Deliveroo weighs exit from the Netherlands as delivery platform losses mount due to new technology and rising costs
- Food delivery platform saw first half losses jump 44% to £153.8 million
- Takeaways have experienced a major delay in orders
- Deliveroo recently forged new links with Asda, Sainsbury’s and Waitrose
Deliveroo’s losses have increased as a significant jump in delivery staff and delivery costs offset continued growth in orders and revenue.
The food delivery platform saw losses rise 44 percent in the first six months of the year to £153.8 million compared to the same period in 2021 as selling and administrative expenses rose significantly.
While gross profit reached £300 million, it was surpassed by an increase in overhead costs, mainly driven by the company hiring more employees for technology positions.
Deliveroo braced for a second day of pain on the FTSE 100 as the stock remained unstable and fluctuated after an early morning drop
Costs were also impacted by an increase in total rider costs to meet growing orders, which rose 10 percent to 160.9 million between January and the end of June.
The total value of orders processed by the company – also known as gross transaction value – increased 12 percent in the first quarter, at constant exchange rates, but only 2 percent in the following three months.
Takeaways have faced a slowdown in orders following the easing of lockdown restrictions around the world and the reopening of catering establishments such as pubs and restaurants.
In recent months, however, worsening inflationary pressures have further damaged trade as cash-strapped consumers have cut back on non-essential spending.
Deliveroo told investors on Wednesday it would soon begin consulting proposals to end operations in the Netherlands, where it derives just 1 percent of its BTV.
It claimed that staying in the country would require “a disproportionate level of investment, with uncertain returns” to try to gain market dominance.
By comparison, the group has gained additional market share in the British Isles, where it receives about half of its orders and a large part of its revenue.
Deliveroo expanded its reach in the UK and Ireland by entering into new partnerships or expanding with supermarkets including Asda, Sainsbury’s and Waitrose, as well as chain stores WHSmith and LloydsPharmacy.
Nevertheless, the London-based company has not made a profit since it was founded in 2013 by American-born Will Shu and Greg Orlowski, and its shares remain about two-thirds below their IPO price. This morning, Deliveroo shares rose 2.7 percent to 93.7p,
Shu said, “Deliveroo is committed to delivering profitable growth… So far in 2022, we have made good progress in realizing our profitability plan, despite increased consumer headwinds and slowing growth over the period.
“We are confident that in H2 2022 and beyond we will see further benefits from actions already taken, as well as benefits from new initiatives.”