeated lockdowns boosted demand for home delivery. Transaction volumes on Deliveroo’s platform increased to £1.7bn in the second quarter of 2021. That was a 76% rise compared with the April to June period in 2020, and an increase of £100m compared with the first three months of 2021. Analysts are focused on how the company performs as vaccination programmes allow lockdown restrictions to ease. Some consumer spending has already reverted back to restaurants and pubs in the UK, but Deliveroo hopes it can hold on to customers who became regulars during lockdowns even when restrictions are removed completely in England, its main market, after 19 July. However, the company said it expected the average value of orders to fall back towards levels it experienced before the pandemic, as families return to eating out rather than at home. In April Deliveroo said it was “difficult to say how much of this growth has been driven by the special circumstances of the current lockdown restrictions in some of our markets”. It also said it would continue to invest in new “growth opportunities” in the second half of the year. The drags on profitability meant the gross profits it made from those sales would be in the lower half of its previous guidance, at between 7.5% and 7.75% of transaction value, it said. That could equate to gross profits of about £470m, although that would not take into account many costs. Shares rose 4.5% in morning trading on Thursday, to 335p, their highest since the day they floated, as the improved outlook for sales appeared to raise investor hopes that Deliveroo will be able to narrow the steep losses that have come with building up the business and spending heavily on marketing, including sponsoring the England men’s football team on its run to the Euro 2020 final. It lost £226m in 2020, according to filings to the stock market before its initial public offering in March. Deliveroo’s shares slumped when they were floated amid investor concerns over how it would achieve profitability, despite the growth in its user numbers. Shares lost 26% of their value on the first day of trading, and are still well below 390p, the lower end of Deliveroo’s target price when it floated. Prominent investment managers had queried whether Deliveroo would be able to convert its customers into profits in light of stiff competition from rivals such as Just Eat Takeaway and Uber Eats, and from restaurants. They also highlighted the risk of extra costs if it were forced to recognise workers who Deliveroo insists are independent contractors as employees. On Wednesday it announced it would hire 400 new workers in technology roles to support its expansion. New services include a deal with Waitrose, the supermarket owned by John Lewis, to rapidly deliver groceries. The deal puts Deliveroo up against new entrants into the fast-growing rapid grocery delivery market, including Weezy, Gorillas and Getir.

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