Deliveroo delivers a profit
Plus, jobs market cools and wage growth slows, British Business Bank in the red, Parameta Solutions may be the LSE's next headache and Britain needs to prove that its open for business
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By Sarah Vizard
Deliveroo delivered a profit milestone in the first half of this year, moving into the black for the first time since it was launched in 2013.
Its interim results, published today, show the company turned a profit of £1m in the first six months of the year, an improvement on the same period last year when it posted a loss of £83m. Revenue was up 2 per cent year on year to £1.03bn, while the value of sales and delivery fees – a closely watched metric – increased by 6 per cent.
Founder and chief executive Shu says: “I am pleased with the performance we have achieved this half, which was driven by effective execution of our growth and profitability initiatives. As a result, we reached two major financial milestones: positive free cash flow and positive profit for the period.”
Shu and his friend Greg Orlowski founded Deliveroo 11 years ago after he was unimpressed by the takeaways he ordered when working late in the City of London. It quickly gained market share on the back of its easy-to-use app and has signed deals with numerous restaurant businesses to deliver their menus.
More recently, it has expanded into new areas including groceries and retail businesses. It now has partnerships with brands including Holland & Barrett, B&Q and Toys R Us after seeing demand for deliveries in non-food items such as toys, flowers and homeware.
That has been key as Deliveroo and companies like it struggled to replicate the success they had during the Covid pandemic, when people who were stuck at home spent more money on takeaways. The cost-of-living crisis has also caused people to reduce their spending, with Deliveroo cutting 350 jobs earlier this year as online orders fell.
However, Shu says consumer spending now appears to be recovering, with Deliveroo seeing a “positive inflexion” in consumer behaviour in many markets. That will be welcome news to many businesses that have struggled as consumers have cut spend to deal with high inflation and increased costs for outlays such as mortgages.
Shu also called out its loyalty programme as key to its profit turnaround. Its ‘Plus Diamond’ tier, which is invite-only and costs £20 a month, offers priority delivery, an on-time promise and 10 per cent credit back on orders of more than £30 to its top customers. It also includes exclusive partners such as Hedonism Wines and The Black Farmer.
Deliveroo is one of only 56 businesses to make it onto Business Leader’s list of Great British Billion-Pound Businesses. We valued the company at £2.1bn in July, putting it and Shu 24th in our ranking. However, its shares have risen by 5 per cent over the past year and are up 9 per cent at the time of writing on the back of the results. Analysts at Panmure Liberum suggested that entry onto the FTSE 250 “could be on the table very soon”.
You can find the full list in the latest issue of Business Leader magazine, here. We also spoke to Shu on our podcast a year ago. You can listen to that here.
Business Agenda
A summary of the most important business news
1. The UK’s largest employers are reporting a cooling in the jobs market, with a slowdown in wage growth and a decrease in vacancies in July continuing a nearly two-year hiring downturn. According to figures from KPMG and the Recruitment and Employment Confederation, permanent staff placements fell as redundancies increased and new hiring slowed. You can read more here.
2. The British Business Bank reported a loss of £122m for the year ending in March, marking its second consecutive year of losses due to declining valuations in private companies. CEO Louis Taylor emphasises that the losses reflect short-term valuation dips rather than actual cash losses and he remains optimistic about future returns. You can read more here.
3. The London Stock Exchange may face another challenge as TP Icap, a major inter-dealer broker, is reported to be considering a US listing for its data business, Parameta Solutions. This potential move, which could value Parameta at more than $1bn, highlights the appeal of the US market for financial data firms and underscores concerns about London’s competitiveness for new listings. You can read more here.
4. British farmers are experiencing record-low grain harvests due to a prolonged, wet winter that left fields waterlogged and crops rotting. Wheat planting has decreased by nearly 10 per cent, with 65 per cent of farmers reporting financial losses. The National Farmers’ Union highlights extreme weather, high production costs and reduced farm support as major challenges, calling for more resilient and sustainable farming practices to cope with future climate extremes. You can read more here.
5. Italy has doubled the flat tax on foreign income for new residents from €100,000 to €200,000, aiming to balance attracting wealthy expats and addressing local concerns about rising living costs. Prime minister Giorgia Meloni’s government defended this move as a way to mitigate overly generous tax breaks, while maintaining appeal for wealthy foreigners. The decision reflects Italy’s efforts to manage fiscal policies without engaging in a competitive tax race with other countries. You can read more here.
Business Question
Guess the company
- It was founded in 1917
- Its headquarters are in the UK but its roots are in South Africa
- It acquired the company behind the slogan: “A diamond is forever”
- Despite a near miss this year, it is a FTSE100 regular
- It employs 95,000
- 2023 revenue stood at $32.5bn, with an EBITDA of $10bn
The answer can be found at the bottom of the page.
Business Thinker
Deep dives on business and leadership
🚪🚶If Britain is open for business, prove it
Labour missed its campaign promise of holding an investment summit within 100 days of taking power, with the event now set for October 14. Mark Kleinman, writing for City AM, says this summit will precede Rachel Reeves’ first budget, crucial for outlining tax policies and reassuring investors. Despite the grand claims, rebuilding investor confidence and making the UK a prime investment destination will require consistent, long-term efforts beyond hyperbolic political rhetoric.
👩🏻💼 Inside the first year as a CEO
Transitioning to a CEO role presents unique challenges, with high expectations and a steep learning curve. A study by Russell Reynolds Associates, profiled in Harvard Business Review, found that 15 per cent of CEOs who left their positions in Q1 2024 had served less than 24 months, highlighting the pressure on new CEOs to perform quickly. Key insights from the study show that new CEOs prioritise forming their senior leadership team, face surprising challenges with company culture and board relations, and often regret not acting faster or adapting their leadership style sooner.
🌿 All the best offices are embracing the Great Outdoors
Offices are increasingly integrating green spaces to boost employee well-being and productivity, a trend accelerated by the pandemic. Plans like cutting into the HSBC tower for green terraces reflect this shift, writes Lucy Arthur, emphasising outdoor spaces for work and relaxation. With the rise of well-designed outdoor areas, companies also address sustainability, enhancing urban environments and making offices more attractive than working from home.
Business Quote
Inspiration from leaders
“Leadership is not about titles, positions, or flowcharts. It is about one life influencing another.”
– John C. Maxwell
Business Leader
The best of our content
The secret sauce behind Gail’s Bakery
Tom Molnar, CEO of Gail’s Bakery, transitioned from studying aquatic ecology and energy trading to founding one of the UK’s most beloved bakery chains. Partnering with Gail Mejia and Ran Avidan, he opened the first Gail’s Artisan Bakery in 2006.
With over 100 outlets today, Molnar reveals the ‘secret sauce’ behind their success. Emphasising the importance of caring, complexity, and community connections, Molnar shares his philosophy on maintaining high standards and fostering a culture of learning and compassion in every neighbourhood they serve.
You can read the article here.
Other popular pieces
👨🍳 Mastering the recipe for success: Jason Atherton’s entrepreneurial insights
❤️ Castore CEO Tom Beahon’s five tips for building a career you’ll love
And finally…
Humans have been making bridges for thousands of years. Some of us use bridges every day but it’s easy to take for granted the engineering marvel that they are. And all bridges are not made equal.
X user @JamesLucasIT has posted a thread of some of the world’s most beautiful bridges. From the Golden Bridge in Vietnam (above) and Spain’s Puente Nuevo to the Pont du Gard in France and the Øresund Bridge that connects Sweden and Denmark, the Business Leader team were split on our favourites.
You can see the thread here.
The answer to today’s Business Question is Anglo American.
