Deliveroo Shares Surge After H1 Loss Beats Estimates

By Scott Kanowsky 

Investing.com -- Deliveroo Holdings PLC (LON:ROO) shares rose on Wednesday after the British food delivery service reported a better than expected loss in the first half thanks to higher fees and a rise in revenue from its new advertising platform.

Adjusted earnings before interest, taxation, depreciation, and amortization fell to a deeper loss of £67.9M, down by 163% compared to the corresponding six-month period last year. However, that contraction was still above analyst estimates of £73.3M, according to Bloomberg.

Meals ordered also rose by 10% to 160.9M, while revenue jumped 12% to more than £1.01B.

But half-year gross transaction value per order - a key figure used to help determine the health of Deliveroo's business - slumped by 3%, suggesting a pandemic-driven surge in momentum for delivery platforms is slacking as customers rein in spending to confront increased cost-of-living pressures and soaring food prices. In the second quarter, Deliveroo previously said GTV growth would slow to 2% from 12%.

Deliveroo confirmed the annual outlook it lowered in July, with chief executive officer and founder Will Shu saying he remains confident in the company's ability to handle potential "changes" in the broader economy. GTV growth is expected to be in the range of 4% to 12% in constant currency, while core income margin is seen falling by 1.5% to 1.8%.

The company also unveiled a new ad platform to help drive cash generation and laid out plans to break even on adjusted core profit between the second half of 2023 and the first six months of 2024.

"We are confident that in H2 2022 and beyond we will see further gains from actions already taken, as well as benefits from new initiatives," Shu said in a statement.

Meanwhile, Deliveroo announced that it is looking into closing down its operations in the Netherlands, which made up 1% of GTV in the first half. Its business in Spain has already been shuttered, with the firm saying the necessary investments to keep it competitive in the country were too high.

Shares in Deliveroo jumped by more than 7% following the latest earnings, but are lower by over 73% over the last one-year period.