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WATCH: Deliveroo's cautious update spooks investors
Shares in Deliveroo (ROO.L) fell on Thursday as the company warned that a recent boom in orders is set to fade.
Deliveroo, which had a disastrous stock market debut a fortnight ago, on Thursday posted strong first quarter results but said its outlook remained uncertain as lockdown eases. The company anticipates consumers may order less takeaways as they are allowed to go out more.
Shares in the company were down 1.7% on Thursday morning at 265.50p. It had sold shares at 390p-a-piece in its initial public offering.
Growth in the first three months of 2021 accelerated for the fourth consecutive quarter, with orders up 114% year-on-year to 71 million and gross transaction value (GTV) up 130% to £1.65bn. Monthly active consumers grew 91% to average 7.1 million during the first quarter.
“Demand has been strong in both the UK&I [UK and Ireland] and international markets driven by record new consumer growth and sustained engagement from our existing consumers," chief executive Will Shu said. "This is our fourth consecutive quarter of accelerating growth.”
However, Shu said the company was “mindful of the uncertain impact of the lifting of COVID-19 restrictions. So while we are confident that our value proposition will continue to attract consumers, restaurants, grocers and riders throughout 2021, we are taking a prudent approach to our full year guidance.”
Deliveroo said it was hard to say how much of its growth has been driven by current lockdown restrictions in some markets. It expected its rate of growth to decelerate as lockdowns ease.
“Pending further information on consumer behaviour post-COVID, Deliveroo is being prudent and maintaining the guidance set out in its prospectus for full year annual GTV growth of between 30% to 40% and gross profit margins (as a % of GTV) of 7.5-8.0%,” it said.
Micheal Hewson, chief market analyst at CMC Markets, said Deliveroo's first quarter performance was "encouraging" but said its cautious outlook would be "a concern across the sector."
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Deliveroo had set a goal to reach two thirds of the UK population by the end of the year. By the end of the first quarter it had reached over 60%. The company said it was "laying the foundation for future growth."
Deliveroo was expected to be one of the hottest listings of the year but it has struggled since listing on the stock market last month. Shares in the company fell 30% when they began trading on the London Stock Exchange and have repeatedly dropped to new lows.
Investors have said bankers overvalued the company. Many institutions also expressed concerns about Deliveroo's persistent losses and governance structure, which gave founder Shu continued control of the business even after it floated. Aviva (AV.L), L&G (LGEN.L), and M&G (MNG.L) all ruled out investing in the business before it floated.
Bankers and advisors that worked on the deal blame broader market conditions for the failure. Investors have been rotating away from tech stocks towards companies that are poised to do well as economies begin to reopen. Those close to the float also claim short-sellers targeted the IPO, although public market disclosures have yet to back this up.
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