Dusseldorf The delivery service Delivery Hero exceeded its growth target in the past financial year. The turnover generated via the platform increased by 62 percent to 35.4 billion euros. The forecast was between 33 and 35 billion euros. These sales also include partners on the platform.
The company’s own turnover rose by 89 percent to 6.6 billion euros – and is thus at the upper end of the target corridor it set itself. However, the company has strayed somewhat from the goal it set itself of approaching profitability. The profit margin measured in terms of platform sales (Ebitda/GMV) was minus 2.2 percent. The company had forecast minus 2 percent.
The company had announced that it would be in the black for the first time in the second half of 2022. However, new business areas such as Quick Commerce (ultra-fast delivery service) are excluded, because massive investments have to be made there first. But there is still a long way to go to make a profit in the core business.
CFO Emmanuel Thomassin, however, was optimistic: “Our conscious focus on scaling and increasing efficiency is paying off, and we expect our platform business to generate positive adjusted Ebitda this year,” he emphasized. “With steady growth rates and an increasing contribution margin from our own deliveries, it’s clear that our business model is working.”
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The targets for the current year remain ambitious. The Dax company wants to increase its platform sales to 44 to 45 billion euros, its own sales should be between 9.5 and 10.5 billion euros. For the entire business, Delivery Hero expects a profit margin (Ebitda/GMV) of between minus 1 and minus 1.2 percent.
High hopes for Glovo takeover
But the company made a few decisions over the past year that have yet to be seen if they will have a positive impact on its path to profitability — and when they will translate to bottom line results.
The most important strategic step was to take over the majority in the Spanish delivery service Glovo, in which Delivery Hero previously held shares. The share is to be increased from 44 to 84 percent for an estimated €800 million. The deal is expected to close in the second quarter.
>>> Read about this: Glovo founder and CEO Oscar Pierre explains how his company plans to grow following its acquisition by Delivery Hero
What speaks in favor of the takeover from the point of view of analysts: the two companies complement each other well, they hardly overlap geographically. Silvia Cuneo from Deutsche Bank describes the step as “very sensible”. Glovo is strong in South America and Eastern Europe, where Delivery Hero still has large gaps.
In addition, Glovo is not only the market leader in the Spanish home market, but says it is on the verge of becoming profitable there. Analyst Rob Joyce from Goldman Sachs, however, noted in a study that the key question here is the level of investment this year and next.
Analysts lowered target price for Delivery Hero shares
The vast majority of analysts continue to recommend Delivery Hero shares as a buy. But step by step they are reducing their price targets, which had long averaged 150 euros. For example, JP Morgan lowered its price target from 139 to 114 euros this week, and UBS even from 151 to 110 euros.
In the middle of last year, the share had reached its previous high of 140 euros because the company was considered one of the winners of the pandemic. But since then, the paper has lost massively in value and was last listed below the 70 euro mark. Even the Glovo takeover was unable to change this downward trend.
In the short term, the renewed withdrawal from the German market is viewed more as a setback. Delivery Hero sold its home market business to competitor Just Eat Takeaway in 2018. But last year the company started again in Berlin under the Foodpanda brand.
But after just a few months, Delivery Hero ended this attempt again in December last year. CEO Östberg called it a “difficult decision”, which he also justified with the strong competition in Germany. “The number of competitors increased, which also created a shortage of drivers that limited our potential to scale the business,” he said.
But at the same time, this now offers the opportunity to put the money into other, possibly more profitable projects. At the same time, many other attractive opportunities had arisen, emphasized Östberg. “This decision ultimately enables us to seize other attractive growth opportunities throughout the group,” said the CEO.
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