17 March 2022
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
‘’Deliveroo is riding deeper into the red, as it shifts gears to try to carry off a bigger slice of the takeaway market. All muscles are pumping in terms of sales, with gross transactional value jumping by 71%. It’s making a huge effort to pedal into new markets to try and widen its reach of riders across the UK and that’s encouraged investors, with the share price rising by more than 5% in early trade.
But its aggressive growth strategy is expensive and even though revenues have risen by 57% losses have deepened, widening to more than £308 million, compared to just over £226 million a year ago. The company now covers more than three quarters of the UK’s population and this strategy is aimed at sowing the seeds of future growth. Those seeds though will need careful nurturing and there’s a risk they could be blown away as rivals whip up competition and the dark clouds of inflationary pressures hover.
For now it does appear that some pandemic habits are sticking around, with restaurant deliveries staying popular, on-call groceries increasingly in demand and a growing source of revenue for Deliveroo. But the cost-of-living squeeze is intensifying and as savings are eaten away, there may be less appetite to pay for an easier life. With many supermarkets and restaurants set to pass on the cost of higher commodity prices, more consumers may begin to trim budgets by starting with little luxuries like take outs, and that still could puncture Deliveroo’s ambition to break even in two years.
Spiderman now has a sideline in saving Cineworld from racking up even higher losses but even this superhero hasn’t been able to fully protect the chain from latest ravages of Covid. The success of the latest instalment in the franchise and other hits helped the company narrow its annual loss to just over £708 million for 2021 compared to the eye-watering £3 billion red plunge in 2020. But there was still a volatile start to trading today for the company with the shares diving in and out of positive territory as investors asses the chain’s ongoing problems. The shock of Omicron hit bookings again in January and February and the production delays due to extra pandemic precautions has continued to limit the pipeline of big hits.
It’s now counting on other superheroes and fast jet pilots to fly onto screens to help boost bookings over the coming months, with a fresh billboard of Marvel movies and the highly anticipated prequel to Top Gun set to hit screens. The chain is clinging onto hopes that these will be the lifelines to help bookings snap back to better health this year, to help it cope with its crippling level debt.
But a fresh horror story could still unfold if the company loses its appeal over the huge fine it was slapped after pulling out of the Cineplex deal. It’s existing interest payments on its debts might make it impossible for the firm to pay the fine upfront. It needs more than a roll-call of superheros and top guns to sort out its structural problems but the lure of a cheap night out in front of a big screen may help provide a short term salve.”
