Online delivery platform Just Eat’s (JE.) £50m investment plan for brands, developing markets and delivery services has unnerved the market.
Shares in the company have fallen 9.3% to 772.8p.
The company is guiding for £600m and £700m in sales and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of between £165m and £185m in 2018.
Delivery services will involve Just Eat spending money on labour and transportation, which could constrain earnings growth.
Berenberg analyst Robert Berg argues chief executive officer Peter Plumb needs to clarify how investing £50m will result in ‘material incremental value creation’ over the medium term.
EARNINGS EXPECTATIONS MATERIALLY BELOW FORECASTS
While sales expectations for 2018 are in line with forecasts, Berg flags underlying EBITDA in a range of £165m to £185m is ‘materially below’ consensus of £226m, with the shortfall reflecting the investment plans.
Canaccord Genuity’s Nigel Parson says 2017 was another stellar year for Just Eat after its results beat forecasts thanks to the acquisition of SkipTheDishes in Canada.
Order growth at SkipTheDishes soared 264% in the year to 31 December, making it the second largest business in the group.
Parson is also disappointed with earnings guidance, highlighting £50m s a ‘really big hike in investment,’ but remains optimistic.
‘In a ‘winner takes all’ industry, Just Eat is tightening its grip on the UK market, and expanding fast in its target markets abroad,’ comments Parson.
SALES AND PRE-TAX LOSSES RISE
On a statutory basis Just Eat racked up pre-tax losses of £76m in the year to December after writing off £180m of goodwill in Australia and New Zealand last year.
Demand for takeaways remained high with sales up 45% at £546m, and organic growth was strong at 30%.
The X Factor final marked the highest single day of orders on 2 December. The day was also a huge success for pizza takeaway firm Domino’s (DOM).
