Deliveroo reports first full year profit but investors remain cautious over growth prospects

Deliveroo has reached a milestone by reporting its first full year of profit since its founding 12 years ago. The food delivery company posted a net profit of £2.9 million for the financial year ending in December 2024, a significant turnaround from a £31.8 million loss the previous year. However, its performance fell short of analyst expectations, with forecasts predicting a profit of £7 million.

The company’s success was bolstered by rising sales, which increased to £2.07 billion from £2.03 billion, supported by a 2 per cent rise in total orders, reaching 296 million globally. Deliveroo also generated £86 million in free cash flow over the year and announced a £100 million share buyback programme. Improvements in cost efficiencies and a stronger loyalty scheme contributed to the company’s profit swing, alongside a generally easing cost-of-living environment in key markets.

Deliveroo saw a 6 per cent increase in the total value of transactions across its platform to £7.4 billion, with adjusted profits rising by 52 per cent to £129.6 million, at the upper limit of its projected range. Despite these successes, investors were less enthusiastic due to the company’s revised timeline for improving profit margins. Deliveroo now anticipates margin expansion to accelerate from 2026 onwards, delaying its previously set 4 per cent target margin in the medium term. The adjustment reflects plans to prioritise investment in growth areas.

Will Shu, co-founder and chief executive of Deliveroo, noted that consumer conditions had not improved as quickly as expected. He also emphasised the company’s focus on delivering value and enhancing customer experience through its tiered membership programme, which offers perks like lower delivery fees.

In the UK and Ireland, Deliveroo’s largest markets, order volumes rose by 2 per cent year-on-year to 162.8 million. Similar growth of 2 per cent was witnessed in its international markets, led by strong performances in Italy and the UAE, though competitive pressures weighed on results in Hong Kong. Earlier this month, Deliveroo announced its withdrawal from the Hong Kong market, citing an increasingly challenging environment dominated by larger rivals.

Despite positive financial results, Deliveroo’s share price remains disappointing compared to the highs reached during the pandemic. The company’s stock dropped by 4.1 per cent, closing at 119.5p—a far cry from the 390p at which shares were floated in March 2021. Deliveroo’s post-pandemic recovery, coupled with its exposure to labour law risks and low margins, remains a source of concern for investors.

The firm projects an adjusted profit of between £170 million and £190 million for the current year, with gross transaction value expected to grow in the high single digits. Shareholders are looking for evidence that Deliveroo can consistently sustain profitable growth while expanding into areas such as grocery deliveries and retail partnerships with prominent brands like B&Q and The Perfume Shop.

Deliveroo’s journey since its public flotation has been turbulent. On its debut in 2021, the company lost £2 billion in value due to investor scepticism surrounding its business model and reliance on gig-economy labour. While Deliveroo has made significant progress since then, significant challenges remain in regaining investor confidence and delivering long-term growth.