Deliveroo reveals narrowing losses ahead of IPO

Deliveroo has unveiled plans for its London stock market debut as it revealed 54 per cent growth in sales but losses of £224m in 2020. 

The Amazon-backed online food ordering company announced its intention to float on the London exchange’s main market on Monday, suggesting that its shares are likely to begin trading by early April. 

The filing includes details of a dual-class share structure that would give Will Shu, Deliveroo’s co-founder and chief executive, 20 votes a share, while every other shareholder will have a single vote for each share. The structure will expire three years after the listing. 

London-based Deliveroo has privately targeted a valuation of as much as $10bn (£7.2bn), people briefed on internal discussions told the Financial Times last week. 

Monday’s filing revealed that more than 6m people order from more than 115,000 restaurants and stores through Deliveroo every month. Its gross transaction value — primarily made up of customers’ spending — rose 64 per cent to £4.1bn in 2020. 

A Deliveroo spokesperson said that net revenues — mostly consisting of fees charged to restaurants and consumers — were £1.2bn in 2020, up 54 per cent on the previous year.

That included net revenue growth of 65 per cent to £599m in the UK and Ireland last year, suggesting that Deliveroo outpaced its more established rival Just Eat to gain share in its home market. 

The company said growth was driven by increased customers and more frequent usage, as the coronavirus pandemic drove many people to try online deliveries for the first time. Even when lockdown rules were lifted and people could visit restaurants, Deliveroo said it “continued to see very strong user engagement and order frequency”. 

Deliveroo narrowed its underlying losses over the previous year by 29 per cent to £223.7m in 2020.

After adjusting for various items, underlying losses before interest, tax, depreciation and amortisation narrowed to £9.6m, compared with a loss of £231.6m in 2019. It was profitable for two quarters of last year on the same basis, which excludes finance costs, stock options costs and other one-off items.

The company warned prospective investors that it would continue to prioritise expansion over profitability, saying it “remains focused on investing in driving growth in a nascent online food market”. 

“Our ambitions have increased as we start to truly understand and execute on the opportunity in front of us in online food,” said Shu. 

However, the fact that the eight-year-old company did not come closer to overall profitability during a boom year for food delivery may raise questions from prospective investors about its longer-term business model. 

Monday’s filing argues that its logistics technology will continue to improve efficiency and productivity for restaurants and its fleet of couriers, boosting its own profitability on each order. Existing customers typically increase the frequency with which they place orders, Deliveroo added, “acting like a recurring revenue stream that grows over time”.

Deliveroo intends to use the proceeds from its initial public offering to support expansion of its “Editions” kitchens, which cater only to delivery customers and do not allow in-house diners, as well as initiatives including on-demand groceries, through partnerships with supermarkets such as Waitrose, Aldi and Carrefour. 

Deliveroo plans to pay out £16m to some of its more than 100,000 couriers in bonus payments after the IPO. It is also reserving £50m worth of shares for private investors who are also customers of its services. 

Goldman Sachs and JPMorgan Cazenove are Deliveroo’s joint global co-ordinators.

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