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Deliveroo's order growth begins to slow as UK economy reopens

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A Deliveroo rider sits outside a fast food restaurant in Liverpool, Britain, April 7, 2021. REUTERS/Phil Noble
'We now work with more food merchants than any other platform in the UK,' said Deliveroo founder Will Shu. Photo: Reuters

Deliveroo (ROO.L), the food delivery app, is seeing its order growth begin to slow down as lockdown restrictions ease.

The takeaway app benefited enormously from the pandemic as people ordered in while confined to their homes. Deliveroo said in its half-year results on Wednesday that its gross transaction value (GTV) — the total value of orders made on its platform — grew by 131% in the first quarter of 2021. But growth slowed to 81% in the second quarter, as restrictions on day-to-day life began to ease.

GTV grew by 102% to £3.4bn ($4.7bn) across the first six months of the year, which Deliveroo said showed “continued strength despite reopening effects and an increasingly tough comparison base”. Orders doubled to 148.8m in the first half.

Revenue rose 82% to £922.5m and pre-tax losses narrowed to £104.8m, down from £128.4m a year earlier.

"Demand has been high amongst consumers," founder and CEO Will Shu said. "We have widened our consumer base, seen people continuing to order frequently and we now work with more food merchants than any other platform in the UK."

Read more: Deliveroo stock hits post-IPO high as rival Delivery Hero buys stake

Deliveroo reiterated its full year guidance, forecasting full year GTV growth of 50% to 60% and gross profit margin in the lower half of the range of 7.5% to 8%. The forecasts reflect "accelerated growth investments and the continued expectation that average order value reverts towards pre-pandemic levels," the company said.

"As reflected in our guidance, whilst we expect that consumer behaviour may moderate later in the year, we remain excited about the opportunity ahead and our ability to capitalise on it,” said Shu.

Deliveroo's share price was down 1.3% as markets opened in London on Wednesday morning.

Deliveroo's stock was down on Wednesday morning. Chart: Yahoo Finance UK
Deliveroo's stock was down on Wednesday morning. Chart: Yahoo Finance UK

"Deliveroo appears to be dominating the takeaway scene... but investors appeared to have lost a little appetite for shares in early trading, with the company expecting customer behaviour to moderate later in the year," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

"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."

Earlier in the week, Deliveroo's stock had rallied to its highest point since its IPO in March after rival Delivery Hero (DHER.DE) bought a 5% stake in the business.

Neil Wilson, chief market analyst at Markets.com, said the Delivery Hero rally should be factored into Wednesday's share price fall.

"Shares [are] up 8% in the last week and more than 16% in the last month," he said.

This was the first set of half-year results from Deliveroo since it went public on the London Stock Exchange in March. It suffered a disastrous public market debut, with shares falling 30% on the first day of trade.

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