Deliveroo PLC (LSE:ROO) (LSE:ROO) is finding the market hard to please despite posting a strong set of interim results with orders and transaction values doubling compared to last year's figures.
Investors were probably spooked by the outlook statement, where the delivery app said it is “optimistic but prudent” as it expects continued year-on-year growth in orders with average values returning to pre-pandemic levels.
READ: Deliveroo hits new high after rival Delivery Hero builds stake
The firm stressed that growth in the first half was materially ahead of estimates and consumer engagement has been “encouraging” even if restrictions eased, so people’s habits are changing for good.
UK and Ireland did not see a material impact on orders despite restaurants reopening, while in parts of Europe this has been felt more strongly, though it might be also due to the warmer weather.
Guidance remains of 50-60% growth in gross transaction value (GTV) and 7.5-8% gross profit margin.
Deliveroo, which has been criticised for its corporate governance standards, noted that 85% of riders globally said they are satisfied or very satisfied with their job and retention rates remain high despite rising job vacancies across its markets.
In the six months to 30 June, GTV rocketed 102% to £3.3bn with revenues up 82% to £922mln.
Statutory loss before tax improved to £104mln from £128mln in 2020, while cash and cash equivalents at period-end were £1.6bn.
“One of Deliveroo’s strengths is that it offers higher quality restaurant options than some rivals, which, coupled with its personalised app content and hyper-localised delivery approach, could be a major draw. It’s also expanding its delivery-only ‘dark’ kitchens, which offer restaurants a way to expand without having to invest lots of cash,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“The fact that it relies heavily on a gig economy model is still a risk for the company. So far it’s shaken off attempts to change the self-employed status of its riders in the UK, but has pulled out of Spain, due to legal changes requiring food delivery platforms to hire staff and not pay them as independent contractors. It could face further difficulties expanding globally if legislators elsewhere look again at workers’ rights in the sector.”
“The pandemic has clearly offered a structural growth opportunity for Deliveroo, but the longer-term outlook depends on how demand holds up in a post-pandemic world, and if that road to profitability looks any clearer.”
Shares shed 4% to 348p on Wednesday morning.