Just Eat motorcycle in front of McDonald's
Just Eat Takeaway raised earnings guidance following a return to growth in the UK / Image source: Adobe
  • Bulk of business returned to growth
  • Full-year earnings guidance upgraded
  • Fresh buyback launched

Online food delivery platform Just Eat Takeaway (JET) raised its earnings and cash-flow guidance for the year to December 2023 following a third-quarter return to growth in the UK, Ireland and Northern Europe.

The Amsterdam-headquartered company also launched a new share buyback of up to €150 million, sending the shares up 7.6% to £11.18 in early dealings on Wednesday 18 October.

However, the stock is still down the best part of 90% over three years and the loss-making lockdowns beneficiary also warned that the turnaround of its North America business is taking longer than expected.

GUIDANCE UPGRADED

In a third-quarter update, Just Eat Takeaway upgraded its guidance for 2023 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to around €310 million, up from an earlier forecast of about €275 million.

Europe’s biggest meal delivery firm also upgraded its free cash flow guidance to approximately break-even in the second half of this year, versus previous guidance for the mid-point of 2024, giving management the confidence to launch a new share buyback programme of up to €150 million, representing roughly 6% of the current market cap.

WELCOME RETURN TO GROWTH

The majority of Just Eat Takeaway’s business returned to gross transaction value (GTV) growth in Q3, with chief executive Jitse Groen calling out particularly strong momentum in Northern Europe, the UK and Ireland, where the group generates the majority of its orders.

Elsewhere, Just Eat Takeaway warned the recovery of the North America business, where gross transaction values were down 18% year-on-year, is ‘on a slower trajectory’, although management stressed this segment too is ‘rapidly becoming cash flow neutral’.

The company said it continued to ‘actively explore the partial or full sale of Grubhub’, the US delivery company acquired for $7.3 billion in 2021.

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THE EXPERT’S VIEW

Russ Mould, investment director at AJ Bell, said a company as established as Just Eat Takeaway ‘shouldn’t be crossing its fingers hoping to be cash flow break-even. That’s the sort of situation you would expect from an immature business that is starting to gain traction selling its products and services, not from a company that was once a member of the prestigious FTSE 100 index.’

Mould continued: ‘It feels like Just Eat is stuck in the mud – always promising progress but always being held back by some part of its business. North America is the latest problem child for the group.

‘During the pandemic people were happy to order in food as there were restrictions on movement which meant they could not go out for a meal when they wanted. Naturally that benefited food delivery platforms like Just Eat – but post-pandemic the sector is finding life a lot tougher.

‘Its share price may have moved higher on the latest trading update yet that’s merely down to upgraded earnings guidance. On a longer-term basis this stock has been as stale as a supermarket Danish pastry, down 89% in value over the past three years.’

LEARN ABOUT JUST EAT TAKEAWAY

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Ian Conway) own shares in AJ Bell.

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Issue Date: 18 Oct 2023