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Just Eat eyes December merger vote as growth slows

The online takeaway food marketplace generated revenue of £247.5mln in the three months to 30 September, a 25% increase year-on-year

Just Eat PLC -

Just Eat PLC (LON:JE.) said it plans to hold a shareholder vote on its merger with Takeaway.com in December, while reporting a softening of sales growth in the third quarter.

The online takeaway food marketplace generated revenue of £247.5mln in the three months to 30 September, a 25% increase year-on-year, which was down from the 30% growth seen in the first half of the year.

READ: Just Eat merger may not complete, warns Deutsche Bank

The FTSE 100 group said it was confident that the current trading performance will enable it to meet guidance for full-year revenue in the range of £1.0bn-£1.1bn and underlying profit (EBITDA) of £185mln-£205mln.

An update was also provided on the Takeaway.com deal, with a shareholder circular to be published at the end of October and the general meeting expected in December, with completion expected around year-end, if shareholder approval is given.

Group orders were up 16% to 62mln and UK orders increased 8% to 33mln in the quarter, with the rate of group growth slowing from 21% in the first half and UK growth down from 11.2% in the second quarter but higher than the 7.4% in the first.

Slower UK orders

Slower UK growth was attributed to weaker growth in the online marketplace business.

Interim chief executive Peter Duffy said the company was “seeing a structural shift, with increasing demand on our platform from customers for broader cuisine choice and more meal occasions, led by quick-service restaurant chains”.

But the slowing UK orders, said broker Peel Hunt, implied that “either delivery isn’t going well, or the marketplace growth has in fact slowed quite markedly".

Countering Duffy's assertions, Peel Hunt analysts said: “We believe this is down to growing competition from the likes of Uber and Deliveroo and the change of consumer preferences will also be being guided by the increase in demand from the freshness of grocery delivery." 

JPMorgan Cazenove said the weak order growth had been "slightly mitigated" by a rising share in delivery orders, which get a high-commission but are low-margin, leading to a lower miss on revenues. 

Caz analysts argued that "this weaker than expected performance is a confirmation of the cannibalization effects on the platform", ie delivery orders increasingly replacing marketplace orders rather than being fully incremental.

Rumbling stomachs?

Just Eat shares, already down around a fifth since the London-listed company agreed a combination with Dutch rival Takeaway.com in early August, fell another 6% to 590p in early trading on Monday.

Rumblings of discontent have growth from investors since the deal was confirmed, with analysts suggests it could fall apart or be hijacked by rival bidders.

At least two major investors have gone public to complain, with hedge fund Eminence Capital and Aberdeen Standard last month objecting to the terms of the deal.

Eminence, which owns a 4.4% beneficial holding, said the Takeaway.com bid for Just Eat significantly is "grossly inadequate" as the 15% premium to JE’s closing price on July 26 "is highly opportunistic".

-- Adds share price, broker comment --

Quick facts: Just Eat PLC

Price: 745.6 GBX

LSE:JE.
Market: LSE
Market Cap: £5.09 billion
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