ii view: Just Eat adds record 58 million UK orders

Increased investment spend has aided orders but hindered earnings. We assess prospects.

First-half results to 30 June 2021

• Revenue by 52% to €2.6 billion (£2.2 billion)
• An adjusted loss of €190 million (£162 million)
• UK added a record number of 58 million orders to a total of 135 million
• Reiterated full-year 2021 guidance

Chief executive Jitse Groen said:

"In the first six months of this year, Just Eat Takeaway.com continued to invest significantly, predominantly in the historically underinvested legacy Just Eat countries. Our consumer base, restaurant selection and order frequency have strongly increased, which will lead to improved profitability going forward."

ii round-up:

Online food ordering company Just Eat Takeaway.com NV (LSE:JET) reported a loss of €190 million (£162 million) for the first half of 2021, driven by increased investment spend, although that was better than many had expected.  

The UK added a record 58 million orders to the group total of 135 million. Its London operations had made an approximate 10% gain in online market share since beginning an investment programme in the third quarter of 2020.

Just Eat shares gained by more than 2% in UK trading, reducing their loss since the start of the year to around a fifth. Shares for rival Deliveroo (LSE:ROO) remain below its 2021 IPO price of 390p per share. 

Just Eat losses were greatest for its Rest of the World operations at €136 million, followed by the UK at €71 million. The loss for its recently acquired US Grubhub business came in at €25 million, implying a slight deterioration from the first quarter to the second quarter. 

Overall orders in Germany grew by 62%, with an adjusted profit of €94 million up 63% from 2020. The average monthly order frequency in the UK reached 3.2 times, up from 2.5 times a year ago.

Just Eat active customer numbers, combining the new Grubhub business, rose 21% to 98 million. Management left its full-year guidance unchanged, with order growth excluding Grubhub, expected to be above 45% year-over-year. 

ii view:

Founded by five Danish entrepreneurs in 2001, Just Eat launched in the UK in 2006 and came to the stock market in 2014. The company gives consumers online access to a host of restaurant takeaways. It mainly collaborates with delivery restaurants, but also provides its delivery services to restaurants that do not deliver themselves.

Early in 2020, Just Eat and Dutch company Takeaway.com combined. In June 2020, it launched a deal to buy US business Grubhub. Core countries of operation are the UK, the US, Germany, Canada and the Netherlands. It combines other countries under its Rest of the World segment. 

For investors, intense competition continues to bear down on delivery fees as increased costs and ongoing investment drag on profitability. It does not currently pay a dividend and vaccination rollouts and a return to some normality may well see growth slowing going forward.

But a coming together with Takeway.com and Grubhub creates a food delivery company truly on the global stage. Tightening gig economy regulations in Europe are likely to hit rivals harder given Just Eat’s existing courier employment benefits. And the current emphasis on investment over profits appears to be playing the long-term game. For now, and while some caution looks sensible given the boost from the pandemic, an analyst consensus fair value estimate of £98.31 per share suggests potential long-term upside. 

Positives: 

• Diverse geographical markets
• Investing for growth

Negatives:

• Intense competition
• A pre-tax loss made for 2020

The average rating of stock market analysts:

Buy