Deliveroo : FY2023 Preliminary Results

Deliveroo plc

2023 preliminary results

14 March 2024

Strong operational progress driving profitable growth

Highlights1

• Good financial performance, with adjusted EBITDA ahead of guidance
• • Resilient year of growth given macroeconomic conditions with gross profit up 13% and revenue and GTV* up 3% (2% and 3%, respectively at constant currency*).
  • Growth trend improved in the second half with H2 GTV up 5% year-on-year and orders recovering through the year to be flat year-on-year in Q4.
  • Significant progress on profitability with adjusted EBITDA* of £85 million (2022: £(45) million); adjusted
    EBITDA margin (as a % of GTV)* increased to 1.2% (2022: (0.7)%).
  • Profit improvement levers included: efficiencies in the delivery network, optimisation of marketing spend, overheads savings and a higher advertising contribution.
  • Loss for the period reduced by £262 million to £(32) million.
• Further progress towards sustainable cash generation
• • Free cash outflow reduced to £(38) million (2022: £(243) million), which included £(20) million cash exceptionals and excluded £32 million interest income.
  • Net cash* of £679 million (2022: £1,000 million); £309 million total return of capital completed in 2023, c.30% of net cash at the start of the year.
• Delivering for our consumers focusing on service and value for money
• • Continued investment and innovation in consumer value proposition (CVP), with enhanced selection and in-appexperience, premium delivery, top-upgrocery orders and launch of retail proposition.
  • CVP initiatives driving clear benefits with higher NPS, lower average mark-ups by restaurants on the platform, improvement in key service metrics and grocery reaching an annualised GTV run-rate of £1.0 billion in Q4, with particularly strong growth in mid-sized basket orders.
• Strategic priorities and targets outlined at recent Capital Markets Event
• • Multiple opportunities for growth including further enhancing CVP (selection, price/value, Deliveroo Plus and delivery experience) and new verticals and use cases (retail and mid-sized grocery baskets).
  • Strong levers for profitability and cash flow including reducing rider wait time and smarter order stacking, increased marketing efficiency, and greater automation to drive operating leverage as we scale.
  • GTV growth: targeting mid-teens percentage growth per annum in constant currency in the medium term.
  • Profitability: adjusted EBITDA margin (as % of GTV) target of 4%+ by 2026.

2024 outlook

• GTV growth (in constant currency) anticipated to be in the range of 5-9%; Q1 growth expected to be similar to Q4 2023, with an improvement in growth through the year as we continue to deliver on our plans.
• Adjusted EBITDA expected to be in the range of £110-130 million.
• Free cash flow expected to be positive for the full year 2024.

Will Shu, Founder and CEO of Deliveroo, said:

"2023 was a good year for Deliveroo and I am proud of what we have delivered financially, operationally and for our consumers. Our focus on service and value for money continues to build consumer trust, which are fundamental to unlocking future growth in this industry. Alongside this, our restaurant and grocery businesses are performing well, we launched our retail offering, Deliveroo Shopping, and we are scaling our advertising business. Building on the strong progress we made in 2023, I'm excited about the further opportunities ahead. We have clear strategic priorities and initiatives in place to achieve our medium term targets, and I am confident in our ability to deliver continued profitable growth."

• In this section, all growth rates are year-on-year and in reported currency unless otherwise stated, and all figures exclude results from Australia and the Netherlands, where operations ended on 16 November 2022 and 30 November 2022 respectively, and Spain, where operations ended on 29 November 2021 (all three markets are treated as discontinued operations).

* Alternative performance measure ('APM'), refer to glossary on page 48 for further details

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2023 preliminary results

Summary financial information

£ million unless stated	2023	2022	Change
Orders	290.2	299.2	(3)%
GTV per order (£)*	24.3	22.9	6%
GTV*	7,062.0	6,848.1	3%
Revenue	2,030.0	1,974.7	3%
Revenue take rate (as % of GTV)*	28.7%	28.8%	(10) bps
Gross profit	726.4	643.2	13%
Gross profit margin (as % of GTV)*	10.3%	9.4%	90 bps
Adjusted EBITDA*	85.4	(45.0)	n.m.
Adjusted EBITDA margin (as % of GTV)*	1.2%	(0.7)%	190 bps
Loss for the period^	(31.8)	(294.1)	(89)%
Free cash flow*^	(38.4)	(243.1)	(84)%
Net cash*^	678.8	999.6	(32)%

• Alternative performance measure ('APM'), refer to glossary on page 48 for further details ^ Continuing and discontinued operations
  Change in constant currency was 3% for GTV, 6% for GTV per order and 2% for revenue

Contact information

Investor Relations

David Hancock, VP Finance, Strategy & IR - [e-mail]

Tim Warrington, Investor Relations Director

Rohan Chitale, Investor Relations Director

Media Relations

Joe Carberry, VP Policy & Communications - [e-mail]

Brunswick Group: Rosie Oddy and Jono Astle - [e-mail]

Analyst and investor call

A conference call and webcast with Q&A for analysts and investors will be held today at 09:00 GMT / 10:00 CET. Registration details as follows:

Conference call: [phone] (quote 'Deliveroo FY23' when prompted by the operator)

Webcast:https://brrmedia.news/ROO_FY23

The webcast will also be available to view at https://corporate.deliveroo.co.uk/. A replay will be made available later.

Upcoming events

Q1 2024 trading update: 18 April 2024

About Deliveroo plc ('Deliveroo' or 'the Company' or 'we')

Deliveroo is an award-winning delivery service founded in 2013 by William Shu and Greg Orlowski. Deliveroo works with approximately 183,000 best-loved restaurants, grocery and retail partners, as well as around 135,000 riders to provide the best food delivery experience in the world. Deliveroo is headquartered in London, with offices around the globe. Deliveroo operates across 10 markets, including Belgium, France, Hong Kong, Italy, Ireland, Kuwait, Qatar, Singapore, United Arab Emirates and the United Kingdom.

Further information regarding Deliveroo is available on the Company's website at https://corporate.deliveroo.co.uk/.

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Disclaimer

This announcement may include forward-looking statements, which are based on current expectations and projections about future events. These statements may include, without limitation, any statements preceded by, followed by or including words such as "target", "believe", "expect", "aim", "intend", "may", "anticipate", "estimate", "plan", "project", "will", "can have", "likely", "should", "would", "could" and any other words and terms of similar meaning or the negative thereof. These forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its subsidiaries and its investments, including, among other things, the development of its business, trends in its operating environment, and future capital expenditures and acquisitions. The forward-looking statements in this announcement speak only as at the date of this announcement. These statements reflect the beliefs of the Directors, (including based on their expectations arising from pursuit of the Group's strategy) as well as assumptions made by the Directors and information currently available to the Company. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate and none of the Company nor any member of the Group, nor any of such person's affiliates or their respective directors, officers, employees, agents and/or advisors, nor any other person(s) accepts any responsibility for the accuracy or fairness of the opinions expressed in this announcement or the underlying assumptions. Actual events or conditions are unlikely to be consistent with, and may differ significantly from, those assumed. In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur. No representation or warranty is made that any forward-looking statement will come to pass. No one undertakes to update, supplement, amend or revise any forward-looking statements. You are therefore cautioned not to place any undue reliance on forward-looking statements.

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Operating and strategic review2

1. Key developments in 2023 Growth and operating environment

GTV and revenue grew 3% year-on-year (3% and 2%, respectively, in constant currency), a resilient performance in the context of the macroeconomic backdrop. Throughout the first half of the year, across many of our markets food price inflation was consistently high, outpacing wage inflation. The associated cost of living crisis put significant pressure on consumer confidence and spending power.

During the second half of the year, food price inflation began to ease and the gap between food price inflation and wage inflation started to narrow. GTV growth improved from 1% in H1 to 5% in H2, both in constant currency. The UKI performed well, with GTV growing 7% in constant currency, in line with overall market growth. International lagged the UKI, with GTV contracting (3)% in constant currency. However, trends improved steadily through the year and International returned to growth in Q4, with notable strength in Italy and UAE, alongside improvements across most other markets.

In 2023, GTV grew in both our two primary verticals of restaurant and grocery delivery. In the five years since we pioneered on-demand grocery, the business has scaled significantly and in H2 2023 it represented 13% of total GTV (H1 2023: 11%) and reached an annual run-rate GTV of £1 billion in Q4. This strong growth despite the difficult consumer spending environment gives us confidence in the strength of demand for the convenience of on-demand grocery and the growth runway ahead.

Overall, while we see some signs of stabilisation in customer behaviour, we continue to face a fragile consumer spending environment. In this context, we are particularly pleased with the progress we have made on a number of customer 'trust-building' metrics within our consumer value proposition ('CVP'), including service and price/value. The strong execution we have demonstrated in the year underpins our confidence in delivering the growth opportunity ahead, which we outlined at our Capital Markets Event in November. We have multiple growth levers within our control to unlock future demand and are on-track with our development of these levers.

Consumer value proposition

The on-demand delivery industry is still early in its maturity and there remains ample room for growth. We firmly believe that the biggest factor to unlock future growth for Deliveroo and our merchants is building consumer trust, through a combination of price integrity and a flawless delivery experience. Achieving this relies on getting the basics right: building the best consumer value proposition by continually improving factors such as consumer experience, selection and price/value. We made good progress on all of these CVP pillars in 2023.

Consumer experience

As an on-demandthree-sided marketplace we aim to deliver a seamless consumer delivery experience on each occasion. While the overwhelming majority of orders go smoothly, a small percentage of orders go wrong, which can negatively impact on consumer trust. Working with restaurants and riders, we have been able to substantially reduce poor service outcomes such as missing items and late orders. The biggest improvement came in what we call 'OMDNR' (Orders Marked as Delivered, but Not Received), where the consumer does not receive their food at all. We have reduced this by c.65% in 2023, generating annualised savings of over £20 million from reduced compensation costs. We also saw an improvement in our net promoter score in the year.

During 2023, we launched a 'premium' delivery option in UKI, France and Italy, allowing consumers to pay a small fee to guarantee that the consumer's order is brought directly to them, ahead of any other order; if a premium delivery arrives after the estimated delivery time, the fee is fully refunded. We developed this feature in response to explicit consumer demand, and we have been pleased by the take up.

• In this section, all growth rates are year-on-year and in reported currency unless otherwise stated, and all figures exclude results from Australia and the Netherlands, where operations ended on 16 November 2022 and 30 November 2022 respectively, and Spain, where operations ended on 29 November 2021 (all three markets are treated as discontinued operations). The following commentary includes discussion of statutory measures such as revenue and operating loss, as well as alternative performance measures ('APMs') such as gross transaction value ('GTV'), gross profit margin (as % of GTV) and adjusted EBITDA, as the business also uses these metrics to monitor and assess performance. A full list of APMs and their definitions can be found on page 48. More detailed discussion of statutory results is contained in the Financial Review beginning on page 9.

* Alternative performance measure ('APM'), refer to glossary on page 48 for further details

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In the majority of our markets we now offer consumers the opportunity to 'top up' their restaurant order with the addition of a grocery order through the order tracking page. This is driving new users to the grocery category: almost a quarter of consumers who ordered through this feature in 2023 were new to grocery. We have also improved the in-app experience for grocery, making consumer discovery more personalised, with features like 'Your Regulars' and 'Top Picks' based on previous buying behaviour, which aid basket-building as we expand into mid-sized baskets (£30-£60).

Selection

We have continued to enhance the selection available to consumers, adding more merchant supply to the platform and taking the total number of restaurant, grocery and retail partners to around 183,000 (end of 2022: ~176,000). However, we have always recognised that consumers care about their hyperlocal selection, rather than the total number of restaurants available on our platform. Over the last year we dramatically increased the selection that consumers see in the app by expanding delivery radii in certain zones to give them access to more restaurants and provide greater choice. We also significantly expanded the range of products available within our grocery offering, with selected partners now offering up to 10,000 SKUs. This is a key enabler to our mid-sized basket expansion, along with the improved in-app experience mentioned above. We have seen positive results in 2023 with mid-sized basket orders growing at over five times the rate of other grocery orders and now representing approximately a fifth of total grocery orders.

Price/value

Price integrity is critical to building consumer trust and price/value is a key component of the CVP, particularly when the cost of living crisis is impacting consumers' spending power. While we do not set menu prices, we are actively promoting value in the app. Examples include highlighting where restaurant and grocers are matching prices to their dine-in or in-store prices, as well as using targeted promotions to provide value, for example our '£7 off 7' orders promotion and 'summer saver' campaigns, alongside buy-one-get-one-free offers with participating restaurants. As we focused on price integrity we have been encouraged to see an increase in consumers who believe that Deliveroo offers good value for money.

Value programme and commercial architecture

In addition to the direct CVP levers mentioned above, we developed indirect tools to incentivise our merchants to provide fair prices in combination with great service. We do this through two programmes working in parallel:

1. Our Value Programme rates the value for money provided by partners based on price integrity (the mark-up vs dine-in prices), quality (using consumer ratings) and service (focusing on availability, speed and low order defect rates). Restaurants scoring well on these three factors are featured in our 'Deliveroo's Choice' carousel in the app, increasing their traffic and visibility, and allowing them to participate in specific offers.
2. Our new commercial architecture means larger merchants can unlock lower commissions linked to performance on trust-building metrics, such as smaller mark-ups and better operational performance. This creates wins for consumers (better prices and fewer poor order outcomes), for riders (lower wait times at restaurants), for merchants themselves (better consumer retention), and for Deliveroo (more trust in the platform).

We have been encouraged by how partners have embraced this approach. Some major partners have invested in new managerial roles to oversee delivery operations and have enhanced their in-house technology solutions, and service improvements have included reduced rider wait time at restaurants and improved opening hours. Overall, we are pleased by the response from partners and consumers, and remain confident that this trust-building approach is the right one for consumers, riders, merchants and Deliveroo.

Launch of retail proposition

While food remains at the heart of what we do, it is clear from app search term data and purchases from our existing grocery partners that consumers want us to deliver more than just food. Therefore, in November 2023 we launched our new retail "shopping" proposition, starting in the UK and UAE. In time, our ambition is to bring the neighbourhood to consumers' doors, unlocking on-demand delivery from retailers such as local florists, DIY stores and pharmacies, in addition to the existing restaurants and grocers available on the platform. With a total addressable market of £700 billion in markets where Deliveroo operates, retail represents a very large potential opportunity. Our target is to create a business in the region of £700 million GTV by 2028.

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We are still at the beginning of our retail journey, but we have been pleased by the early progress with merchants and the response from consumers. We have been ramping up selection across key target categories including flowers, gifting, health and beauty, petcare, home- and kitchenware, baby and DIY. We already partner with national chains such as Boots and Screwfix in the UK and Early Learning Centre, Tavola and Geekay in the UAE, as well as a rapidly growing number of local independent stores. Alongside these 'pure-play'non-food retailers, we have worked with our grocery partners to expand their non-food selection. Within the app, we have continued to evolve our shopping experience, developing new item-first search and browsing capabilities, leveraging machine learning to provide a curated selection to a consumer, as well as introducing a new give-a-gift feature.

Significant improvements in profitability and free cash flow*

We continued to make progress towards reaching our target of a 4%+ adjusted EBITDA margin (as % of GTV) by 2026. Adjusted EBITDA increased to £85.4 million in 2023, compared to £(45.0) million in 2022. Adjusted EBITDA margin (as % of GTV) reached 1.2% in 2023, an improvement of 190 bps versus 2022. This was driven by 90 bps of gross profit margin (as % of GTV)* expansion and 100 bps of reduction in marketing and overheads as % of GTV*.

During the year we continued to benefit from the annualisation of the measures we took in 2022 to optimise consumer fees and the increasing contribution of advertising revenue. In addition, we improved gross profit margin through efficiencies in the delivery network that helped to limit the inflationary impact on cost of sales per order. We did this through reducing the amount of time riders spend waiting at restaurants for an order to be ready, as well as by lowering our spend on customer compensation by substantially reducing the rate of orders that are not received by customers ('OMDNR'). We also further developed our stacking capabilities by launching multi pick-up stacking, where a rider can pick up orders from multiple merchants and deliver them to multiple consumers.

Our advertising business is an important driver of profitability, and it reached an annualised revenue run-rate in Q4 2023 of £77 million (Q4 2022: £40 million) or 1.0% of GTV (Q4 2022: 0.6% of GTV). The majority of this revenue currently comes from our sponsored positioning and search results product for restaurants and grocers, which continue to drive strong ROAS for partners. Our focus remains on taking a consumer-first approach, wanting to strike the right balance between helping merchants drive incremental demand while always prioritising the consumer experience.

Marketing and overheads* decreased to £641.0 million in 2023 compared to £688.2 million in 2022. The year-on-year reduction was in large part due to more targeted marketing investments, as well as overhead cost efficiencies, driven by benefits from headcount reduction measures actioned in the first half of the year.

Free cash flow improved to £(38.4) million - excluding £31.7 million of interest income but including exceptional cash costs of £20.2 million. This compares to £(243.1) million in 2022, with the significant improvement a result of our substantial progress in profitability as well as good investment discipline (£36.7 million lower capital expenditure and capital development costs) and lower cash exceptional costs.

Operational and strategic progress in 2023 underpins our confidence in medium-term targets

At our 2023 Capital Markets Event (CME) we set out our strategic priorities and financial targets: to deliver mid-teens percentage GTV growth per annum (in constant currency) in the medium term and to reach an adjusted EBITDA margin of 4%+ by 2026. Our industry is at an early stage of maturity, and we see multiple opportunities ahead of us to drive strong growth in GTV and revenue, and to generate strong and sustainable profit and free cash flow per share. On the growth side, these opportunities include further CVP levers (selection, price integrity, Deliveroo Plus and delivery experience) and new verticals and use cases (retail and mid-sized grocery baskets). On profitability and cash flow, we see opportunities in reducing rider wait time and smarter order stacking, increased marketing efficiency/targeting, and opportunities to improve operating leverage as we scale, helped by improved tooling and automation. We have made good progress on all these levers in 2023 - as detailed in the sections above - and with multiple further opportunities ahead, we are confident in our ability to deliver our medium-term targets.

Capital position and shareholder returns

Our IPO in March 2021 raised primary proceeds to meet the anticipated investment needs of the Group at that time. Since then, the competitive environment evolved, in part driven by the shift in financial market conditions. In addition, we reached adjusted EBITDA profitability ahead of plan, and have made good progress towards our goal of generating sustainable positive free cash flow. Together, these factors prompted the Board to re-evaluate the cash requirements of the Group during 2023.

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The Board undertook a review of the Group's capital structure, growth opportunities and required cash balances, and concluded that the Group had structurally surplus cash of £250 million. After consultation with shareholders it was determined that the most appropriate mechanism for the return of capital was by way of a tender offer. The tender offer was completed in full in October 2023, with the purchase of 192.3 million A ordinary shares at a price of 130p for a total cost of £253 million (including fees). The purchased shares were subsequently cancelled.

This was in addition to the £50 million on-market share purchase programme announced in March 2023 that completed in December 2023, with the purchase of 44.7 million A ordinary shares, which were subsequently cancelled. This brought the total return of capital announced and completed in the year to £300 million, broadly a third of the Group's net cash at the start of 2023.

Net cash was £679 million at the year end; we will continue to regularly review our capital position as we make further progress on profitability and cash generation and as the competitive, consumer and regulatory backdrop becomes clearer.

During 2022 and 2023, Deliveroo's Employee Benefit Trust ('EBT') purchased 83.3 million shares to be used to satisfy employee share-based compensation awards. At the end of 2023, the EBT held 56.9 million shares. In 2024 and beyond, we intend to satisfy the exercise of all employee share-based compensation awards using shares held currently or purchased in the future by the EBT, thereby offsetting any potential dilution to shareholders from the exercise of employee share-based compensation awards.

2. The three sides of the marketplace

Since 2013, we have pioneered on-demand food delivery via a hyperlocal three-sided online marketplace, connecting local consumers, riders, and merchants. In 2023, we extended our delivery network and online marketplace to include retail, broadening our mission to transform the way people shop, as well as the way people eat, through on-demand delivery. For consumers, Deliveroo unlocks broad choice and fast delivery times, working with merchants who often have never offered an online presence and on-demand deliveries before. For merchants, we not only provide logistics, but, more importantly, an incremental demand generation channel, including access to millions of new consumers, as well as online tools to grow their business effectively. For riders, we offer highly flexible work which they can rely on for attractive earnings, alongside security and benefits. In 2023, we made further progress in developing all three sides of the marketplace.

Consumers

Deliveroo's monthly active consumers ('MACs') averaged 7.1 million across 2023, compared to 7.4 million in 2022. Over the last year, MACs have declined modestly, coinciding with inflationary pressures on consumers. The year-on-year decline stabilised through the year, with H1 2023 MACs down 5% and H2 2023 MACs down 2%, exiting 2023 at a high for the year of 7.3 million MACs, reflecting early signs of stabilisation in consumer behaviour. Average order frequency (AOF) remains stable at 3.4 times per month.

	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
MACs and AOF	2022	2022	2022	2022	2023	2023	2023	2023
UK & Ireland (m)	4.1	4.0	3.9	4.1	4.0	4.0	3.9	4.0
International (m)	3.5	3.4	3.1	3.3	3.1	3.1	3.0	3.3
Group average MACs (m)	7.6	7.4	7.0	7.4	7.1	7.1	6.9	7.3
Year-on-year growth in MACs	15%	5%	4%	(1)%	(7)%	(4)%	(2)%	(2)%
Average order frequency	3.4	3.4	3.3	3.4	3.4	3.4	3.4	3.4
(monthly)

Monthly active consumers ('MACs') is the number of individual consumer accounts that have placed an order on our platform in a given month; average MACs for a quarter is the average of MACs for the three months of that quarter.

Average order frequency (monthly) is the average number of orders placed by active consumers in a month.

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Merchants

Restaurant selection is an important part of our consumer value proposition. Growth in restaurant selection increases availability and choice to consumers on a neighbourhood-by-neighbourhood basis. Our global partner restaurant sites increased to approximately 163,000 at the end of 2023, compared to around 158,000 at the end of 2022. We also expanded delivery radii in certain zones to improve selection for consumers and to allow restaurants and grocers to reach more consumers.

Globally, we now have around 20,000 grocery sites live with major partners and smaller independent merchants, up from approximately 18,000 at the end of 2022. Alongside this 'store pick' model, we continued to roll out Hop, our delivery-only grocery stores. Deliveroo-operated Hop stores and partner-operatedHop-as-a-Service sites are live in the UKI and International segments, with partners including Morrisons, Waitrose, Asda, Carrefour, Esselunga, Choithrams and ParknShop.

In November 2023, we announced our expansion into retail through the launch of our 'shopping' proposition. One of our focus areas for 2024 is to scale this business by rolling out a strong retail CVP in other markets, which will involve adding more great selection to the platform, including both larger retailers and smaller independents.

Riders

Riders are a vital part of Deliveroo's three-sided marketplace and we work with around 135,000 riders globally. Riders value the flexible work we offer, enabling them to set their own work patterns, to select which orders to accept or reject and to work with multiple companies simultaneously. This is reflected in high satisfaction ratings, with 83% of riders globally saying they are satisfied or very satisfied working with Deliveroo in Q4 2023 (Q4 2022: 83%). We continue to see strong rider application pipelines and rider retention rates. However, we have actively managed our rider fleet size by onboarding fewer new riders in the period to reflect the impact of macroeconomic conditions on order volumes and maintain an efficient rider network.

The independent contractor status of riders remains under scrutiny in certain markets, with the following updates on material matters in 2023.

• In the UK, Deliveroo has had multiple court decisions that validate Deliveroo's rider model as one of self-employment. In November 2023, Deliveroo's UK rider model was upheld as self-employment by the Supreme Court, the highest court in the country, meaning UK law has conclusively demonstrated that riders are self-employed.
• We expect the European Institutions to reach final agreement over the Platform Work Directive shortly. Within the current draft, the tests to determine the status of platform workers will still be set at Member State level. Critically, proposals provided to date include welcome clarity that, in the event that classification is challenged, national employment law would continue to determine final employment status decisions.
• In France, an investigation into our rider model has concluded. While a negative judgement was reached over a historical model, authorities found that the Company's current model is self-employment. Separately, Deliveroo has worked constructively with trade unions as part of social dialogue to introduce new measures to support riders.
• In Italy, Deliveroo riders are considered to be 'freelance' self-employed. In October 2023, the Court of Milan concluded that riders working under a historical operating model should be considered as having an alternative form of self-employment that brings additional obligations for platforms. Deliveroo believes that this judgement is flawed and is appealing.
• In Belgium, in December 2023 the Brussels Labour Court overturned a 2021 judgement that found Deliveroo riders to be self-employed. The judgement relates to a historical period. Deliveroo considers this latest judgement to be flawed and will apply to appeal.

At any given time, Deliveroo will be involved in regulatory investigations, audits, claims, court cases and appeals, as well as individual and collective legal claims in any market. We recognise provisions or contingent liabilities for such proceedings as appropriate. These represent management's best estimate of potential economic outflows based on the status of proceedings at the time of approval of the financial statements, and are based on current and/or anticipated claims, even where the amounts claimed are disputed.

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Financial review3

To supplement performance assessment, Deliveroo uses alternative performance measures ('APMs'), which are not defined under IFRS. The Board reviews gross transaction value ('GTV') and adjusted EBITDA, as well as other APMs shown below, alongside IFRS measures.

£ million unless stated	2023	2022	Change
Orders	290.2	299.2	(3)%
GTV per order (£)*	24.3	22.9	6%
GTV*	7,062.0	6,848.1	3%
Revenue	2,030.0	1,974.7	3%
Revenue take rate (as % of GTV)*	28.7%	28.8%	(10) bps
Gross profit	726.4	643.2	13%
Gross profit margin (as % of GTV)*	10.3%	9.4%	90 bps
Marketing and overheads*	(641.0)	(688.2)	7%
Marketing and overheads as % of GTV*	(9.1)%	(10.0)%	100 bps
Adjusted EBITDA*	85.4	(45.0)	n.m.
Adjusted EBITDA margin (as % of GTV)*	1.2%	(0.7)%	190 bps
Loss for the period^	(31.8)	(294.1)	(89)%
Free cash flow*^	(38.4)	(243.1)	(84)%
Net cash*^	678.8	999.6	(32)%

• Alternative performance measure ('APM'), refer to glossary on page 48 for further details. ^ Continuing and discontinued operations

Change in constant currency was 3% for GTV, 6% for GTV per order and 2% for revenue

1. Group operating performance and income statement (see page 16)

Gross transaction value

GTV grew 3% to £7,062.0 million, as GTV per order* growth offset a decline in orders. GTV per order grew 6%, due to item-level price inflation and the annualised impact of consumer fee optimisation in 2022. The impact of food price inflation moderated through the year, with year-on-year growth in GTV per order moderating from 8% in Q1 to 6% in Q2, 5% in Q3 and 4% in Q4, all in constant currency. Orders decreased by 3% year-on-year to 290.2 million in 2023, reflecting the more challenging consumer environment. However, the trend improved through the year, with year-on-year growth of (9)% in Q1, (3)% in Q2, (1)% in Q3 and flat in Q4.

Revenue

Revenue grew 3% year-on-year (2% in constant currency) to £2,030.0 million primarily due to the increase in GTV. Revenue take rate (i.e. revenue as a % of GTV) was broadly stable year-on-year. Drivers of revenue take rate included the positive impact of consumer fee optimisation and the growing contribution from advertising. These were offset by an increase in targeted promotions to provide value, such as the '£7 off 7' campaigns, and a greater proportion of grocery and pick-up orders within the mix, which have a lower take rate. These offsetting factors had a greater impact in the second half, meaning that revenue take rate reduced during the year from 29.1% in H1 to 28.4% in H2.

• In this section, all growth rates are year-on-year and in reported currency unless otherwise stated, and all figures exclude results from Australia and the Netherlands, where operations ended on 16 November 2022 and 30 November 2022, respectively, and Spain, where operations ended on 29 November 2021 (all three markets are treated as discontinued operations).

* Alternative performance measure ('APM'), refer to glossary on page 48 for further details

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2023 preliminary results

Gross profit

Gross profit increased 13% to £726.4 million. Gross profit margin (as % of GTV) was 10.3% in 2023, up 90 bps compared to 2022. The year-on-year improvement reflects increases in GTV per order and growing contribution from high margin advertising revenue, as well as efficiencies in the delivery network that have helped to limit the inflationary impact on cost of sales per order (£4.49 in 2023 versus £4.45 in 2022).

Administrative expenses
£ million	2023	2022	Change
Sales and marketing costs	185.8	214.9	(14)%
Staff costs	305.9	298.2	3%
Capitalised development costs	(36.1)	(50.3)	(28)%
Other expenses	185.3	220.6	(16)%
Depreciation, amortisation and impairments	78.9	61.4	29%
Share-based payments charge and national insurance on	64.3	68.8	(7)%
share options
Exceptional items*	(14.1)	70.4	n.m.
Total administrative expenses	770.0	884.0	(13)%

* Alternative performance measure ('APM'), refer to glossary on page 48 for further details

Administrative expenses decreased 13% to £770.0 million in 2023. Marketing costs reduced by 14% year-on-year through improving our targeting and introducing performance marketing optimisation signals linked to individual customer value. We have also enhanced our machine learning models in CRM that better predict how consumers will respond to promotions, which has driven both cost savings and incremental GTV. Staff costs were up 3% year-on-year; whilst we saw average headcount decrease year-on-year as a result of a redundancy programme which removed 9% of employed positions across the business in Q2, this was offset by wage inflation. Other expenses decreased 16% year-on-year, driven by a significant reduction in contractors within the technology team. Depreciation, amortisation and impairments increased to £78.9 million (£61.4 million in 2022), largely reflecting the increase in capitalised development costs during 2022. Exceptional items* represented income of £14.1 million (£70.4 million expense in 2022), with the reduction of some legal and regulatory provisions partially offset by the recognition of additional amounts related to other matters as well as one-off redundancy costs.

The table below explains the 7% reduction in the share-based payments charge and national insurance ('NI') on share options. The significantly lower share-based payment charge compared to 2022 was primarily driven by a reduction in new option awards in 2023 and the phasing of charges for prior year awards. NI on share options in 2022 benefited from the release of accrued NI as a result of the lower share price at the end of 2022 compared to year-end 2021.

Share-based payments charge and national insurance ('NI') on share options

£ million	2023	2022	Change
Share-based payments charge	56.1	83.3	(33)%
National insurance on share options	8.2	(14.5)	n.m.
Total share-based payments charge and NI on share options	64.3	68.8	(7)%

Other operating income and other operating expenses

Other operating income was £5.9 million in 2023 (£7.8 million in 2022), decreasing principally due to income from a new lease arrangement in 2022. Other operating expenses were £6.0 million in 2023 (£12.6 million in 2022), reducing year-on-year primarily due the prior year including a loss on disposal of fixed assets, as well as a decrease in rider kit costs as fewer new riders were onboarded in the year.

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