Deliveroo’s revenue hits £277 million in 2017 amid Uber rumours

Deliveroo CEO Will Shu.
Deliveroo

• Deliveroo’s rapid growth slowed last year after it
  reported a 116% increase in
  revenue to £277
  million ($361 million).
• The company’s losses also widened to £184.7 million
  ($241 million).
• But Deliveroo said it’s become a more efficient
  business, with its gross margin jumping impressively from less
  than 1% to 23%.
• The earnings come amid rumours that Uber might buy or
  partner with Deliveroo.

Food delivery startup Deliveroo’s stratospheric growth slowed
last year amid reports it is in talks to sell to Uber.

According to preliminary earnings released on Monday, Deliveroo
reported revenue of £277 million ($361 million) for the 12 months
to 31 December 2017, up 116% on the previous year.

While the company’s growth is strong, it has slowed in comparison
to 2016, when its revenue rocketed 611% to
£129 million.

Deliveroo also remains unprofitable. It reported a pre-tax of
£184.7 million ($241 million), worse than its £129.1 million
($168.3 million) loss in 2016.

The firm attributed the widening loss to “major investments” such
as expanding to new markets, offering insurance to its delivery
riders, and its £11
million ($14.3 million) acquisition of US firm Maple.

A big bright spot in Deliveroo’s earnings

But there was one major improvement in Deliveroo’s business — one
which might explain why it’s looking like a tasty acquisition or
partnership target for rival Uber. Deliveroo saw a big jump in
gross margin.

The gross margin figure can indicate the underlying health of a
business, and shows the proportion of each pound or dollar of
revenue a company keeps as a gross profit before it pays out
costs such as overheads. A higher margin indicates a more
efficient, scalable company.

In 2016, Deliveroo reported a tiny gross margin percentage of
around 0.7%. According to the firm’s public statements, that
number leapt to 23% in 2017.

Deliveroo said the improvement was thanks to “growing maturity”
in its markets, and the fact more customers are ordering more
food. Gross profit came in at £64.3 million ($84 million), up
from £1.1 million ($1.4 million) in 2016.

Deliveroo revealed the numbers in a press release on Monday,
ahead of formally filing its accounts with more detailed numbers
with the UK’s Companies House. Those accounts, when public, will
reveal more details around employees and salaries.

Uber and Amazon rumours swirl

The earnings come amid reports, confirmed by sources speaking to
Business Insider, that Deliveroo has fielded multiple acquisition
offers.

Initial talks with Amazon,
first reported by The Telegraph, were never serious,
according to sources. They may have been a case of the retail
giant scouting out the competition.

Uber is a more serious contender to acquire Deliveroo, although
investor sources seem mixed on whether a full acquisition will
happen,
per a Bloomberg report.

A partnership or investment are more likely options, according to
industry insiders. The sources said Deliveroo was unlikely to
accept an acquisition offer for less than $6 billion. Deliveroo
was last valued at $2 billion.

Will Shu, chief executive of Deliveroo, said in a statement:
“Deliveroo is growing rapidly around the world, driven by our
passion to bring amazing food to people whenever and wherever
they want it.

“Our growth is matched only by our ambition. We want to become
the world’s definitive food company and we have invested heavily
in innovation, technology, people and restaurants. We are
changing the way people eat and helping restaurants to expand to
new areas and in new ways.”