Business

Deliveroo’s pre-tax losses grow as consumers cut their earnings

Pre-tax losses at Deliveroo rose to £147m in the first half of the year, as the food delivery company warned consumers were being hit by cost-of-living pressures and ordered fewer drinks and dishes.

The London-based food delivery app on Wednesday said it completed 160 million orders in the first six months of 2022, up 10% from a year ago, with revenue up 12% to just over 1 billion pounds. Its pre-tax loss was £95m in the first half of 2021.

But total transaction value (GTV) – a measure of orders placed through its platform – per order fell 3% in the first half of the year.

The company also reported an increase in staffing costs, partly due to hiring more people on its tech team. Marketing and expenses rose 29% to £368.8m in the first half, compared with £286.2m in the same period a year earlier.

Food delivery platforms boom as people stay home during the coronavirus lockdown but the sector is struggling to bounce back as Covid-19 restrictions have been eased, while rising inflation has put pressure on budgets, causing people to cut back on purchases.

“People can order some drinks, deals are down [on items] . . . Maybe they get a cheaper burger or something like that,” said Will Shu, founder and CEO of Deliveroo.

Deliveroo results come a month after it Full-year growth forecast cut on the back of “increasing consumption trends”. It projects growth for its full-year GTV of between 4 and 12% on a constant currency basis, more than halving its previous estimate of 15 to 25%.

Deliveroo on Wednesday said GTV growth slowed to 2% in the second quarter of this year, compared with 12% in the first three months of the year, due to consumer difficulties.

Monthly active users increased 4% to 7.8 million consumers, year-over-year, but declined slightly between the first and second quarters of this year, which the company said was due to reduced marketing and macroeconomic situation. Deliveroo shares were up 4% Wednesday morning.

The company said it was considering leaving the Netherlands in November, saying it lacked a “solid local position” after nearly seven years in the region. Deliveroo ceased its business in Spain in November 2021 but is expanding to Qatar over the next few months.

The results came as Lord Simon Wolfson, Next’s chief executive, announced he would step down from Deliveroo’s board effective late Wednesday. He joined about 18 months ago, in the first outside director role in 30 yearsand says the role is “no longer compatible” with his other commits.

Deliveroo shares have struggled since emerging in 2021, when around £2 billion was wiped off the company’s market value on the first day of trading and fell more than 50% by 2022.

Its competitors were also affected by the decline in consumer spending. Just Eat Takeaway last week wrote down value of its US subsidiary Grubhub fell 3 billion euros, falling in value almost half a year after it acquired the food delivery group as it faces a tight consumer budget and stiff competition.

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