Deliveroo Earnings: U.K. Ahead With Solid Relative Performance and Bolstered Capital Returns

Deliveroo reported 2023 half-year results with gross transaction value and orders up 3% and down 6% respectively. Within this, the U.K. and Ireland segment continue to impress in the second quarter, especially compared with competitors; GTV growth was 8% and orders were up 2% versus Just Eat Takeaway's GTV, up 3% and orders down 5% in the same period, implying robust market share gains (albeit some of those gains may well be attributed to Deliveroo's more focused execution in the grocery segment). The international segment (41% of GTV) continues to lag the U.K. and Ireland with orders down 11% and GTV up 3% in the first half. Revenue in the U.K. and Ireland was up 11%, implying 29.3% take rates, a solid step-up versus a year ago (28.4%) due to food price inflation, higher consumer fees, and the contribution from ad revenue (annualized run rate in the second quarter was GBP 55 million). From a unit economics view, Deliveroo has come a long way over the last two years with the cost of each order at GBP 4.5 (versus GBP 4.4 two years ago) and GTV per order at GBP 24.2 (versus GBP 21.5 ), leading to a 170-basis-point rise in gross margins to 10.4% of GTV (from 8.7% a year ago). More importantly, adjusted EBITDA increased to 1.1% of GTV, driven by marketing and overhead efficiencies with free cash outflow now at GBP 27.7 million (or GBP 9.2 million, excluding one-offs versus GBP 170 million a year ago).