BERLIN (dpa-AFX) - The business of food delivery service Delivery Hero did not grow as strongly as hoped at the end of 2022. However, the company made significant progress and lost much less money operationally in the final months of the year than in the same period last year. Group CEO Niklas Östberg sees his company on course to achieve the profitability target he has set himself. However, the manager wants to invest surplus money in better service instead of achieving even higher margins. "We don't just want to maximize profitability, we want to be profitable and be able to grow at the same time," Group CEO Niklas Östberg told financial news agency dpa-AFX on Thursday. However, the figures for the final quarter were worse than expected by the market. The share then came under significant pressure.

The share, which is listed in the MDax index of medium-sized companies, fell by up to ten percent in the morning, which in the meantime meant a total discount of almost one fifth compared to the previous high for the year at the beginning of February.

In the last three months of last year, the key indicators for the industry, gross merchandise volume (GMV) and sales after deduction of voucher costs, had once again increased by double-digit percentages. However, analysts had expected more - and had also hoped for a first look at the targets for both key figures for the current year. Meanwhile, the group only gave a forecast for profitability in day-to-day business.

Meanwhile, Delivery Hero says it is well on its way to achieving its self-imposed target of a slightly positive operating margin for the current year. Thus, more than 0.5 percent of the gross merchandise value should stick as earnings before interest, taxes, depreciation and amortization (Ebitda margin) adjusted for special effects, with profitability more than doubling in the second half of the year.

Östberg, meanwhile, expressed confidence that he would be able to present an even higher operating margin for the current year than the Group had targeted. However, he said this was not the top priority, instead he wanted to invest in the business. "Once we reach our profitability target, we could reinvest the excess cash in growth and in advertising."

The company had committed itself to radical change after an unprecedented slide in its share price last spring: Henceforth, he said, the focus should be on profitability, after Delivery Hero had spent years trimming its business to maximize growth.

The margin already increased significantly in the final quarter of last year. While the management board recorded a negative value of 3.3 percent in the same period last year, the margin was now minus 0.3 percent, as the MDax-listed company announced in Berlin on Thursday.

Gross merchandise value - everything customers pay for - in the fourth quarter climbed by almost 9 percent to 11.3 billion euros. Sales adjusted for voucher costs (segment sales) rose by around a fifth year-on-year to 2.5 billion euros. However, both key figures developed significantly weaker than industry experts had expected.

Critics have long explained the discrepancy by the fact that Delivery Hero is investing less advertising in growth. Accordingly, gross merchandise value and revenue are now developing more slowly. However, because less advertising budget is needed for vouchers or campaigns, for example, profitability is increasing at the same time. Östberg, on the other hand, emphasizes the high comparative level: in the heyday of the Corona pandemic, people ordered significantly more food home when they were not allowed on the street and restaurants remained closed for local consumption.

The reason for the comparatively weak development is likely to continue to be people's sluggish propensity to buy due to high inflation. The figures now include the South Korean acquisition Woowa and the Spanish subsidiary Glovo. In terms of sales, the Group clearly missed the consensus, said JPMorgan expert Markus Diebel.

Business performance at the start of the year was similar to the fourth quarter, Östberg said. "There was weaker demand across the industry in January." The entrepreneur did not dare to give a full-year forecast for gross merchandise value and sales excluding voucher expenses. "We live in challenging times where forecasting has become difficult in the face of inflation and the Corona pandemic." Analyst Giles Thorne of Jefferies stressed that the lack of guidance could trigger profit-taking on the stock. The market had been waiting for the lack of full-year targets, commented RBC's Sherri Malek.

For 2022, Delivery Hero reported a 17.5 percent increase in gross merchandise value to 44.6 billion euros. Segment revenue climbed nearly a third to about 9.6 billion euros. In both cases, the former Dax company thus slightly missed its own targets for the year. Delivery Hero plans to publish the full set of figures for the completed year and a look at the current first quarter on April 27./ngu/tav/stk