Performance

Report
January 2021

Subject: Understanding Business/Business Planning

0212 – König M., Montealegre N.

Group: Nr. 6

Members: BREUNIG Linda Dorothea, HOLESOVSKY

Luca Noel, LEIBOVITZ David, RIEDL Carina, SIEDOV
Mykyta, WACHA Christoph
Table of Content
1. Industry Overview ............................................................................................................... 2
2. Company Overview ............................................................................................................. 2
3. Business Model of Delivery Hero ........................................................................................ 3
3.1. Value Proposition ........................................................................................................ 3
3.2. Value Chain .................................................................................................................. 3
3.3. Target Group................................................................................................................ 4
3.4. Profit Mechanism ........................................................................................................ 4
4. Competitor Analysis of Just Eat Takeaway.com ................................................................. 4
5. Non-Financial KPI Analysis .................................................................................................. 5
5.1. Customer Experience ................................................................................................... 5
5.2. Orders .......................................................................................................................... 5
6. Horizontal and Vertical Financial Statement Analysis ........................................................ 5
6.1. Balance Sheet – Horizontal Analysis ............................................................................ 5
6.2. Balance Sheet – Vertical Analysis ................................................................................ 6
6.3. Income Statement – Horizontal Analysis..................................................................... 6
6.4. Income Statement – Vertical Analysis ......................................................................... 7
7. Financial Ratio Analysis ....................................................................................................... 8
7.1. Profitability Measures ................................................................................................. 8
7.2. Cash Conversion Cycle (CCC) ..................................................................................... 10
7.3. Short term liquidity measures ................................................................................... 12
7.4. Long-term Liquidity Measures ................................................................................... 13
8. Conclusion ......................................................................................................................... 14
Reference List ........................................................................................................................... 16
Annex ........................................................................................................................................ 19

Performance Report 1
1. Industry Overview
The industry of food delivery has a long history, starting in Korea, in the 18th century, where
delivery was restricted to cold noodles and “hangover soup”. Today, one might still get a food
delivery to cure a hangover, yet, the rivals in this highly competitive industry cannot afford to
deliver a cold meal anymore. This is due to the fact, that in recent years the industry evolved
rapidly as well as dramatically, leading to the emergence of several different subindustries:
meal delivery, delivery of ingredients and grocery delivery (Wikipedia, 2021).

It is undeniable, that all aforementioned industries evolved side by side with the internet, with
the meal delivery industry generating a revenue of around 136,431 million US dollars and
around 1,213.9 million users in 2020 worldwide. The expected annual growth rate is about
7.5% resulting in a total estimated market volume of 182,327 million US dollars by 2024.
Globally, China contributes the most to the total revenue. Given this, Europe generates a mere
15% of the total global market value with 20,885 million US dollars in 2020, however Europe’s
projected annual growth rate is slightly higher than the worldwide average, at around 8.2%
which adds up to an impressive 50% increase of the market value in Europe (total of 28,631
US dollars) by 2024 (Statista, 2020).

On top of that, we need to consider that the projected figures do not take the impact of Covid-
19 as much into account as we would like. On the one hand, the industry was forced to evolve
under extraordinary circumstances, to be more efficient and satisfactory to the custumers and
on the other hand, the overall situation might have induced hypergrowth or at least
considerably accelerated the expansion of this industry. In this case, speculations don’t serve
much, but the consequences will only be seen in the upcoming years; this is, however, as why
presented figures need to be taken with a grain of salt. Having said this, Covid-19 or not, this
industry is an upcoming line of business that holds huge potential for the future.

2. Company Overview
Delivery Hero SE, founded in May 2011 by Niklas Östberg, a Swedish engineer, is one of the
major online food ordering and delivery marketplaces worldwide; by being parent to various
subsidiaries, it is represented in around 50 countries across Europe, Africa, Asia and South
America. In total, Delivery Hero SE consists of 19 corporate entities, famous examples being
“foodpanda” in Eastern Europe and Asia or the Austrian equivalent “Mjam”. The company is
currently located in Berlin and employs around 27 000 employees in about 700 cities, receiving

Performance Report 2
over 5 million orders per day (Delivery Hero, SE., 2020). It needs to be pointed out that
Delivery Hero SE increased their number of total orders by 80% from 2018 to 2019; at the
same time, they experienced significant growth in harsher regions like the Middle East and
Northern Africa (Delivery Hero, AG., 2020). Definitely worth mentioning, is the fact, that
Delivery Hero SE performed the largest IPO in 2017, in Germany, by raising about one billion
euros, wherefore they were given the “Börsenzeitung” Corporate Finance Award (Bochmann,
2018). Starting in 2019, Delivery Hero SE introduced so-called “Dmarts” delivery stores
offering foods, electronics, pharmaceuticals and more (Bochmann, 2020). Very recently,
Delivery Hero was all over the news as its share price, after announcing that it would receive
approval for its strategic joint venture with South Korea’s largest online food delivery platform
(Woowa Brothers Corp.), reached a record high of 132,10 euros (Press Team, 2020). Lastly,
the company puts emphasis on sustainability, as by 2020 all of their European operations
became climate-neutral (Connolly, 2020).

3. Business Model of Delivery Hero

3.1. Value Proposition
The concept is simple: Delivery Hero provides a platform for customers to order dishes from
selected restaurants; once the meal is prepared, delivery will be made by the restaurants’ staff
or by a vendor. What differentiates the company from its competitors is its hybrid function
between a marketplace and a delivery service. Partnering with over 500 000 restaurants, they
can offer a broad variety of foods and cuisines to choose from (Delivery Hero, SE., 2020). The
success of this network can also be explained by the multiple benefits that are brought to the
partner restaurants, including advertisement or the possibility to hire a vendor. The ordering
process for the customer is extremely simple and convenient by e.g. introducing a search
function at dish level and visual material. Furthermore, it is also personalized as you are
specifically targeted with restaurant recommendations. Overall, delivery is fast and reliable,
with the possibility of life-tracking or a constant status update. The average delivery time was
below 28 minutes in 2019 (Delivery Hero, SE., 2020). In addition, the customer can choose
from a variety of payment options.

3.2. Value Chain

To ensure high-quality products and reliability, Delivery Hero SE operates a tightly managed
marketplace and ensures that all steps in the food delivery process are neatly executed;

Performance Report 3
including transmission, delivery, as well as post-order services. To keep improving the
customer experience, Delivery Hero SE follows a data-driven approach allowing them to be as
efficient as possible and to develop innovative logistic technology; instead of delivery time
estimations, they now use machine-learning algorithms (Delivery Hero, SE., 2020).

3.3. Target Group

As the Delivery Hero SE group includes companies operating in around 50 countries
worldwide, they serve a wide range of customers, most of them being located particularly in
urban areas where the demand for delivering meals and the number of restaurants is higher
than in the countryside. The sole requirement for customers to use this service is access to
the internet. Therefore, Delivery Hero’s customers are varied: Families with kids, working
people ordering meals for lunch, friends eating together and students; the majority of them
placing orders regularly. Thus, most of the generated revenues can be attributed to returning
customers, who were accountable for 94% of all sales in 2017. (Delivery Hero, SE., 2018).

3.4. Profit Mechanism

Finally, the question about Delivery Hero SE profit mechanism arises. Generally, the company
uses multiple revenue streams generated through fees levied on the partnering restaurants.
The company charges an initial set-up payment, a monthly subscription for restaurants to be
represented on its platform and takes a commission on orders completed. The commission
depends on the service provided and varies across countries. (Delivery Hero, SE., 2018).

4. Competitor Analysis of Just Eat Takeaway.com

One big international competitor of Delivery Hero, with a clear market-leading position in 6
countries, is Just Eat Takeaway.com, formally known as Takeaway.com (Reuters Editorial,
2020). Named company is active in 11 countries, with its main focus on Europe; in Austria their
subsidiary is called “Lieferando”. Takeaway.com was founded in 2000 in the Netherlands and
Just Eat was founded in 2001 in Denmark; the companies merged in 2020 with their
headquarters now situated in Amsterdam (Just Eat Takeaway.com., 2020). In total, they had
19.5 million active customers with 159.2 million orders in 2019 (Just Eat Takeaway, AG.,2020).
The overall business model is very similar to that of Delivery Hero, as they both use a similar
platform to sell their services. However, one major difference between the two companies is
that Just Eat Takeaway.com builds one strong brand, while Delivery Hero manages its business
through a variety of subsidiaries.

Performance Report 4
5. Non-Financial KPI Analysis
5.1. Customer Experience
Customers determine the success or the failure of a company, which is why a firm needs to
know how satisfied consumers are and wherein room for improvement in this relation lies.
Since measuring emotions effectively is difficult, companies try to scale customer experience
by asking consumers to rate goods or services using Net Promoter Score (NPS). NPS is a
measurement system to qualify how likely it is, that customers recommend a brand to
acquaintances with a possible score between -100 and 100. A modified version of this tool
allows Delivery Hero to analyze the entire customer journey in detail and to reveal weak spots.
As a result, Delivery Hero obtains qualitative information, that helps to improve their service.
Delivery Hero’s NPS significantly enhanced in the last years and peaked in 2019 at 46 NPS
(Delivery Hero, SE., 2020), which is considered to be a good score.

5.2. Orders
Generally speaking, rising purchases indicate growth of a company. Therefore, a certain
number of orders is crucial for a company, otherwise a firm runs the risk to be overtaken by a
competitor or in worst case, become insolvent if purchases are further decreasing. In fact,
Delivery Hero is thriving, as orders increased by 80.3% from 369.4m to 666m in 2019 (Delivery
Hero, AG., 2020) and by around 48% in 2017 and 2018 (Delivery Hero, AG., 2018) (Delivery
Hero, AG., 2019). Moreover, due to COVID-19 measures purchases were rising again as
restaurants lacking delivery service started to cooperate with the Delivery Hero group.

6. Horizontal and Vertical Financial Statement Analysis

6.1. Balance Sheet – Horizontal Analysis
Total assets increased by a third from 2018 to 2019. At the same time the main competitor,
Just Eat Takeaway.com, had a more rapid increase (297.7%), yet total assets still amounted to
1000 million Euros less than those of Delivery Hero. The main driver of growth in total assets
was the first-time application of new IFRS, leasing improvements and increasing investments
leading to an overall increase of 52.6% in non-current assets such as property, plant and
equipment (398.5%) and other financial assets (693.6%).

In general, current assets increased on average by 11% in the time interval of 2017 to 2019;
trade and other receivables increased more drastically by 52.1% from 2018 to 2019 due to the

Performance Report 5
organic growth of the group. Additionally, the company increased cash and cash equivalents
by 92.1% from 2018 to 2019 which can in part be explained by Delivery Hero selling their
German branches. Overall, Delivery Hero is more liquid than its competitor, Just Eat Takeaway.

Non-current liabilities increased by 196.6% and current liabilities by 88.7%, which again can
be attributed to the introduction of IFRS and increasing liabilities to restaurants and trade
payables. In contrast, Just Eat Takeaway had an increase of 924.2% of non-current liabilities
due to the issuing of convertible bonds to finance the acquisition of the German subsidiary of
Delivery Hero and a decrease of 3% of current liabilities.

Lastly, the equity of Delivery Hero decreased by 6.1% from 2017 to 2018, but increased by
15.8% in 2019, mainly due to retained earnings and other reserves. In comparison, the key
competitor increased its equity by 715.9% from 2018 to 2019 attributable to the issuance of
new shares to finance the acquisition of der German branches from Delivery Hero.

6.2. Balance Sheet – Vertical Analysis

Delivery Hero owns more non-current assets, especially intangible ones, than current assets,
which coincides with their business model. From 2017 to 2019 the proportion of intangible
assets to total assets decreased, while the ratio of property & plants, as well as other financial
assets increased. In comparison, Just Eat Takeaway.com also owns mainly intangible assets,
that have increased over the past three years amounting to 88.8% of total assets in 2019.

Furthermore, 30.6% of Delivery Hero’s total assets were cash and cash equivalents in 2017
which decreased, amounting to 18.2% in 2018 and reached 26.2% in 2019, which shows that
the company has certain cash reserves that improve their liquidity.

Delivery Hero mainly financed their assets through equity as one can clearly see from the
equity rate of 84.0% in 2017, 80.5% in 2018 and 69.9% in 2019. However, they increasingly
financed their assets with liabilities in form of trade credit (trade and other payables) which is
reflected in the proportion of liabilities to total assets amounting to 15.9% in 2017, 19.4% in
2018 and 30% in 2019.

6.3. Income Statement – Horizontal Analysis

Revenues of Delivery Hero increased by 46.6% from 2017 to 2018 and by 86.1% from 2018 to
2019, which suggests that Delivery Hero has experienced continuous growth over the past
three years.

Performance Report 6
At the same time, the cost of goods sold increased by 191.3% from 2018 to 2019, which
outweighs the increase in revenue, leading to an overall decrease of gross profit by 10.4% in
2019. This increase in cost of sales can be explained by the expansion of Delivery Hero’s
business and the establishment of Dmart stores. Usually, in the beginning, the costs of goods
sold are proportionally higher compared to the revenues that are generated, which eventually
will decrease over time. This coincides with their business model of expanding their own food
delivery services into new markets leading to the mentioned increasing COGS.

The operating result of Delivery Hero decreased from 2017 to 2018 by 3.4% and from 2018 to
2019 by 168.1%, which indicates that their core operations are actually generating a loss.
Although this is not beneficial for a company to survive in the long run, it is necessary to
expand.

From 2017 to 2019, the increase of operating expenses is mainly attributable to marketing, IT
and general administration. Marketing expenses (2017-2018: +21.6% and 2018-2019: +57.8%)
increased due to rising competition and an extended restaurant portfolio. Furthermore, the
enhanced IT expenses (2017-2018: +32.1% and 2018-2019: +74.6%) mainly relate to the
research and development of new services and general administrative expenses (2017-2018:
-0.5% and 2018-2019: +72.0%) are primarily linked to the general growth of the company.

Concluding, one can say that Delivery Hero grows, invests and is starting to make a profit,
which is reflected in their bottom line increasing by 87.9% from 2017 to 2018 and 645.5% from
2018 to 2019; gained profits can be used to pay out dividends to shareholders or to reinvest.

6.4. Income Statement – Vertical Analysis

Delivery Hero has a high cost of sales, which takes up 38.3% of total revenue in 2017 and up
to 74.9% in 2019. As explained before, initial cost of sales, when investing in new markets,
usually decrease over time. Very interesting to see is, that Just Eat Takeaway has a much lower
cost of sales, leaving 73.3% of revenues as gross profit (2019).

Costs for marketing and administration decreased from 2017 to 2019 but are still relatively
high. Due to the increase in the cost of sales, the percentage of revenue, left as gross profit,
decreased from 61.7% in 2017 to 25.1% in 2019. Marketing costs of Just Eat Takeaway are a
bit lower than the ones of Delivery Hero and are decreasing, but are still relatively high, which
makes sense in this industry, as research by McKinsey suggests, once a customer has decided

Performance Report 7
to use one platform, 80% stick with their choice which makes marketing a key issue in this
industry. (Hirschberg, C., Rajko, A., Schumacher, T., & Wrulich, M., 2019)

As we can already see in the horizontal analysis, Delivery Hero is not able to sustain its business
with the operating results. In 2018 it seemed that Delivery Hero might be able to decrease
losses, but in 2019 they again made bigger losses in relation to revenues. Reasons for that are
explained in the horizontal analysis.

The bottom line tells us that, Delivery Hero and Just Eat Takeaway made rather big losses in
2017, which were smaller in 2018. For Delivery Hero, the net income for 2019 became positive
amounting to 18.6% of the revenue. Just Eat Takeaway made a loss again. From this we can
conclude that both businesses are growing, but Delivery Hero is currently growing with
positive profit, making it more stable, thus being more interesting for investors.

7. Financial Ratio Analysis

7.1. Profitability Measures
The Gross Profit Margin provides information on how much money is still available once cost
of goods sold was covered. In other words, it indicates the amount of money that is left of
every Euro generated through sales (cents on the Euro). In case of Delivery Hero, they had 62
cents available in 2017, 52 cents in 2018 and only 25 cents in 2019 of every Euro generated.

The Net Operating Profit Margin provides information on how much money is available after
covering all operating expenses (COGS + all other operating expenses). Delivery Hero has a
negative net operating profit margin of -52.4% in 2017, -36.3% in 2018 and -51.5% in 2019,
indicating that their core operation is actually generating a loss. In other words, the company
lost 52 cents in 2017, 36 cents in 2018 and 52 cents in 2019, for every Euro generated.

The Net Profit Margin provides information on how much money is left after covering all
expenses. In other words, it indicates the bottom-line performance of the company and thus,
provides information on whether enough overall profit is generated to cover all expenses. In
general, a negative net profit margin may indicate that the company is actually losing money
while running the business. However, this does not always have to be the case, since negative
profits may be generated due to acquisitions of assets that will generate higher future profits.

In the years 2017 and 2018 Delivery Hero incurred a negative net profit margin of -77% and -
6%, respectively, indicating that the sales did not cover all expenses, as each Euro invested

Performance Report 8
resulted in a loss of 77 cents and 6 cents. However, in 2019 the company generated a positive
net profit margin of 19% which indicates that after deducting all expenses, including taxes, for
every Euro the company made a profit of 19 cents. This can mainly be attributed to the sale
of Delivery Hero’s German subsidiary to its competitor Takeaway.com in exchange for cash
and an equity stake in Takeaway.com. This sale compensated the generated loss from
continuing operations, enabling Delivery Hero to generate a positive net profit margin.

While Delivery Hero managed to increase its net profit margin over the past three years, its
largest competitor, Just Eat Takeaway.com, was not able to do the same. The company
managed to increase its net profit margin from -26% in 2017 to -6% in 2018 with the ratio
falling back to -28% in 2019. Over the past three years, both companies had net profit margins
below the industry average of -3.3%, with the exception of Delivery Hero in 2019.

An explanation for the continuous net loss of Delivery Hero is the expansion into the Asian
market and rising competition in other markets, which both lead to increased marketing
expenses and administrative expenses (e.g. personnel expenses). Although the company has
managed to build up a large cushion of retained earnings and capital reserves over the past
years, they should think about their long-term future, where the tremendous investments in
the past years should eventually pay off and lead to positive net profit margins.

If continuous investments of Delivery Hero pay off, COGS will go down eventually, and they
will be left with a much stronger market position due to their diversified market portfolio and
their increased potential of generating revenues in conquered markets (e.g. Asia).

The Return on Assets (ROA) provides information on the efficiency of a company to generate
profits with every Euro invested in assets. In general, a high return on assets is an indicator for
a profitable company, constituting the ability to utilize total assets to generate profits. In case
of Delivery Hero, the company had a negative ROA in 2017 and 2018 amounting to -19% and
-2%, respectively. This indicates, that the company generated a loss of 19 and 2 cents,
respectively, for every Euro they invested in assets. In 2019, however, the company managed
to generate 9.8 cents of profit for every Euro invested in assets, reflected in their positive ROA
of 9.8%.

Delivery Hero’s largest competitor, Takeaway.com, has a similar ROA over the past three years
with the most significant difference in 2019, where Delivery Hero managed to have a positive
ROA. Takeaway.com had a ROA of -19% in 2017, -5% in 2018 and -11% in 2019, which is

Performance Report 9
compared to both Delivery Hero and the industry average of around -7.4% significantly less
(except for 2018). From this point of view, Delivery Hero has a better financial position as their
ROA has increased consistently over the past 3 years, whereas the ROA of Takeaway.com
decreased from 2018 to 2019.

On the one hand, a negative ROA is usually an indicator that the company’s investments do
not generate a profit, on the other, it is not a general rule since the ratio is very sensitive to
the stage of growth a company currently finds itself in. Especially when companies start
building up or expanding their asset base, the latter investments usually take a few years to
effectively start generating profits. This phenomenon can be observed in both companies.

In 2019, Delivery Hero sold part of their operations in exchange for shares and cash which
eventually lead to a net profit and thus a positive ROA. However, during the previous years,
when the company started to expand its business into the Asian market, they initially
generated a net loss and thus a negative ROA. Whether the company continues to generate a
profit over the following years will determine its future profitability and ability to operate.

Takeaway.com on the contrary, started a major business expansion in 2019 by acquiring the
German branch from Delivery Hero, which eventually lead to a net loss and thus, a negative
ROA in 2019. If the investments pay off, Takeaway.com has potential to become the largest
food delivery service in Germany. Eventually, the company will have to start generating
profits, as otherwise, it will not be able to survive prolonged losses.

The Asset Turnover provides information on the efficiency of a company to generate revenues
with every Euro invested in assets. In 2017 Delivery Hero generated 25 cents, in 2018 33 cents
and in 2019 the company generated 53 cents of revenues for every Euro invested in assets.

The Return on Equity (ROE) provides information about how much money is earned for every
Euro invested by the shareholders. In 2017 and 2018 the company generated a loss which is
reflected in the ROE being negative, indicating that each Euro invested resulted in a loss of 27
and 3 cents, respectively. In 2019, Delivery Hero generated a profit and thus every Euro
invested by the shareholders generated a surplus of 13 cents.

7.2. Cash Conversion Cycle (CCC)

The cash conversion cycle is a metric that expresses the time (usually measured in days) each
Euro is tied up in the production and sales process before it gets converted into cash received.

Performance Report 10
The CCC takes into account the time a company needs to sell its inventory, to collect the
receivables and to pay its payables without getting penalties. Thus, the CCC is composed of
three components: DIO, DSO and DPO.

The DIO (Days Inventory Outstanding) provides information on how long it takes a company
to sell its inventory. In case of Delivery Hero, the company has a very low DIO of around 2-3
days, which indicates that the inventory is not tied up for a long time period and thus is sold
very quickly.

The DSO (Days Sales Outstanding) provides information on how long it takes a company to
collect the receivables from the customers. Delivery Hero has managed to reduce its DSO
significantly from 56 days in 2017 to 32 days in 2019 which strengthens their liquidity; they
received amounts that were owed to them faster and thus had more cash at disposal.

The DPO (Days Payable Outstanding) provides information on how long it takes a company
to pay suppliers. A high DPO may be beneficial because the company can hold onto cash longer
and thus increase its investments potential. However, it may also indicate that a company has
issues of paying its bills on time. Delivery Hero’s DPO decreased from 270 days in 2017 to 127
days in 2019, which is mainly due to its increasing COGS.

The Cash Conversion Cycle is the result of the sum of DIO and DSO minus the DPO. Both
Delivery Hero and Takeaway.com have a negative CCC which means that both companies
receive cash from sales before they pay their suppliers. This in turn could be seen as a supplier
credit, which in turn means that the companies try to hold onto cash as long as possible to
keep their investment potential as high as possible. The advantages of such supplier credits
are that usually they are on favorable terms and allow companies to be more flexible when
paying their bills.

Additionally, Delivery Hero takes significantly less time to sell their inventory than Just Eat
Takeaway.com. On the one hand, this can be attributed to the company not having a lot of
inventory due to their business model which primarily focuses on the software and IT
infrastructure. On the other hand, the significant difference is attributable to their leadership
position in innovation and technology, enabling them to predict customer behavior by
partnering up with data analytic companies. Furthermore, the high COGS of Delivery Hero are
mainly due to the expansion of their delivery service, which does not require a lot of inventory

Performance Report 11
(e.g. external riders, gas, etc.). Overall, while being considerably larger than its competitor,
Delivery Hero manages to keep their inventory low and still generate large revenues.

Both Delivery Hero and Takeaway.com have a similar DSO which is mainly attributable to the
fact that both business models are based on a delivery service that usually coincides with
customers paying immediately after buying/ordering their food (cash or online).

Finally, there is a significant difference between the DPO of both companies. First, Delivery
Hero pays its suppliers within 6-7 months while Takeaway.com takes around 9-10 months
(averaged over the past 3 years). A lower DPO may indicate lower investment potential and
inefficiency when it comes to retaining funds. At the same time a higher DPO may indicate an
inability to pay bills on time. There are advantages and disadvantages with higher/lower DPOs.

7.3. Short term liquidity measures

The Working Capital is defined as the difference between a company’s current assets and its
current liabilities, it can be used as a measure of the company’s liquidity, operational efficiency
and short-term financial health. A positive working capital of a company is a prerequisite to
new investment and consequently to grow. Yet, one also has to consider that a high working
capital is not a good thing either, because that might indicate that the company stores too
much inventory or is not investing efficiently.

In case of Delivery Hero SE working capital amounts to 542.5 million Euros in 2017 which
slightly increased over the next year, amounting to 548.4 million Euros in 2018. For 2019 the
working capital is considerably lower at around 331.7 million Euros. In contrast, its largest
competitor, Just Eat Takeaway.com, displays negative working capital in 2018 and 2019 which
indicates an inability to pay back creditors on time. Concluding, compared to Just Eat
Takeaway.com, Delivery Hero has a positive as well as higher working capital.

The Current Ratio is very similar to the working capital, which is why it is also referred to as
the “working capital” ratio. It is defined as the relation of current assets and current liabilities,
which is expressed as a number, greater, less or equal to one. If the current ratio equals one,
all current liabilities can be paid off by liquidating all current assets. As a result, a ratio below
one means that this is not possible and a ratio above one means the company has more
current assets than liabilities; the same holds true for the cash ratio, but instead of current
assets we use cash and cash equivalents.

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In 2017 named ratio was at around 3.4, which decreased over the next two years amounting
to 2.7 in 2018 and 1.5 in 2019. In 2019 the liabilities were higher than in the preceding years
which is why the ratio slumped. The current ratio for Takeaway.com is considerably lower,
with 0.5 in 2018 and 0.6 in 2019 which is both below the industry average of 1.23. Additionally,
the current ratio of Delivery Hero is very high compared to the industry average.

In this case, a high ratio may indicate that the company either has too much inventory or is
hesitant to make new investments, which is especially true for the years 2017 and 2018.
However, this changed in 2019 where the ratio decreased, due to new liabilities/ potential
investment. Yet even in this year, the ratio still stayed above the industry average, which might
speak for hesitance, when it comes to investment, but also liquidity. One might point out that
a high current ratio is derived from a lot of current assets being tied up in the company, yet
due to this particular business model the company does not really have any inventory. Even
though a high current ratio speaks for high liquidity, the company needs to try to find a balance
between having high working capital and still investing efficiently.

The Cash Ratio is, similarly to the current ratio, a figure to measure a company’s liquidity by
solely taking cash and cash equivalents into account. The cash ratio is more conservative than
the current ratio, because it only considers the company’s most liquid assets.

The cash ratio for Delivery Hero SE was 2.8 in 2017 and 1,1 in 2018 as well as in 2019. This is
both higher than the industry average of 0.4 and the cash ratio of the key competitor (which
was 2.1 in 2017, 0.4 in 2018 and 0.2 in 2019). Again, even though a high cash ratio seems to
be good, by definition, it is not. In case of Delivery Hero SE, it may reflect inefficiency when it
comes to utilizing cash or maximizing the benefit of low-cost loans. We are partly reassured
though, as the cash ratio considerably decreased from 2017 to 2019, yet still staying above
the industry average.

7.4. Long-term Liquidity Measures

The Debt Ratio provides information on the proportion of assets that are financed by debt. A
low debt ratio indicates that most assets were financed via equity which implies that the
company is not highly indebted. Furthermore, this ratio has to be less than 1 in order for a
company to keep operating. Otherwise, the liabilities would outweigh the total assets which
would lead to the insolvency of the company due to negative equity. Delivery Hero has an

Performance Report 13
average debt ratio of around 0.3 indicating that 30% of the total assets are financed by debt,
which in turn implies that the company has more equity than liabilities.

The Debt to Equity Ratio provides information on the proportion of total liabilities to total
equity. In other words, this ratio indicates whether a company is highly geared or not which
has further influence on the flexibility of the company. A debt to equity ratio greater than 1
means that a company has more liabilities than equity, indicating less flexibility in terms of
market changes. On the other hand, a debt to equity ratio less than 1 means that the company
has more equity than liabilities, indicating an increased responsiveness to market changes.
Delivery Hero has a pretty steady debt to equity ratio of around 0.3 over the past 3 years,
which is close to the industry average of 0.6.

Compared to its largest competitor Takeaway.com, Delivery Hero has a more stable and
overall better debt to equity ratio. Especially in 2018, Takeaway.com had a ratio of 2,
indicating that their liabilities were twice as much as their equity, which further indicates high
vulnerability to market changes. However, in 2019 the company managed to overcome this
problem by increasing its equity, leading to a debt to equity ratio of 0.5, close to the industry
average. Nevertheless, Delivery Hero still had a better ratio of 0.4.

Overall, Delivery Hero has maintained a strong equity base over the past three years, enabling
them to continuously expand their business, to increase sales and eventually profits in the
long run.

8. Conclusion
After having conducted the financial analysis, we can conclude that Delivery Hero is in a good
financial position. On the one hand, this is reflected in their steadily increasing net profit
margin, indicating that their ongoing investments in various subsidiaries across different
markets are starting to pay off; especially the sale of their German branch and the conquest
of the Asian market are additional indicators for success. The downside of the expansion is
that certain initial costs need to be borne. On the other hand, the good financial position is
reflected in the increasing revenues, that almost doubled from 2018 to 2019, which is mainly
attributable to the strong organic growth across all company segments. Worth mentioning is
also the tremendous cushion of capital reserves and retained earnings Delivery Hero has built
up over the past years, enabling them to finance most of their investments via internal equity.

Performance Report 14
Moreover, the business model and different value creation elements of Delivery Hero are in
harmony with the financial statements of the company. First, their data-driven approach
enables the company to be as efficient as possible, to forecast customer behavior and thus
rapidly increase sales as well as continuously improve their IT infrastructure. Second, the CCC
is a perfect representation of the food delivery industry: The company has little inventory, is
efficient at collecting receivables and pays their suppliers at a later stage but on time,
increasing their investment potential. Finally, Delivery Hero’s hybrid function, as a
marketplace and delivery service, differentiates the company from its competitors.

After analyzing Delivery Hero, we suggest the company tries to continue to operate as it
already did in the past. With the exception that they try to seize the opportunity that is given
to them due to Covid-19 and substantially enlarge their customer base. We acknowledge that
times are very volatile, yet this possibility might present itself only once in lifetime, therefore
investments into marketing and customer acquisition will most likely pay off in an over-
proportional manner than under usual circumstances and there is no question if the company
can afford it.

Performance Report 15
Reference List
Bochmann, M., (2018). Delivery Hero wins Corporate Finance Award.
Retrieved from
https://www.deliveryhero.com/blog/delivery-hero-wins-corporate-finance-award/ .
Accessed December 29, 2020

Bochmann, M., (2020). Delivery Hero rapidly expands quick commerce and partners with more
than 20,000 vendors globally.
Retrieved from
https://www.deliveryhero.com/delivery-hero-rapidly-expands-quick-commerce-and-
partners-with-more-than-20000-vendors-globally/ . Accessed December 30, 2020

Connolly, S., (2020). 2020, we’re on it! How our brands predicted this year’s consumer habits.
Retrieved from
https://www.deliveryhero.com/blog/2020-consumer-habits/ . Accessed December 30, 2020

Delivery Hero, SE. (2018). Annual Report 2017 [PDF file].

Retrieved from
https://ir.deliveryhero.com/download/companies/delivery/Annual%20Reports/DE000A2E4K
43-JA-2017-EQ-E-00.pdf . Accessed December 26, 2020

Delivery Hero, SE. (2019). Annual Report 2018 [PDF file].

Retrieved from
https://ir.deliveryhero.com/download/companies/delivery/Annual%20Reports/DE000A2E4K
43-JA-2019-EQ-E-00.pdf . Accessed December 27, 2020

Delivery Hero, SE. (2020). Annual Report 2019 [PDF file].

Retrieved from
https://ir.deliveryhero.com/download/companies/delivery/Annual%20Reports/DE000A2E4K
43-JA-2019-EQ-E-00.pdf . Accessed December 27, 2020

Delivery Hero, SE. (2020). About Delivery Hero.

Retrieved from
https://www.deliveryhero.com/about/ . Accessed December 28, 2020

Performance Report 16
Hirschberg, C., Rajko, A., Schumacher, T., & Wrulich, M. (2019, February 13). The changing
market for food delivery. McKinsey & Company.
Retrieved from
https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-
insights/the-changing-market-for-food-delivery# . Accessed January 1, 2021

Just Eat Takeaway.com. (2018). Annual Report 2017 [PDF-file].

Retrieved from
https://www.justeattakeaway.com/investors/annual-reports/ . Accessed December 26, 2020.

Just Eat Takeaway.com. (2019). Annual Report 2018 [PDF-file].

Retrieved from
https://www.justeattakeaway.com/investors/annual-reports/ . Accessed December 26, 2020.

Just Eat Takeaway.com. (2020). Annual Report 2019 [PDF-file].

Retrieved from
https://www.justeattakeaway.com/investors/annual-reports/ . Accessed December 26, 2020.

Just Eat Takeaway.com. (2020). About Just Eat Takeaway.com | What we do

Retrieved from
https://www.justeattakeaway.com/about-us/what-we-do/ . Accessed December 30, 2020

M. (2020). The Food Delivery Business Model - A complete Guide.

Retrieved from
https://productmint.com/the-food-delivery-business-model-a-complete-guide/ . Accessed
December 31, 2020

McClintock, S., (2020). Understanding our customers: the way to delivering an amazing
experience
Retrieved from
https://www.deliveryhero.com/blog/customer-experience/. Accessed December 28, 2020

Performance Report 17
Press Team. (2020) Delivery Hero to receive regulatory approval for its joint venture with
Woowa.
Retrieved from
https://www.deliveryhero.com/delivery-hero-to-receive-regulatory-approval-for-its-
strategic-partnership-with-woowa/ . Accessed December 30, 2020

Reuters Editorial. (2020). Company Profile for Just Eat Takeaway.com

Retrieved from
https://in.reuters.com/finance/stocks/company-profile/TKWY.AS . Accessed December 30,
2020

Statista (2020). Online Food Delivery.

Retrieved from
https://www.statista.com/outlook/374/100/online-food-delivery/worldwide. Accessed
January 1, 2021

Wikipedia (2021). Food Delivery.

Retrieved from
https://en.wikipedia.org/wiki/Food_delivery#History. Accessed January 4, 2021

Performance Report 18
Annex
Balance Sheet – Delivery Hero 2019

Performance Report 19
Statement of Profit and Loss – Delivery Hero 2019

Performance Report 20
Balance Sheet – Delivery Hero 2018

Performance Report 21
Statement of Profit and Loss – Delivery Hero 2018

Performance Report 22
Balance Sheet – Delivery Hero 2017

Performance Report 23
Statement of Profit and Loss – Delivery Hero 2017

Performance Report 24
Balance Sheet – Just Eat Takeaway.com 2019

Performance Report 25
Statement of Profit and Loss – Just Eat Takeaway.com 2019

Performance Report 26
Balance Sheet – Just Eat Takeaway.com 2018

Performance Report 27
Statement of Profit and Loss – Just Eat Takeaway.com 2018

Performance Report 28
Balance Sheet – Just Eat Takeaway.com 2017

Performance Report 29
Statement of Profit and Loss – Just Eat Takeaway.com 2017

Performance Report 30