Losses have risen sharply at Deliveroo, according to its latest accounts
The company, incorporated under the name Roofoods, made a worldwide loss of £129m in 2016, up from £30m in 2015.
Deliveroo made sales of £128.56m, up from £18.1m, but the cost of getting the goods to customers was £127.47m, leaving it a very small profit margin.
On top of that the company has been funding an international expansion plan.
Deliveroo is now in 12 countries, including Germany and Singapore and connects thousands of bike couriers to customers wanting food from restaurants that do not have their own delivery system.
Deliveroo does not employ its riders directly, but in July the company said it would pay sickness and injury benefits to its 15,000 riders in the UK if the laws were changed.
Last year the number of Deliveroo riders worldwide rose from around 6000 in 2015 to 26,000, a number that has carried on rising.
That rapid expansion was behind rising administrative expenses, which ballooned to £142m last year and Its accounts also show it raised £208m from shareholders in 2016, representing 29% of the company.
A company spokesman said in a statement: “Deliveroo is investing heavily in new technology and new sites across the world. ‘We are extremely proud that in only four years Deliveroo now works with over 30,000 riders and 20,000 restaurants to deliver great-tasting food in over 140 cities around the world.”
Andrew White, CEO of Preoday – a rival non commission based ordering system commented
”The news today that Deliveroo made a £129m loss in its last year must be difficult for a company that is often hailed as a great success by the British food ordering and delivery industry. It seems one of the toughest areas for the company is the cost of delivery; it spent £127.47m on this last year. How will this company, with the eyes of the nation upon it, handle this loss and what will it do to correct its calculations? It can’t cut wages or staff numbers, not without a huge backlash, and not if it’s going to continue to scale and meet growing consumer demand.
Sadly it seems its best bet might be to raise the fees it charges restaurants, a daunting prospect given that it is already charging venues around 35% commission per order.
If it is to do that, we could see restaurants leaving the platform in their droves. When there are more affordable delivery options in the market, and digital ordering technologies that charge no commission at all, why would any restaurant marginalise its own profits further (many make just 10% profit on online orders) by paying more to keep Deliveroo afloat?
It’s a difficult position it finds itself in, only time will tell who will suffer as it fights to get back on track”.