Just Eat’s cost cutting delivers mixed results

The post-pandemic world has not been kind to food delivery companies. The end of lockdown restrictions more or less coincided with a cost of living crisis that forced consumers to curtail their discretionary spending. 

Given this backdrop, investors were probably bracing for a dire set of half-year results from Just Eat Takeaway (JET) – only to be pleasantly surprised by the impact of its cost-saving measures. The takeaway services adjusted Ebitda figure amounted to €143mn (£122mn) for the first half of this year, exceeding the City’s consensus expectations by around €22mn. Compared with last year’s €134mn loss, this certainly looks like progress.

Management now expects to report a full-year adjusted Ebitda figure of €275mn, as stated in its previous guidance. The company also highlighted the fact that advertising revenue hit  €99mn in the first half – an increase of a third compared with the same period last year. Just Eat’s shares ended results day over 5 per cent higher.

Bears will say this is something of a dead cat bounce – and that the structural challenges facing the food delivery sector aren’t going to vanish overnight. “The lack of an [adjusted Ebitda] upgrade is also disappointing and fuels our concerns that more investment is needed to offset volume declines,” Numis analysts said.

It’s also worth noting that the company is still trying to find a buyer for struggling US unit Grubhub, which it bought just two years ago. Though its operating loss might have narrowed since last year, we think that Just Eat, and the wider food delivery market, remains unpalatable. Sell.

Last IC view: Sell, 1,927p, 8 December 2022