Just Eat raises guidance, but order appetite shrinks


04/19/2023

Just Eat Takeaway.com NV (TKWY.AS) has raised its adjusted core profit forecast for this year and has initiated a share buyback programme worth up to €150 million ($164.34 million) that will conclude by the end of 2023. The world’s largest meal delivery company’s management reported that it was ahead of schedule in achieving delivery-oriented operational enhancements, which resulted in the increased adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) forecast. However, it also noted that food orders had declined.

The food delivery sector had been boosted by the COVID-19 pandemic, but consumer discretionary spending has fallen as prices have surged, and that effect has started to diminish. The Dutch-listed company anticipates 2023 adjusted EBITDA of €275 million ($301.6 million), having previously estimated €225 million ($246.47 million) in January.

However, Just Eat’s Q1 trading update shows a 14% year-over-year drop in total orders to 227.8 million. The company expects gross transaction value (GTV) growth of between -4% to +2% YoY in 2023 after recording a GTV of €6.67 billion ($7.31 billion), an 8% YoY decline, in Q1. Management anticipates free cash flow to turn positive in mid-2024.

Since its initial public offering (IPO) in 2016, Just Eat’s share price has lost nearly 30% of its original value, and its cash flow has yet to emerge from the red. At 0737 GMT on Wednesday, its share price initially rose, only to fall by 4%.

Some analysts remain cautious, indicating that the company’s financial growth profile (and therefore its multiple) relies mainly on margin expansion in the absence of top-line growth. According to J.P Morgan analysts, the visibility of the company’s margin expansion prospects remains low.

In conclusion, Just Eat Takeaway.com NV has raised its adjusted core profit outlook for this year and plans to launch a €150 million ($164.34 million) share buyback program. Despite management’s optimism, the company’s Q1 trading update revealed a 14% YoY decline in total orders, while analysts expressed concerns about the absence of top-line growth and the low visibility of margin expansion prospects.

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