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13 January 2021

Just Keeps Growing

Just Eat Takeaway.com has continued its incredible growth during the end of 2020 which sets up the company nicely for 2021; questions surrounding profitability, however, are increasingly being asked.

The company saw UK orders rise 58% to 35.5 million in the fourth quarter, far outpacing third-quarter growth of 43% and reaccelerating thanks to further global lockdowns and consumer hesitancy about venturing from their homes. In total, fourth-quarter revenues rose more than 60%, bringing full-year revenues to £2.1bn, 50% higher than last year.

Just Eat also focused on acquiring new restaurant partners during 2020, bolstering the already strong offering across its platform. McDonalds and Greggs were the two most high-profile additions, with Just Eat providing food delivery for both companies for the first time, offering those working from home a treat they would usually have to travel for. The two new additions were coaxed onto the Just Eat platform by the firm’s sales force, a team that has doubled over the year, increasing its total number of employees worldwide to c.8,000.

This significant investment, however, does mean that profitability has taken a hit as the firm looks to sustain its impressive growth into the long-term. Underlying profit margins are now expected to be approximately 10%, much lower than the 42% recorded during the first half of the year.

The firm has adopted a ‘growth at all costs’ strategy, aggressively investing into its platform in order emerge the structural winner in the industry and utilising mergers and acquisitions to increase its global footprint and dominance over the food delivery market. Given that 2020 was a year when food delivery companies scrambled to gain a larger slice of the market pie, we would expect investments into the firm and its platform to slow slightly in 2021 and beyond. This should help profitability into the long-term and propel forward one of the fastest growing, exciting UK businesses.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Just Keeps Growing
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