Just Eat earnings seen at top end, McDonald's partnership agreed

(Sharecast News) - Food delivery company Just Eat said on Tuesday that full-year core earnings were set to be at the top end of its guidance, as it announced a partnership with McDonald's.
In an update for the year to the end of December, the company said 2019 ended in line with the board's expectations and it now expected to reported underlying earnings before interest, tax, depreciation and amortisation of around £200m, with group orders of 254m and revenue of about £1bn.

UK orders grew 8%, it said, while order growth in its other markets during the fourth quarter followed similar trends to those seen in the third quarter, with "good" momentum in Australia, Italy and Switzerland and continued "strong" growth in Canada.

Just Eat, which is being bought out by Dutch food delivery firm Takeaway.com, also announced that it has agreed to partner nationwide with McDonald's in the UK and Ireland. The partnership, set to be implemented this year, will see Just Eat become McDonald's second exclusive delivery partner for McDelivery.

This follows Just Eat's recent announcement of a partnership with Greggs.

Chief executive officer Peter Duffy said: "We are pleased to confirm uEBITDA towards the top end and revenue broadly in line with the guidance range we provided at the start of 2019, notwithstanding the significant developments during the year.

"We are delighted to announce that we have agreed to partner in the UK and Ireland with McDonald's. This partnership, along with our recently announced relationship with Greggs, will require significant investment but will accelerate our growth ambitions and enhance our market position by offering our customers the widest choice available."

At 1215 GMT, Just Eat shares were down 0.2% at 853.80p.

RBC Capital Markets said:"McDonald's and Greggs are the two largest players in the breakfast and lunch meal categories. We view this as another significant win, and it should accelerate order momentum in 2020, although will come at a significant cost."

As far as the trading update is concerned, Canaccord Genuity said the UK is the crown jewel of the business so it is a "concern" that order growth is slowing. It said that UK order growth of 8% was considerably below its 12% growth forecast and just under half the growth rate of FY18.

"We calculate that UK order growth has fallen from 9.3% in H1 to just 6.8% in H2. We think this is also a symptom of a cut-back in marketing support as the company waited for the rival bids to play out."