Deliveroo upgrades profit margin outlook despite slip in Q4 orders

By Scott Kanowsky 

Investing.com -- Deliveroo Holdings PLC (LON:ROO) says its annual core profit margin is now expected to be higher than its previous guidance after elevated prices and cost cutting helped ease the impact from a downturn in orders in the fourth quarter.

In a trading update on Thursday, the U.K.-based food delivery service predicted that full-year adjusted earnings before interest, taxes, depreciation and amortization margin for all its operations is seen at approximately -1.0%, above its prior outlook range of -1.2% to -1.5%. The company explained that this upgrade was driven by an expansion in gross profit margin and lower expenses.

Adjusted EBITDA margin was also "approximately breakeven" in the second half, Deliveroo said, which would represent an improvement from a mark of -3.2% in the corresponding six-month timeframe last year.

London-listed shares in the company rose by over 4% in early dealmaking, but remain down by more than 45% in the past one-year period.

Quarterly gross transaction value - a measure of the total dollar value of purchases processed on the platform - grew by 6% year-on-year to £1.80 billion (£1 = $1.2333), thanks in part to inflation in item prices and consumer fees. However, this missed the Bloomberg consensus target of £1.84B.

Meanwhile, group-wide orders dropped by 2% to 75.1 million during the fourth quarter. Deliveroo's international division saw orders dip by 5%, while the figure inched up marginally in its U.K. and Ireland unit.

The tallies for gross transaction value and orders exclude results from Deliveroo's operations in Australia and the Netherlands. The firm exited both markets last year.

In a statement, founder and Chief Executive Officer Will Shu noted that the macroeconomic environment has been "difficult." The company has been hit by customers reining in spending on pricier food delivery options following a recent spike in living costs.

Shu described the outlook for 2023 as "uncertain," but still anticipated that adjusted core income will improve over the year.

Deliveroo will post its full-year 2022 results on March 16.