Deliveroo (LON: ROO) shares are down around 2.6% Wednesday after the company announced it is ending its Australia operations.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
As a result, Deliveroo said its Australian subsidiary, Deliveroo Australia Pty Limited (DAPL), has been placed into voluntary administration and will permanently cease trading imminently.
The food delivery firm said the decision is due to the company's “disciplined approach to capital allocation,” and with the market in Australia being highly competitive, with four global players, Deliveroo doesn't hold a broad base of strong local positions.
Deliveroo revealed that in the first half of the year, its Australian business represented around 3% of the company's total Gross Transaction Value and negatively impacted its adjusted EBITDA margin by roughly 30 basis points.
After working with local Australian leadership, Deliveroo determined it cannot “reach a sustainable and profitable scale” in the country without substantial investment, with the expected return on investment not meeting the company's risk/reward thresholds.
“Management is committed to driving growth and delivering on its path to profitability while aiming to have strong, profitable businesses in each of the markets in which it operates, built on the foundation of leading hyperlocal market positions,” the company said in its statement.
Despite the announcement, Deliveroo said there has been no change to its previous guidance