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Thursday 16 March 2023

Shu shines Deliveroo’s ‘profits’

logoI really admire Will Shu’s gung-ho optimism. He’s the CEO of Deliveroo, you know, and he believes that the business he launched in 2013 is now profitable. That's not how I read the numbers, but at least, and for a change, they're heading in the right direction – for now.

Here's the real numbers.

Deliveroo’s thumping net losses of £330m in 2021 have eased back to ‘only’ £294m in 2022, of which nearly £52m was the hit from discontinued operations (see ‘Roo bounces out of Oz), compared to £41m knocked off the bottom line for the same reason in 2021.

And it's also pleasing to see that while Deliveroo’s continuing businesses took nearly 300m orders last year – 5% more than in 2021 – the value of those orders was 3.4% higher, the revenue per order higher still (+8.4%) and gross profit per order much higher (+23.7%).

However, an even greater chunk of the increased gross margin was eaten away by SG&A expenses, which rose last year by 15% to £884m. Why? Because Deliveroo’s staff costs rocketed by 65% to a tad under £300m ‘driven in particular by growth in headcount in technology’. So-called ‘Other Expenses’ also soared, by 32% to £221m. These increases were assuaged only in part by a 20% reduction in sales & marketing costs, to £215m.

Now, Shu is the master of making the numbers look good. Therefore you may be little surprised to learn that, according to him, Deliveroo ‘reached adjusted EBITDA profitability in the second half of last year’. Who would have imagined that if you don’t count all the costs you can actually report a profit?

Shu has yet to implement the staff defenestration tactics of the likes of Meta, Salesforce, Zoom, ebay, et al (see Salesforce puts profits at the heart of its strategy and related posts). But if he is to reduce losses further, let alone have any realistic prospect of making a real profit (which he doesn’t, by the way), surely that time must come sooner rather than later.

Posted by: Anthony Miller at 09:15

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