Dusseldorf, Frankfurt Delivery Hero has now responded to concerns about its financial strength. On Monday morning, the Dax group announced that it had taken out external financing totaling 1.4 billion euros. “We have built a solid and diversified capital structure that gives us financial flexibility and ample liquidity buffers to meet our strategic priorities,” said CEO Niklas Östberg.
This was well received on the stock exchange. The share, which had experienced an almost unprecedented price slide in the past few months, rose by more than 13 percent at the start of trading and was later up a good ten percent. The price temporarily broke the 47 euro mark. However, it is still a long way from its highs of around EUR 145 last year.
The strong rise in the price also calls the financial regulator Bafin on the scene. “If we find price fluctuations that are conspicuous, we look at them routinely,” said a spokesman for the authority on Monday. Among other things, the Bafin then deals with the question of whether there are indications of market manipulation or insider trading. The stock had already risen by almost five percent on Friday.
In February, the stock fell by more than 30 percent because the losses were higher than the market had expected. As a result, the price continued to slide. Analysts had primarily expressed concerns about the financing.
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The takeover of the Spanish company Glovo brought Delivery Hero close to its liquidity limits, according to Andrew Porteous of HSBC. And Brian, Garnier & Co.’s Clément Genelot had expressed concern that several bonds would expire in 2024.
The company is now explicitly emphasizing that the new credit lines are also to be used to refinance the convertible bonds that are due soon. The additional external financing should also help to diversify the company’s sources of financing.
Another reason for the positive price reaction is that the company is now officially predicting a positive operating profit (Ebitda) at group level for the 2023 financial year for the first time. So far, Delivery Hero had not dared to make a forecast for 2023.
Delivery Hero expects high losses this year
The company also announced that it was able to maintain the strong sales growth in the first two months of 2022. The total sales of the segments increased by 53 percent compared to the previous year.
The additional external financing consists of three parts. So there should be a line of credit that is 825 million dollars, and one over 300 million euros. Both run for a good five years.
In addition, the Company is expected to enter into a EUR 375 million syndicated revolving credit facility with a syndicate of banks at the same time as signing the facilities. However, this syndicated loan is only intended to be additional security, and the company emphasized that it does not assume that it will actually be used.
>> Read here: It’s not just Delivery Hero that has high liabilities. The 273 billion euro risk – high debt becomes a problem for corporations.
The prediction of when the delivery service dared to make a profit for the first time apparently also depended on the unclear financing situation. Östberg emphasized: “This financing transaction is another important milestone for Delivery Hero on the way to our goal of achieving sustainable growth and moving closer to profitability at group level.” This forecast also includes Glovo, which is also currently in deficit.
However, losses are still likely to be high this year. The company expects an Ebitda margin based on platform sales of minus one to minus 1.2 percent.
The only Dax group that has never reported a profit
This is due to the expansion of the “Integrated Verticals” business line. This mainly refers to the rapid delivery of groceries, which is being expanded in some countries and which requires large investments in storage. This segment alone is expected to contribute an operating loss of 525 million euros in the current financial year. According to the forecast, the core business of delivering restaurant food should already become operationally profitable in the second half of the year.
Delivery Hero is the only group in the leading index Dax that has never posted a profit in its history. In the fourth quarter of 2021 alone, the operating loss was 781 million euros. The company will publish the detailed results for the past year on April 28.
But the company sees progress. “Our conscious focus on scaling and increasing efficiency is paying off, our contribution margins are improving from quarter to quarter,” CFO Emmanuel Thomassin told Handelsblatt.
In order to accelerate the path to profitability, Delivery Hero quickly ended the short and expensive foray into the German market. The company also wants to sell its business in Japan and its stake in the South American delivery service Rappi.
More: The 273 billion euro risk: High debts are becoming a problem for corporations.