Interactive Investor

ii view: Just Eat optimistic about profit in 2024

Shares in this international food delivery group have outperformed the FTSE 100 over the last six months. Buy, sell, or hold?

28th February 2024 15:57

Keith Bowman from interactive investor

Full-year results to 31 December

  • Revenue down 7% to €5.2 billion (£4.45 billion)
  • Headline loss of €1.8 billion, down from a 2022 loss of €5.7 billion
  • Adjusted profit (EBITDA) of €324 million, up from €19 million in 2022
  • Cash and cash equivalents of €1.7 billion, down from €2 billion a year-ago

Guidance:

  • Expects full-year 2024 adjusted profit of around €450 million

Chief executive Jitse Groen said:

“In 2023, we significantly improved our financial performance in all our segments. I am particularly pleased with the strong momentum in the UK and Ireland, with adjusted EBITDA margin rapidly approaching a similarly high level as Northern Europe. 

“Overall, the business is in a strong position to capture further improvement to our topline performance, adjusted EBITDA and free cash flow in 2024."

ii round-up:

Just Eat Takeaway.com NV (LSE:JET) today detailed a rise in adjusted profit, with the online food ordering company forecasting a further improvement for the year ahead. 

Adjusted profit, or EBITDA for 2023 rose to €324 million from €19 million in 2022, aided by a 12% improvement in revenues per order minus adjusted fulfilment costs, with management forecasting a rise to €450 million in 2024.

Shares in the London and Amsterdam listed company fell 5% in post results trading having come into this latest news up by close to a fifth over the last six months. That's comfortably ahead of a 2% gain for the FTSE 100 index and in comparison to a 1% loss for rival Deliveroo (LSE:ROO)

Just Eat connects consumers with more than 695,000 food partners or restaurants via its online platforms. 

Despite a 9% fall in total annual orders year-over-year to 891,000, the average customer transaction value rose to €29.67 from €28.66 in 2022.  

The improvement in EBITDA helped Just Eat achieve the milestone of turning free cash flow positive during the second half of 2023.

An overall 2023 loss of €1.8 billion, led by a €1.5 billion write-down in the value of previous acquisitions, improved from a loss of €5.7 billion in 2022. Stripping out write-downs, a profit of €145 million contrasted with a loss of €652 million in 2022.

A first-quarter trading update is scheduled for 17 April. 

ii view:

Started in the year 2000, Just Eat today employs over 13,000 people. Revenues come from a combination of commissions charged to its 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 this latest financial year at 58%, followed by the UK & Ireland at 22%, and North America 20%.  

For investors, pressured consumer spending given elevated borrowing costs cannot be overlooked. Its takeover of Grubhub in the US has been called ill-judged given its timing and inflated price due to the pandemic. Costs for businesses generally remain elevated, while no dividend payment is yet being paid.

On the upside, adjusted profit is moving in the right direction and the business is now free cashflow positive. A focus on operational efficiency has seen the group exit countries like Norway and Portugal where it's been hard to turn a profit, while a potential sale or part sale of Grubhub could improve management’s focus. 

The numbers seem to be moving in the right direction, profit is tipped to rise this year, and a consensus analyst fair value estimate at over £18 per share indicates longer-term optimism. However, current losses and uncertainty about Grubhub may make some investors cautious.

Positives: 

  • Diversity of geographical markets
  • Investing for growth

Negatives:

  • Intense competition
  • Loss making

The average rating of stock market analysts:

Strong hold

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