Traders work during the Pivotal Software Inc. initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 20, 2018.
Michael Nagle | Bloomberg | Getty Images
Having watched the phenomenal “Avengers: Endgame” this weekend (no spoilers here), I did take a moment to think about parallel universes and the concept of time.
To put it bluntly it doesn’t take a genius like Tony Stark to work out that many market commentators are living in a parallel universe, let’s call it “cloud cuckoo land,” and have no concept of time, i.e. they can’t remember what happened 20 years ago.
Now I very rarely get emotional at the movies but I did cry a tad watching the Avengers climax but not nearly as much as I cry inside every time I read yet more sycophancy and ingratiating copy from my peers about companies that have never made money, show no signs of making money anytime soon and who claim to have reinvented the wheel. Companies such as Delivery Hero, which is one of the pioneers from the revolutionary world of, wait for it … food delivery.
To recap Delivery Hero is a Berlin-based online food delivery company. It has a whizz-bang app that allows people to, yes you got it, order takeaway food online. Apologies if I’m missing some amazing subtlety in interpretation of the business model but I only have 450 words for this piece of copy so time is of the essence, a bit like when you are trying to deliver pizza.
Taking a step back before I go on, the City of London, Wall Street and others are all looking for the next big thing, the next Amazon everyone can get behind and pump billions into the momentum trade. All a bit like 20 years ago really in the heady days before the dot-com bubble burst. Then, every man and his dog could call itself XXXDotCom and get financial market support. Here in 2019, everyone is trying yet again to find a similar cause celebre, with or without sound financial rationale.
So back to pizza, Delivery Hero’s first-quarter statement was only three pages long but it seems the scribes and market watchers only read the front page, otherwise known as the executive summary, the bit where companies put all the stuff they want you to read. In this case it was loaded with fab numbers such as 93% first-quarter revenue growth, orders up by 55% and GMV up 57% (apparently GMV is group merchandise volume). Wow, I thought, this company must be making bundles now its revenue is surging.
Er, but, no, apparently their EBITDA, you know this acronym, it’s short for earnings before everything, was moving aggressively in the other direction last year. Now to be fair this was “hidden” on page three of this mighty three-page release, so how can anyone be expected to read the background information that far back?
So here’s the number my peers failed to reach. EBITDA for the full-year 2018 was -141.6 million euros, more than double the 2017 loss of 69.8 million euros etc … i.e. this massive revenue surge is being accompanied by enormous losses. In its outlook for this year it expects to reach a previously set adjusted EBITDA guidance of between -270 million euros and -320 million euros.
Maybe I’m clearly missing the point, yet again, and the first quarter of 2019 has turned in a massive profit, a reversal of these big losses. In that case I wonder why this wasn’t sung from the rafters on page one of the release? Anyone? Mr Stark? Doctor Strange? The Hulk?
(Editor’s note: A spokesperson for Delivery Hero told CNBC that the losses in 2018, excluding its discontinued operations of Germany, was -100.2 million euros and would have been -83.2 million euros in 2017 when looking only at continued operations. No further guidance was given for the expected loss in 2019.)