Deliveroo has revealed a strong financial and operating performance for 2020 ahead of its intended listing on the London Stock Exchange, which was formally announced this morning.
Over the course of the year, the company grew gross transaction value – the total amount of transactions it processes on its platform – by 64%, from £2.5bn in 2019 to £4.1bn. Fourth quarter 2020 run-rate GTV amounts to over £5 billion. Strong GTV growth was driven by an increase in monthly active customers as well as greater engagement from its existing consumer base.
While 2020 has seen strong engagement from Deliveroo’s user base of more than 6 million monthly consumers, the company’s consumer cohorts have increased their spend on the platform year-on-year, acting as a growing, recurring revenue stream.
Deliveroo has seen strong market share gains in 2020 that have driven it to leading positions across many of its markets. When markets have opened for dine-in following lockdowns Deliveroo has continued to see very strong consumer engagement and order frequency.
Despite this significant growth, online food delivery is still at an early stage, presenting enormous growth potential. The restaurant and grocery sectors represent an addressable market of £1.2 trillion in Deliveroo’s 12 markets, of which just 3% of sales are estimated to be online – equivalent to less than 1 out of the 21 weekly meal occasions being online.
Proven profitability at scale and best-in-class and improving unit economics
Deliveroo demonstrated that it could operate profitability at scale in 2020, having been profitable on an Adjusted EBITDA basis over two quarters. Furthermore, underlying gross profit was up 89.5% to £358m from £189m the previous year.
Deliveroo’s profitability is a validation of the fact that it is the leading operator of the logistics food delivery model. Through a combination of its leading technology, operations and quality of customer cohorts, Deliveroo has achieved best in class unit economics. Gross profit margin as a percentage of GTV has grown from 5.8% in 2018 to 8.8% in 2020, with all markets experiencing an improvement over this period. In several key markets that are more mature, Deliveroo has achieved a gross profit margin of 12% or more.
These best in class unit economics come after accounting for the major investments Deliveroo has made in its Editions, Signature, Plus and on-demand grocery businesses, delivering an outstanding customer experience in every neighbourhood it operates.
As a result of this strong performance, Deliveroo narrowed underlying losses for the year to £223.7m, compared to £317m in 2019. The company remains focused on investing in driving growth in a nascent online food market.
Leading from the front on innovation
Deliveroo plans to invest in its long-term proposition by developing its core marketplace, enhancing its superior consumer experience, providing restaurant and grocery partners with unique tools to help them grow their businesses, and providing riders with the flexible work they value alongside security.
Deliveroo will also invest to further develop its innovative growth businesses: Editions delivery-only kitchens; Signature, enabling restaurants to offer delivery via their own online channels; Plus subscription service, removing delivery fees for a flat monthly charge; and on-demand grocery.
Strong operational execution
Deliveroo pioneered the logistics delivery model in the UK, which is now the winning model in food delivery globally. The company works with over 115,000 best loved restaurants, takeaways and grocery stores globally and provides work to over 100,000 riders across 800 locations across12 markets.
Deliveroo’s leading technology, driven by machine learning, ensures that all three sides of its marketplace continue to interact seamlessly, strengthening the interests of each constituent part, with restaurants maximising online sales, riders maximising earning potential, and consumers receiving a wider selection of desired food on time.
Supporting all three sides of our marketplace with an unprecedented £50m Community Offer for consumers
Alongside its EITF announcement, Deliveroo has ensured that all sides of its marketplace will benefit from any future floatation. The company announced that it will make an unprecedented 50 million in shares available to its UK customers in an expected forthcoming IPO and once listed will create a new £16 million Thank You Fund for riders, providing cash payments to the riders who have completed the most orders. Deliveroo has also announced a £50 million Communities Fund to support the local communities in which it operates. In 2018 Deliveroo announced that all permanent employees would be option-holders in the company, and so the company’s workforce will also benefit from any future floatation. These moves reflect Deliveroo’s desire to give back to those that have contributed to the company’s growth to date and to ensure they can share in its future.
In an introductory letter to the company’s Expected Intention to Float, Deliveroo founder and CEO, Will Shu, writes:
“Today, Deliveroo is so much bigger than I ever would have thought possible. We are building delivery-only kitchens, delivering groceries, building tools for restaurants to take them into the digital age – things I never contemplated when we launched. Yet we truly believe we are still getting started. Our ambitions have increased as we start to truly understand and execute on the opportunity in front of us in online food.
A lot has changed since we launched eight years ago, but two very important things haven’t. First, we are customer-obsessed. And second, we are all about food. And if there are two principles that govern us here, it’s these. Serving our restaurants, our grocery partners, our riders and of course our end consumers is what we’re all about. All working together in the service of great food. That will never change.”