Deliveroo Announces Plan to Distribute Additional £250mn to Shareholders

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Deliveroo is confident in its ability to generate cash and intends to return an additional £250mn to shareholders, following a significant reduction in losses during the first half of this year. Will Shu, Deliveroo’s founder and CEO, stated, “The company is in a much better position now compared to when we went public 30 months ago. We are currently breaking even in terms of free cash flow.”

Delivery and logistics companies in the food industry, such as Deliveroo, Uber, DoorDash, and Delivery Hero, have faced increasing pressure from investors to show profitability. With rising interest rates, these companies, known for their losses in previous years, need to prove their ability to generate profits. Deliveroo’s pre-tax losses decreased from £127.1mn in the first half of last year to £57.6mn in the first six months of 2023. Despite a 6% decrease in order volumes to 145.2mn, revenue rose by 5% to £1bn, mainly due to an average customer spending increase of 10% per order to £24.20, attributed partly to inflation.

Deliveroo revised its gross transaction value growth forecast for the year to “lower single digits” percentage growth, but increased its adjusted earnings guidance for 2023 from £20mn-£50mn to £60mn-£80mn. Deliveroo’s stock price remains below its initial public offering price of 390p, impacted by factors such as reduced demand for online food delivery post-pandemic, consumer pressure due to rising living costs, and investor preference for more profitable ventures.

However, Deliveroo’s stock has increased by over 40% this year, indicating its improving profitability. Will Shu stated, “We are very confident in our position.” Deliveroo previously announced a £50mn share purchase program and completed a £75mn buyback scheme. The additional £250mn will be returned to shareholders through a special dividend, share buybacks, or a tender offer, pending approval from shareholders. Deliveroo currently has £948mn net cash on its balance sheet, providing room for growth and unforeseen circumstances.

Will Shu also noted that the decision to return funds to shareholders reflects investors’ expectations of higher returns from equities due to rising interest rates. Deliveroo plans to share its longer-term vision with investors this year, including expansion into “adjacent verticals” beyond food delivery, such as groceries and non-food items.