FTSE 100’s Just Eat dumped after shock loss

Despite more tasty trading figures, Just Eat (JE.) served up a timely health warning today for investors swept up by the euphoric rise of this FTSE 100 (UKX) upstart.

Shares have been at a record high as recently two weeks ago, giving the company a market capitalisation above £6 billion following a surge of more than 250% since its stockmarket flotation in April 2014.

But questions remain about the heady valuation attached to the stock, which today revealed it generated annual revenues of £546 million from its platform enabling customers to order and pay for food from restaurants. It thinks it can grow revenues to between £660 million and £700 million this year.

Just Eat tops the FTSE 100 index list of stocks in terms of price/earnings (PE) multiples, with shares on a forward ratio of 52.3 even after today’s 10% share price fall.

The trigger for today’s sell-off came from an unexpected full-year loss of £76 million as new boss Peter Plumb booked an impairment charge of £180 million on the company’s acquisitions in Australia and New Zealand.

Competition is intensifying in certain markets, not just Down Under, and Just Eat noted that customers now expect an “even better experience from their digital services”.

Despite the threat posed by the likes of Deliveroo and UberEats, the company points out there are clear opportunities to broaden growth in areas that remain under-served. It now operates from 12 global markets, including Brazil.

In 2017, Just Eat’s global base of 21.5 million active customers consumed £3.3 billion worth of takeaway food through 172.4 million orders, an increase of 26% on a year earlier. The net addition of 13,800 restaurants onto the company’s ordering platform gave it 82,300 restaurant partners at the end of the year.

As well as its core marketplace offering, Just Eat is also working on plans with a number of branded restaurant chains to see whether it can manage the delivery component of their takeaway services.

This is not a new concept for Just Eat as it has operated a profitable delivery operation in its original market, Denmark, and it now also has the recently acquired SkipTheDishes in Canada.

The company is operating a pilot scheme with the branded restaurant chains in the UK to see the impact on its existing marketplace, and the economics associated with providing delivery services.

Just Eat believes working with the major branded restaurant chains represents a new £18 billion market opportunity for the company.

Plumb, who spent eight years as the boss of price comparison site Moneysupermarket.com, promised that the delivery services “will be engineered to complement” the marketplace business by bringing more choice to customers. He has also pledged to step up investment in the brand and in developing markets.

Just Eat was launched by five Danish entrepreneurs from a basement in August 2001. It joined the FTSE 250 Index (MCX) in June 2014, shortly after its flotation, and was promoted to the FTSE 100 Index at the end of last year.

The company does not pay a dividend as it needs its earnings to expand the growth and development of its business.

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