Delivery Hero sees 2024 earnings at low end of previous forecast

DELIVERY Hero tempered profit expectations for the year, a sign of strain in the company’s strategic overhaul in the competitive food delivery market.

The German firm reported third-quarter figures roughly in line with forecasts, reporting 3.2 billion euros (S$4.6 billion) in sales from 12.2 billion euros in gross transactions in the period, it said in a statement on Thursday (Nov 7). Analysts surveyed by Bloomberg expected revenue of 3.2 billion euros on transactions of 12.3 billion euros.

But the company told investors it will likely hit the “lower end” of its previous guidance for adjusted earnings before interest, taxes, depreciation and amortisation between 725 million euros and 775 million euros.

After a growth surge during the pandemic, food delivery apps have been hit by thinning margins and cutthroat price wars. Delivery Hero, which expanded globally via splashy acquisitions, has tried to trim costs and restructure its operations after a backlash from activist investors and regulators.

Sachem Head Capital Management built a stake in the company and won a board seat in April after criticising its leadership for its poor performance. Three months later, Delivery Hero merged its European and Asian businesses and laid off staff.

On Thursday, the company reported that it had 1.65 billion euros in cash at the end of the quarter and expects to hit its guidance on free cash flow. Delivery Hero shares have risen 54 per cent so far this year.

In August, the company announced plans to list its Middle Eastern business, Talabat, on the Dubai stock exchange in the fourth quarter. The share sale could raise about US$1 billion, Bloomberg News reported. Delivery Hero said it would retain a majority interest in the listing.

The prospect of a Talabat listing shows that some areas of the business are thriving. Bloomberg Intelligence estimated that Talabat could net an enterprise value between US$9 billion and US$12 billion.

During the third quarter, the company reported that sales in the Middle East and North Africa grew 23 per cent over the prior year. BLOOMBERG