Delivery Hero says investments to hurt profitability, shares fall

Reuters
0
In this article:

* Delivery Hero cuts earnings outlook on investment costs

* Raises 2018 revenue outlook

* H1 revenue up 60 pct at 357 million euros (Adds details on divestments, rivals, updates share price)

By Sylwia Lasek

Aug 2 (Reuters) - German food delivery platform Delivery Hero said on Thursday it would not break even on a monthly basis this year as it plans to invest an additional 80 million euros ($93 million) to stimulate growth, sending its shares lower.

The online takeaway business has boomed in recent years, and firms such as Delivery Hero, Takeaway.com and Just Eat have spent heavily in order to gain greater market share.

Delivery Hero said due to investment costs, it does not expect to reach its target to break even on an adjusted EBITDA basis on a monthly level by the end of 2018 and in the full year 2019.

This overshadowed the company's raised revenue guidance, now expected between 760 million and 780 million euros in 2018, against previous guidance of 740 million to 770 million euros.

Its Frankfurt-traded shares fell by up to 8 percent after the announcement but recovered to be 1.6 percent lower at 0938 GMT.

Chief Executive Niklas Östberg said in a media call it was difficult to speculate when the company will reach breakeven.

He added that one of the markets where it will increase investments is Germany where it is battling for control against Dutch rival Takeaway.com.

The company said it would continue investing at similar levels during 2019, which will also add about 25 million euros to next year's revenue.

"We've long anticipated that across the sector EBITDA guidance will be shelved in the face of the massive secular growth opportunity ahead," Jefferies analysts said in a note.

"We've seen Just Eat punished for this of late - it's now Delivery Hero's turn to test the market's appetite for more revenue at the cost of an elongated EBITDA inflection."

Just Eat said on Tuesday it would spend more on technology and delivery services to stay ahead of rivals.

Delivery Hero, which operates in more than 40 countries, said its first-half revenue rose 60 percent on a like-for-like basis to 357 million euros, driven by strong order growth in Middle East and North Africa and Asia.

In the six months to the end of June, orders grew 46 percent to 184 million, while the adjusted EBITDA margin came in at negative 15 percent.

BATTLEGROUND GERMANY

In addition to increased investment, Delivery Hero announced plans to sell its operations in highly competitive markets Australia, France, Italy and the Netherlands.

Takeaway.com spokesman Joris Wilton told Reuters his company would "certainly consider" buying the Dutch Foodora operations from Delivery Hero, as it would add a number of food deliverers.

Delivery Hero's investment plans would not change much in the battle for German customers, Wilton said.

Takeaway.com said on Wednesday its revenue in Germany rose 45 percent in the first six months of 2018 to 39.2 million euros, with order growth accelerating in the second quarter.

Delivery Hero does not publish quarterly revenue numbers for Germany, but in the full year 2017 it had revenue of 90.3 million euros in its home market, while Takeaway reported 57.9 million euros.

"We both grow very nicely, but I still think there is a big gap there", Östberg said during the call when asked about its main competitor in Germany, but he declined to give details.

Takeaway.com said it would continue to invest as it guided for an unspecified loss over 2018 without providing a timeframe for when the company might break even. ($1 = 0.8584 euros) (Additional reporting by Bart Meijer; editing by Emelia Sithole-Matarise and David Evans)

Advertisement

Recommended Stories

  • Dow Jones Falls As Donald Trump Stock Craters; Cathie Wood Buys This Stock Amid 51% Plunge

    The Dow Jones fell as Elon Musk made a Tesla move. The Donald Trump stock sank on the stock market today. Cathie Wood bought a diving stock.

  • Stock Selloff Spreads as Middle East Tension Rises: Markets Wrap

    (Bloomberg) -- European stocks tumbled, following a selloff in Asia and on Wall Street that was sparked by angst over elevated US interest rates and fueled by signs of fading momentum in China’s economy and rising tensions in the Middle East.Most Read from BloombergBeyond the Ivies: Surprise Winners in the List of Colleges With the Highest ROITrump Media’s $5.3 Billion Selloff Deepens as 270% Rally FizzlesS&P 500 Breaks Below 5,100 as Big Tech Sells Off: Markets WrapIran’s Attack on Israel Spark

  • Trump Media stock tanks on move to issue millions of shares

    Trump Media stock slid as much as 16% on Monday after the parent company of Donald Trump's social media platform, Truth Social, filed to issue more than 21 million shares.

  • Nvidia Reveals 8 'Secrets' For When To Sell Stocks. No. 2 Is Key.

    As top growth stocks like Nvidia test key moving averages, keep in mind these proven rules for when to sell stocks.

  • 4 Oversold Stocks to Buy Right Now

    Here are four stocks to buy now that could offer investors upside in the short and long term.

  • Elon Musk Agrees With Jamie Dimon's Warning Of Political Polarization 'Creating Risks That Could Eclipse Anything Since World War II'

    JP Morgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon's annual shareholder letter is a moment investors await to understand the thinking of one of the world's most influential bankers. While there has been speculation of Dimon entering politics, with him even gaining the support of billionaire hedge fund manager Bill Ackman to run for president, JP Morgan shared in a statement that "Jamie has no plans to run for office" and that "he is very happy in his current role." That has not stopped him from oc

  • Tesla layoffs hit high performers, some departments slashed, sources say

    Tesla management told employees Monday that the recent layoffs -- which gutted some departments by 20% and even hit high performers -- were largely due to poor financial performance, a source familiar with the matter told TechCrunch. The layoffs were announced to staff just a week before Tesla is scheduled to report its first-quarter earnings. The move comes as Tesla has seen its profit margin narrow over the past several quarters, the result of an EV price war that has persisted for at least a year.

  • Dow Jones Futures: Another Ugly Market Reversal; Nvidia Skids, Tesla Tumbles On 'Dark Day'

    Mideast fears and surging yields triggered another ugly market reversal. Nvidia and Microsoft fell while Tesla dived.

  • Bitcoin Halving May Lead to Some Sales, Crypto.com CEO Says

    (Bloomberg) -- Bitcoin selling may become evident as the date of the so-called halving nears but the event is set to bolster the price of the largest digital asset longer term, according to the head of the Crypto.com exchange.Most Read from BloombergBeyond the Ivies: Surprise Winners in the List of Colleges With the Highest ROITrump Media’s $5.3 Billion Selloff Deepens as 270% Rally FizzlesS&P 500 Breaks Below 5,100 as Big Tech Sells Off: Markets WrapIran’s Attack on Israel Sparks Race to Avert

  • BlackRock’s Kapito Says Stocks Are Primed for a Comeback

    (Bloomberg) -- BlackRock Inc.’s Robert Kapito says the stock market is poised to benefit as investors deploy their outsized holdings of cash.Most Read from BloombergBeyond the Ivies: Surprise Winners in the List of Colleges With the Highest ROITrump Media’s $5.3 Billion Selloff Deepens as 270% Rally FizzlesS&P 500 Breaks Below 5,100 as Big Tech Sells Off: Markets WrapIran’s Attack on Israel Sparks Race to Avert a Full-Blown WarApple Faces Worst iPhone Slump Since Covid as Rivals RiseThere’s almo