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Just Eat swings back to a profit as recent investments start to deliver

Surging delivery orders, coupled with growing marketplace orders and the inclusion of HungryHouse helped revenue and profits to jump in 2018
just eat bike
More than 220mln orders were placed through the Just Eat platform in 2018

Just Eat PLC’s (LON:JE.) huge investment into the delivery side of its business looks to be paying off as a surge in orders helped the online takeaway marketplace to swing back to a profit last year.

The FTSE 250 group poured £51mln into rolling out its delivery service last year as management looks to head off the growing threat posed by rich rivals Uber Eats and Deliveroo.

READ: Just Eat CEO to step down as it raises 2018 guidance and expects growth in 2019

Its ‘strategic investment’ is likely not done there, with Just Eat telling the market back in November that it expects to spend up to £60mln in total on building out that side of the business.

Accelerating growth of delivery orders, which more than trebled, contributed to a 43% jump in revenues last year to £779.5mln (2017: £546.3mln).

Shares drop, though

Strong underlying marketplace order growth and the inclusion of HungryHouse this time around also helped to push up the numbers.

Underlying earnings (EBITDA) climbed 6% year-on-year to £173.9mln (2017: £163.5mln), reflecting the costs of investment and the impact of lower margin delivery orders.

Just Eat recorded a pre-tax profit of £101.7mln last year versus a loss of £76.0mln in 2017, when it took a hefty one-off charge related to its Australia and New Zealand business.

But shares, which had risen by more than 30% so far this year, fell at the opening bell on Wednesday by 2.9% to 758.2p.

Guidance in-line with City forecasts

As for what to expect in the year ahead, the takeaway firm is guiding for revenue of £1.0-1.1bn and underlying earnings in the range of £185-205mln, in line with what City analysts had forecast.

The Canadian side of the business, called SkipTheDishes, is expected to enjoy its first full year of profitability, although Just Eat’s struggling Latin American operations will likely cost it £80-100mln.

“Just Eat's continued strong growth and strategic investments saw more than four million new customers join us in 2018,” said interim chief executive Peter Duffy.

“We are creating a leading hybrid offering founded on our unrivalled marketplace, combined with the targeted roll-out of delivery.

“This gives our growing customer base access to the greatest choice of restaurants and drives even more orders to our Restaurant Partners, ultimately strengthening the network effects of our business.”

CEO search underway

Duffy is filling the CEO role temporarily while Just Eat finds a permanent successor to Peter Plumb, who stepped down in January after less than two years in charge.

There was no news on who the new boss might be in Wednesday’s results, although chairman Mike Evans did confirm that a search is underway.

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