ii view: Just Eat delivers slower growth

Third-quarter trading update to 30 September

• Adjusted gross transaction value growth of 2% to €4.16 billion (£3.48 billion)

Guidance:

• Continues to expect full-year adjusted gross transaction value growth of between 2% and 6%
• Continues to expect full-year adjusted profit (EBITDA) of around €450 million

Chief executive Jitse Groen said:

"We made good progress across our key strategic pillars, which we believe will drive growth. Cost and operational efficiencies have allowed us to increase investments while maintaining our outlook. We are well on track to deliver our guidance for the full year."

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ii round-up:

Online delivery company Just Eat Takeaway.com NV (LSE:JET) today detailed a slowdown in growth but reiterated full-year forecasts including that for adjusted profit.

Growth in Gross Transaction Values (GTV) for the third quarter to late September, and excluding its North American business which is up for sale, slowed to a gain of 2% or €4.16 billion. That’s down from first half growth of 3%, although management still expects an annual improvement of between 2% and 6% year-over-year. Estimated adjusted annual profit (EBITDA) of €450 million is potentially up from 2023’s €324 million. 

Shares in the London and Amsterdam stock market listed company fell 2% in post results trading having come into this latest news down 15% year-to-date. That’s in contrast to a 16% gain for rival Deliveroo (LSE:ROO) in 2024. The FTSE 250 index is up 6%. 

Just Eat connects consumers with more than 730,000 food partners or restaurants via its online platforms. Under an increased diversity strategy, Just Eat also now delivers groceries and pharmacy items in some regions. 

Adjusted GTV growth of 3% and 4% for its Northern Europe and UK and Irish regions respectively drove performance during the quarter. The two combined account for 60% of group orders. 

The smaller Southern Europe business reported a 12% GTV retreat, with the metric for the potentially being sold North American, or Grubhub division down 11%.  

Broker Deutsche bank reiterated its ‘buy’ stance on the shares post the news, highlighting a valuation discount to rivals Deliveroo and Delivery Hero SE (XETRA:DHER). 

Full-year 2024 results are scheduled for 26 February.  

ii view:

Started in the year 2000, Just Eat today employs around 13,000 people. Revenues come from a combination of commissions charged to restaurant partners, fees for online payment services, and delivery fees charged to consumers on orders for which Just Eat is responsible for delivery. Northern Europe generated its biggest slug of adjusted profit over the 2023 financial year at 58%, followed by the UK & Ireland at 22%, and North America 20%.  

For investors, pressured consumer spending given high borrowing costs will likely be hindering consumer demand. Just Eat’s previous takeover of Grubhub in the US has subsequently and arguably proved ill-judged given its timing and likely price influence from the pandemic. Although down from a 2022 loss of €5.7 billion, an unadjusted loss of €1.8 billion was made in 2023, while no dividend payment is yet being paid.

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To the upside, adjusted profits are moving in the right direction, with a move into free cashflow during 2023 a further positive. A focus on operational efficiency previously saw unprofitable countries such as Norway and Portugal exited. A potential full or part sale of Grubhub should further magnify management focus, while some share price support is being derived from an ongoing share buyback programme, totalling €340 million over the last 18 months. 

On balance, a consensus analyst estimate of fair value above £15.50 indicates longer-term optimism in the City, but financial losses and a volatile share price give grounds for caution.  

Positives: 

• Diversity of geographical markets
• Investing for growth

Negatives:

• Intense competition
• Loss making

The average rating of stock market analysts:

Cautious buy