Deliveroo, the international grocery delivery app, announced a sharp spike in losses on Wednesday as investment costs eat up rising revenue, adding that the company plans to exit the ailing Dutch market.
Loss after tax rose 41 percent to £153.8 million ($186 million) compared to the first six months of last year, the British group said in a statement.
Revenue rose 12 per cent to £1billion despite the easing of Covid restrictions and controversy over the treatment of its drivers.
Deliveroo said the outlook has been clouded by high inflation and the Ukraine war.
However, company founder and CEO Will Shu expressed confidence in the company’s ability to “financially adapt to further changes in the macroeconomic environment.”
– Netherlands exit –
Deliveroo said it “proposes to consult on terminating its operations in the Netherlands,” noting that it does not have “a strong local position” in the country.
The company added that it would require “disproportionate levels of investment with uncertain returns to achieve and maintain a prime market position.”
A planned exit from the Netherlands towards the end of November follows Deliveroo’s exit from Spain last year, although the group said on Wednesday it had gained market share in the UK and Italy.
It added that total marketing and other investment costs, including technology spending, rose 29 per cent to almost £369m in the first half.
Deliveroo has enjoyed strong sales growth in a short period of time but faces questions about its sustainability, highlighted by its failed IPO, which took place in London last year.
The IPO was the capital’s largest IPO in a decade, valuing the group at £7.6 billion.
But the share price fell almost a third from its IPO price of £3.90 on launch day, as investors questioned Deliveroo’s treatment of its self-employed drivers.
A French appeals court last month found Deliveroo guilty of “undeclared work” after classifying a courier company as an independent contractor rather than an employee.
Deliveroo’s share price rose 0.8 percent to 92 pence in early London trade following Wednesday’s earnings update.
“Stay-at-home stocks like Deliveroo have performed extremely well during the pandemic, as restaurants and bars have been closed and homes have been forced into lockdown,” noted Victoria Scholar, head of investments at Interactive Investor.
“However, the reopening of the economy combined with stiff competition from companies like Just Eat and Uber Eats and q-commerce (fast trade) players like Gorillas and Go Puff, and the cost of living crisis have created an extremely challenging environment.”
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