The takeaway food delivery business is looking increasingly unstoppable. Especially now the merger of the old Just Eat with the Netherlands-based Takeaway.com is creating a new FTSE 100 giant in the shape of Just Eat Takeaway (LSE: JET).
For its final year before the merger, the company reported Takeaway.com gross revenue of €426.8m (£355.7m). And while it hadn’t previously been making a profit, we saw positive adjusted EBITDA of €12.3m (£10.25m) in 2019.
The firm handled 159.2 million orders in 2019, up 70% from 2018, and I think you’d have to be very pessimistic not to expect that growth to continue strongly.
Shares in the old Just Eat have been suspended since 3 February, and Just Eat Takeaway shares started trading that same day. That’s after the offer by Takeaway.com for Just Eat became unconditional on 31 January, with 92.2% of the shares acquired by that date.
Merger
But that doesn’t mean the merger is 100% complete yet. It doesn’t, in fact, have final approval from the Competition and Markets Authority (CMA) ye. And right now, the firm is still operating under a CMA ‘hold separate’ order. But even with that uncertainty still there, I think the chances of the CMA scuppering the deal are remote.
The big question, obviously, is whether shares in the new Just Eat Takeaway are a buy. And I have to say, right now, I really can’t tell. That’s partly because there’s no guidance.
Speaking of the year ahead, the company said: “Given the material impact of the combination with Just Eat on our plans for 2020, we will not provide an outlook“. That means analysts have little to go on, and they can’t offer meaningful forecasts.
No idea?
I expect there’ll be some criticism, on the basis that the company should have its fingers on the pulses of both of its constituent parts and should have a reasonable view of what to expect. After all, if it can’t quantify the outlook for its Just Eat and Takeaway.com parts, doesn’t that cast doubts on the wisdom of the merger?
I’m torn. On the one hand, I’d like to see full transparency in the firm’s thoughts. But against that, I don’t like the risk of possibly over-optimistic expectations.
But while we have no figures from which to estimate any forward valuations, I think we can still see some very likely forward trends. While there’s certainly potential for very significant order growth, I think it will need increasing marketing spend for Just Eat Takeaway to get ahead of the competition.
Branding
Right now, when people think of takeaway food, they think primarily of the supplier — whichever maker of burgers, pizza or curry they prefer. If I held shares, I’d want to see the company trying to shift people’s thinking away from “let’s order McDonald’s tonight” to “let’s order Just Eat tonight.” I think the next few years in the business could be all about branding.
While I’m bullish about the business, I see too much uncertainty now. Not just about financial forecasts, but also about the line-up of takeaway delivery companies in five or 10 years. I think it could be very different to today.
I’m going to stick with my ‘just watch’ stance.
