Morningstar

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

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Securities In This Article
Deliveroo PLC
(ROO)

Deliveroo ROO 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).

Deliveroo narrowed guidance for 2023, with the firm now expecting low-single-digit growth in GTV versus low- to mid-single-digit growth previously and upgraded adjusted EBITDA to further improve in the range of GBP 60 million-GBP 80 million from GBP 20 million-GBP 50 million previously. All in all, strong top- and bottom-line performance in the current macro context and relative to main competitors. We do not expect to materially alter our GBX 215 fair value estimate. After a strong share price performance year to date (up 45%), shares are trading in 4-star territory.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
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Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar*. He covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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