Just Eat slashes value of Menulog by almost 40 per cent

Australia’s largest on-line meals ordering platform, Menulog, is aiming to extend its share of the market by including supply providers, growing competitors for rivals Foodora, Deliveroo and Uber Eats.

Menulog’s British mum or dad Just Eat, which paid $855 million for the enterprise almost three years in the past, is investing one other $88 million or £50 million to launch supply providers in its three main markets, Australia and New Zealand, the UK and Canada.

Menulog managing director Alistair Venn stated the addition of supply providers would assist the Sydney-based firm appeal to extra eating places and clients on extra meal events and speed up gross sales progress, which has slowed in recent times.

Menulog’s gross sales rose 25 per cent to £49.eight million ($88.6 million) in 2017 after rising 64 per cent in 2016 and 94 per cent in 2015, whereas earnings earlier than curiosity, tax, depreciation and amortisation greater than doubled in 2017 to £17.three million.

“The sky is the limit here,” says Alistair Venn, managing director of Menulog, which plans so as to add deliveries to its on-line meals ordering platform.

James Brickwood

“We do believe that online food delivery in Australia still has enormous potential and we would very much like to accelerate that growth further,” Mr Venn advised The Australian Financial Review.


“We have 3 million active customers and we know on average they’re not able to use Menulog every single day because they order from some restaurants that are not yet on Menulog. By enabling delivery services we can unlock an enormous amount of new supply of great new restaurants that our customers are asking for.”

Goodwill impairment

Shares in Just Eat fell by 12 per cent on Tuesday after the web meals market slashed the value of its Australian and New Zealand belongings by $322 million (£180 million) or almost 40 per cent after slicing cashflow forecasts.

Mr Venn stated the goodwill impairment mirrored the additional funding required to launch supply providers somewhat than signalling a extra pessimistic outlook for the enterprise.

“We grew EBITDA 104 per cent to £17.3 million, the business continues to grow very strongly and future cashflow forecasts are also strong, but the announcement of substantial investment in delivery services is a material change to the original assumptions when it was purchased.,” he stated.

Menulog plans to make use of the identical know-how and working mannequin as Canadian aggregator SkiptheDishes, which was acquired by Just Eats final yr, and set up a fleet of couriers or third social gathering contractors to deal with deliveries on behalf of its restaurant companions.

“The sky is the limit here,” Mr Venn stated. “We actually do consider this unlocks new channels for progress not solely by unlocking new eating places but in addition unlocking new occasions of day and new eating events for our clients.

“Traditionally we have now been targeted on dinner supply – that is when our restaurant companions did most of their deliveries – however we strongly consider there’s very giant progress alternatives at different occasions of the day. Having our personal driver fleet permits us to unlock that.”

Slowed sharply

Just Eat hit the headlines in May 2015 after outlaying $855 million for Menulog, which was 55 per cent owned by co-founder Leon Kamenev and 25 per cent owned by on-line retailer Catch Group, which bought an identical enterprise, EatNow, to Menulog earlier in 2015 in return for an fairness stake.

At the time Menulog had about 5000 eating places and was producing annual gross sales of round $40 million. The buy worth was almost double market expectations and represented a a number of of 370 occasions earnings (EBITDA) of $2.three million.

Delivery Hero (now Foodora) chief government Clive Thorpe stated the worth was “insane” “I really think even $500 million would have been too much”.

However, Just Eat’s then chief government David Buttress dismissed ideas the corporate had overpaid.

Menulog now has greater than 10,000 eating places on its platform and three million lively clients. It has migrated on to the Just Eat platform and is within the course of of retiring the EatNow model.

However, regardless of new eating places and clients, Menulog’s gross sales and order progress has slowed sharply amid growing competitors. Orders rose simply 5 per cent within the December-half after growing 16 per cent within the June half, 32 per cent within the December-half 2016, 56 per cent within the June half 2016 and by 80 per cent within the 2015, in response to Deutsche Bank evaluation.

Deutsche Bank analyst Michael Simotas stated Menulog appeared to have misplaced market share to on-line rivals with supply capabilities together with UberEats, Deliveroo and Foodora.

Investing closely

Domino’s Pizza and Pizza Hut have additionally been investing closely in digital and deliveries to seize a much bigger share of the web takeaway meals market. Pizza Hut signed up with Menulog in late 2016 to expedite its digital supply and Domino’s is considering of doing the identical.

Online takeaway meals gross sales are rising almost 5 occasions quicker than the full takeaway meals market and are forecast to rise from about $1.5 billion, or 10 per cent of the market in 2017 to $four.2 billion, or 23 per cent of the market, by 2025, according to a report by Morgan Stanley in January.

Morgan Stanley estimates that on-line aggregators will raise gross sales from $600 million in 2017 to $2.four billion by 2025 as extra shoppers and eating places shift on-line and as aggregators increase into new markets.

Smaller fast-food retailers are coming underneath growing strain to enroll with aggregators or danger lacking out on gross sales, which come at a price. Morgan Stanley estimates that eating places sometimes pay a 35 per cent fee on order value to aggregators who present supply providers and 13 per cent fee to Menulog for orders solely.

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