On its debut on the London stock market just over four years ago, online ordering service Just Eat (JE.) declared it was not interested in being the second-largest operator in any of its markets. Just two years later, this prompted the €22.5m (£17.3m) sale of the group’s Benelux business, which had failed to turn a profit or usurp the dominant operator in that market. Exiting that geography left the group as the largest operator in all its markets – an arguably highly-defensive position that helped the business continue to propel its share price and market valuation and ultimately push it into the FTSE 100 index in late 2017.
But critics argue the group is far too reliant on the increasingly competitive UK market, while others have doubted the shares’ valuation in a volatile tech sector prone to shocks and sudden de-ratings.
The shares have lost more than a quarter of their value since a February 2018 peak of 906p, and took another downward tumble this week on the release of annual results from close UK rival Deliveroo. The top-line growth is impressive: revenues grew 116 per cent to £277m, an annual improvement of £148m on 2016. But the decision to invest £106m more back into the business compared with 2016, giving rise to a 73 per cent ballooning in operating expenses, meant losses escalated. According to analysts at Peel Hunt, the group is now working with 50,000 restaurants and 50,000 riders around the world in 13 countries, compared with Just Eat’s 93,700 restaurants.
But Deliveroo’s future is still up for grabs – and poses a potential threat to Just Eat’s current dominant position in the UK. Sceptics who pointed out wafer-thin gross margins of just 1 per cent in 2016 have been silenced by a significant widening to 23 per cent last year, while a potential tie-up with taxi app Uber has been mooted. A possible IPO is also an option, although rumour has it that a float is unlikely to materialise before 2020.
