After the fanfare of how Deliveroo is going to reward drivers with bonuses and give customers a chance to buy the shares, here comes the hard facts. The most important point is how the company remains loss-making despite experiencing a surge in business going through its platform during the pandemic.
It’s hard to see it’ll have another year when market factors were so much in its favour. Lockdowns kept people at home for months at a time and online grocery slots were hard to come by, so demand for takeaways shot up. A cynic might ask, if Deliveroo couldn’t deliver a profit against that backdrop, when will it?
“Fans of the business will point out that it has narrowed its losses by nearly 30% and that its underlying gross profit has shot up, both in absolute terms and as a percentage of the gross transaction value. That’s likely to be enough to fuel interest for many people in the shares when they come to the London market,” said AJ Bell’s Russ Mould.
“But the fact remains that it is still loss-making once accounting for the costs of running the business. This goes to show that delivering food is not a quick win. It’s about building scale and there are several other firms running the same race.
“Deliveroo says it will continue to invest in its business which could impact profitability. It has no choice as rivals are doing the same. At some point down the line, it will have to start delivering that magic profit or investors will lose interest