Just Eat Earnings: Profit and Free Cash Flow Ahead While Fiscal 2023 Guidance Achievable

Just Eat Takeaway reported half-year 2023 results with total orders down 12% and gross transaction value down 7%, broadly in line with expectations. The Southern Europe, Australia, and New Zealand market, and Grubhub continue to be the main detractors with orders down 17% and 15% respectively. On a positive note, GTV and revenue improved in the important Northern Europe market (GTV up 2%, revenue up 10%) and in the U.K. and Ireland market (GTV down 3%, revenue down 4%) in the first half while trends are positive in the second quarter versus 2022 (GTV was up 3% in both Northern Europe and the U.K. and Ireland). Half-year adjusted EBITDA improved to EUR 143 million (EUR 277 million change versus last year) driven by delivery efficiencies and savings (Grubhub's restructuring resulted in $30 million run-rate savings from 2024). On guidance, management confirmed its outlook for fiscal 2023 adjusted EBITDA of EUR 275 million and also top-line guidance (GTV growth from negative 4% to 2% with growth skewed toward the end of the year given soft comps from 2022). Top-line guidance implies down 1% to up 11% GTV growth in the second half. We think conservative EBITDA guidance allows for flexibility in much-needed demand-generating marketing investments in the second half, investments that could render the midpoint of top-line guidance achievable. Free cash flow before changes in working capital improved to negative EUR 78 million (from negative EUR 407 million a year ago) or negative EUR 16 million excluding one-offs and exceptionals. Management also expects free cash flow (excluding working capital movements) to turn positive in mid-2024, which we think is achievable given profitability improvements and cost controls.