James
Gard:
Deliveroo
is
making
its
stock
of
the
week
debut.
Shares
are
up
more
than
40%
this
year
and
rose
again
after
the
half-year
results.
Do
we
have
a
turnaround
situation
here
and
is
it
sustainable?
Let’s
look
at
the
key
numbers.
One
of
the
biggest
problems
investors
have
with
food
delivery
firms
is
their
lack
of
profitability;
in
Deliveroo’s
case
it’s
getting
there,
with
first
half
losses
narrowing
from
£153
million
to
£82
million.
Most
companies
these
days
would
prefer
you
to
look
instead
at
“adjusted
EBITDA”
and
on
that
measure
Deliveroo
made
a
profit
for
the
first
half,
against
a
loss
last
year.
It
has
also
upgraded
its
profits
forecasts
for
the
full
year.
Rival
Just
Eat
Takeaway
has
reported
a
similar
pattern
of
adjusted
losses
in
2022
followed
by
profits
in
2023.
What
about
other
metrics?
Deliveroo’s
revenue
and
gross
profit
are
higher
than
last
year.
There’s
been
a
big
improvement
in
free
cash
flow
since
last
year
but
it’s
still
negative.
Orders
are
lower
year
on
year
but
“gross
transaction
value”
is
up,
so
people
are
spending
more
each
time.
What’s
got
investors
excited
is
talk
of
a
possible
dividend
worth
£250
million,
a
move
unthinkable
for
much
of
the
company’s
public
life.
This
at
least
answers
some
of
the
critics
of
“jam
tomorrow”
stocks
like
this;
a
dividend
will
provide
“jam
today”.
Shares
are
at
roughly
£1.25,
and
Morningstar
analysts
say
they’re
worth
£2.15.
But
investors
like
me
who
bought
at
the
IPO
are
still
nursing
heavy
paper
losses.
I’m
glad
I
didn’t
sell
the
shares
below
one
pound
but
what
realistic
chance
have
they
got
of
returning
to
their
float
price
of
£3.90?
At
that
price
Deliveroo
would
be
worth
as
much
as
Ocado.
Our
analysts
think
that
the
company
could
make
a
tasty
takeover
target
and
that
would
no
doubt
give
the
shares
a
lift.
In
the
meantime
I’m
going
to
look
forward
to
the
dividend
and
hope
the
company
make
its
first
profit
soon.
For
Morningstar
I’m
James
Gard.
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