DHER Whatever Happened to That First-Ever Profit?

The Profit That Didn't Survive the Year

The H1 2018 post flagged Delivery Hero's first-ever half-year "profit" - €146.7 million - as almost entirely a one-time gain on the hungryhouse divestment sitting on top of a €115.7 million continuing-operations loss. That skepticism turns out to have been warranted, and then some: for the full year 2018, Delivery Hero's net result was a €42.2 million loss, not a profit at all. Whatever combination of discontinued-operations gains and losses closed out the second half, it wasn't enough to keep the H1 number's momentum going - the continuing-operations net loss widened to €277.1 million for the full year (from an implied roughly €115.7 million-equivalent trajectory at the half), while net income from discontinued operations for the year was €234.8 million, not enough to offset it. Revenue still grew a healthy 46.6% to €665.1 million and gross profit rose 23.9% to €347.2 million, but the operating result (-€241.7 million, barely improved from -€233.8 million a year earlier) and a widening Adjusted EBITDA loss (-€141.6 million of the segments, from -€94.2 million) tell the real story: 2018 was a year of accelerating investment, not approaching breakeven, and the headline that looked like a turnaround at midyear wasn't one by year-end.

The other defining event of the year is a subsequent one: on December 20, 2018, Delivery Hero signed a transaction to sell its entire German food-delivery business - Lieferheld, Pizza.de, and foodora - to Takeaway.com N.V., its Dutch rival, in exchange for cash, Takeaway.com shares, and warrants. The deal didn't close until April 1, 2019, so none of the 2018 financials reflect it yet beyond German operations being reclassified as discontinued, but it's the single biggest strategic decision in the company's history: Delivery Hero is exiting its home market entirely and taking a large minority stake in a competitor instead.

The Prescription

Delivery Hero should treat the Takeaway.com transaction as a template, not a one-off: swapping operational control of a market it can't win outright for a meaningful equity stake in the company that will consolidate it is a genuinely smart way to capture upside without continuing to fund a losing fight. Applied selectively - Germany today, potentially other saturated European markets tomorrow - this could turn Delivery Hero from a company trying to operate everywhere into a portfolio of controlling positions in markets where it can actually win (MENA, much of Asia) plus minority stakes in markets where a rival already has the edge.

What it should stop doing is guiding to a near-tripling of Adjusted EBITDA losses for 2019 (-€270 million to -€320 million, from -€100.2 million in 2018 on a comparable basis) without a clearer public accounting of what specifically that money buys. The FY2019 guidance disclosed alongside this report frames €250 million of the incremental loss as "new investments" across all segments, but a reader has no way to judge whether that's disciplined market-share buying or an unconstrained spending ramp - and the widening Americas margin (see Key Financial Metrics) is exactly the kind of investment that hasn't been paying off. A company about to burn three times as much money deserves to say, market by market, what "investment" means.

Key Financial Metrics

FY2018 vs. FY2017, continuing operations unless noted, reported in EUR (FY2018 also shown in USD)

FX: EUR 1 = USD 1.1450 (December 28, 2018 close, the last trading day before this period's December 31, 2018 end).

Metric	FY2018 (EUR)	FY2018 (USD)	FY2017 (EUR)	YoY
Revenue	€665.1M	~$761.6M	€453.7M	✅ +46.6%
Gross profit	€347.2M	~$397.6M	€280.1M	✅ +23.9%
Adjusted EBITDA (total segments)	-€141.6M	~-$162.1M	-€94.2M	⚠️ loss widened 50.3%
Operating result (EBIT)	-€241.7M	~-$276.7M	-€233.8M	⚠️ loss widened 3.4%
Net result (incl. discontinued operations)	-€42.2M	~-$48.3M	-€348.1M	✅ loss narrowed sharply, but still a loss
Diluted/basic EPS (continued + discontinued)	-€0.21	—	-€1.94	✅ loss narrowed
Cash flow from operating activities	-€164.6M	~-$188.5M	-€209.7M	✅ outflow narrowed 21.5%
Free cash flow (proxy: OCF less capex)*	-€213.9M	~-$244.9M	n/a	—
Cash and cash equivalents (period-end)	€439.8M	~$503.6M	€640.9M	⚠️ -31.4%

*Delivery Hero doesn't report free cash flow as a defined metric; the figure above is operating cash flow less capex - payments for property, plant and equipment (-€29.6M) and intangible assets (-€19.7M).

Balance sheet	Dec 31, 2018	Dec 31, 2017	Change
Total assets	€2,005.0M	€2,048.2M	⚠️ -2.1%
Total equity	€1,615.0M	€1,720.8M	⚠️ -6.1%
Total liabilities	€390.0M	€327.4M	⚠️ +19.1%

The Net result and EPS figures above come from the audited comparative column in Delivery Hero's FY2019 Annual Report rather than this period's own report - a legitimate use of a later filing's restated comparative for a number this period's own report doesn't clearly disclose as a single consolidated figure (see Beyond the Usual). Net result of -€42.2 million splits into -€38.2 million attributable to shareholders of the parent and -€4.0 million to non-controlling interests.

The headline arc of 2018 is a full reversal within the year itself: a "first-ever profitable" half in H1, followed by a second half loss-making enough to erase it and then some, ending the year with the Group still €42.2 million in the red.

Key Operational Metrics

Actual reported figures unless noted

Metric	FY2018	FY2017	YoY
Orders	369.4M	248.3M	✅ +48.7%
GMV»	€4,454.4M	€3,130.8M	✅ +42.3%
Total segment revenue (incl. Germany)	€792.4M	€544.2M	✅ +45.6%
Employees (headcount, period-end)	20,608	10,633	✅ +93.8%

Headcount nearly doubled in a single year - a much steeper increase than the 48.7% order growth it's meant to support - reflecting the continued build-out of Delivery Hero's own-delivery rider fleet across MENA and the Americas rather than a proportional increase in corporate staff.

Segment Results

FY2018, four reportable segments (geographic regions), unchanged since the IPO

Segment	Revenue (FY18)	YoY	Adj. EBITDA (FY18)	Adj. EBITDA margin	FY17 margin
Europe	€221.3M	✅ +11.3%	-€56.8M	-25.7%	-22.9%
MENA	€316.4M	✅ +106.4%	€18.1M	+5.8%	+15.5%
Asia	€192.5M	✅ +33.0%	-€51.9M	-27.0%	-32.5%
Americas	€62.1M	✅ +31.2%	-€50.9M	-81.9%	-53.6%

MENA's margin decline - first flagged as a reversal in the FY2017 post and still sliding as of H1 2018 - continued for a full year: the segment's margin sequence now reads 15.5% (FY17) → 7.3% (H1'18) → 5.8% (FY18), a region that generated 15 cents of profit per euro of revenue two years ago now barely clearing break-even, even as its revenue growth (106.4%) outpaces every other segment. Asia kept improving, its margin moving from -32.5% to -27.0% - the same steady trajectory seen across FY2017 and H1 2018, driven by Korea and Singapore. Americas is now unambiguously the worst-performing segment on every measure: its margin deepened again to -81.9% of revenue, worse than the -61.0% already flagged as the segment's worst-ever mark at H1 2018, meaning the second half alone was even more lossmaking than the first. Europe's margin also worsened slightly, though this is the segment about to shrink dramatically once the German sale closes in April 2019.

Beyond the Usual

The reported net result isn't stated as a single number in this report

This period's own annual report doesn't present the full-year consolidated net result (continuing plus discontinued operations) as a clearly labeled single line in the sections extracted for this post - the combined management report discusses continuing-operations earnings before income taxes (-€258.8 million) at length, and separately notes that the hungryhouse divestment "contributed €261.3 million to the net loss for the full year 2018," but doesn't spell out what the resulting full-year net result actually was. The number used in this post (-€42.2 million) comes from the audited comparative column in the following year's Annual Report, which is a legitimate source for a prior period's own restated figures. A reader relying only on this period's own combined management report discussion, without checking the actual consolidated income statement or a later comparative, could easily walk away thinking FY2018 continued the "first profitable half" narrative from H1, when the full year was a loss.

This report's own management discussion doesn't state the full-year net result as a single clear number - a reader has to either dig through the consolidated financial statements directly or wait for a later report's comparative column to learn that FY2018, despite a headline-grabbing "profitable" first half, ended the year with a €42.2 million net loss.

A near-tripling of guided losses, disclosed the same day as this report

Alongside this report, Delivery Hero issued FY2019 Adjusted EBITDA guidance of -€270 million to -€320 million (ex-Germany), against an FY2018 comparable-basis loss of -€100.2 million - a guided deepening of 2.7x to 3.2x in a single year, with management attributing €250 million of the increase to "new investments" across all segments. This is a much larger and more explicit planned loss acceleration than anything guided in either prior post, and it's being announced from a starting position where the Americas segment's margin (see Key Financial Metrics) has already deteriorated for three straight periods without turning around.

Delivery Hero guided investors to a near-tripling of Adjusted EBITDA losses for 2019 - from -€100.2 million to as much as -€320 million - in the same report where its worst-performing segment (Americas) just posted its third consecutive quarter of worsening margins, without disclosing a market-by-market breakdown of where the incremental spending is actually going.

Exiting the home market for a stake in the company buying it

The Takeaway.com transaction, disclosed here as a subsequent event, is Delivery Hero's largest strategic move since the IPO: selling its entire German business (Lieferheld, Pizza.de, foodora) for cash plus a roughly 15.5% stake (post warrant-exercise) in Takeaway.com, the acquirer and a direct European competitor. This isn't a portfolio-pruning divestment like the exits flagged in the H1 2018 post - it's Delivery Hero voluntarily giving up operating control of its home country. The company's own equity value bridge (published alongside this report) already implies a roughly €552 million value for the Takeaway.com stake before the deal has even closed, suggesting management is treating it as a real, trackable asset rather than a one-time consideration to be forgotten once received.

The strategic logic is coherent - Delivery Hero couldn't win outright in a market where Takeaway.com already had scale, so it converted a losing fight into equity upside instead - but a reader should understand this is a fundamentally different kind of transaction than the earlier five-market retreat, not more of the same pattern.

A related-party pattern already visible before it shows up in this year's numbers

The FY2017 post flagged Delivery Hero's Korean minority stakes (RGP Korea, then Barogo) as a source of disproportionate footnote complexity for the company's size in that market. This report shows the pattern deepening rather than resolving: Delivery Hero's own subsidiaries continued transacting with these investee companies during 2018, a dynamic that becomes fully quantified only in the following year's related-party disclosures (see the FY2019 post) but was already visible in this period's acquisitions note, where further minority stakes were taken alongside continuing operational ties to earlier Korean investments.

Two consecutive one-time gains from unrelated divestments

The hungryhouse gain (€261.3 million, already covered at H1 2018) wasn't the only disposal gain in Delivery Hero's 2018: the Group also recognized €8.2 million from separately disposing of subsidiaries in Italy, Brazil, and Switzerland, and closed operations in France, the Netherlands, and Australia during the year - the same five-market retreat flagged as a subsequent event at H1 2018, now fully executed rather than just announced. Other operating income of €10.0 million (2017: €25.0 million) declined mainly because the prior year had included a one-time €20.3 million gain from divesting foodpanda India in December 2017 - meaning two consecutive years now have a meaningful chunk of "other operating income" driven by a single one-time disposal gain rather than recurring business activity, a pattern worth watching for whether it continues into 2019.

Target Valuation Range

The market is implying an enterprise value of roughly €5.60 billion - ~8.4x trailing FY2018 revenue, or ~5.0x FY2019E guidance revenue (1.26x trailing GMV) - the market re-priced Delivery Hero lower through the second half of 2018, and the FY2019 guidance issued alongside this report gives good reason why: a business guiding to a near-tripling of losses is fairly valued only if the growth math backing that guidance actually works out, which isn't yet provable from what's disclosed here. No comparable public peer exists yet and a real DCF still isn't attempted (see below), so these EV/Revenue reads are the numeric anchors this post can offer.

Delivery Hero SE closed the last trading day before this period's December 31, 2018 end (Friday, December 28, 2018) at €32.50 per share. With 185,930,494 shares outstanding at period-end (subscribed capital of €185.9 million at €1.00 nominal value per share, up from 182,498,900 shares at December 31, 2017), and period-end cash of €439.8 million against non-current liabilities of just €62.6 million (mostly deferred tax liabilities from acquisition accounting, not financial debt - the Group carries no meaningful bank debt):

Market cap → enterprise value	FY2018
Share price (period-end)	€32.50
Shares outstanding	185,930,494
Market capitalization	€6.04B (~$6.92B)
Total liabilities (non-current, mostly deferred tax)	~€62.6M (negligible interest-bearing debt)
Less: cash and equivalents	€439.8M
Enterprise value	~€5.60B (~$6.41B)

Peer-multiple sanity check	H1 2018	FY2018	Change
Revenue basis	FY2018 guidance midpoint	FY2018 actual, €665.1M / FY2019E guidance midpoint, €1.115B	-
Enterprise value	~€7.75B	~€5.60B	✅ down
EV/Revenue	~10.1x (forward guidance)	~8.4x (trailing actual) / ~5.0x (FY2019E forward guidance)	✅ down
EV/GMV	~1.6x (H1 annualized)	~1.26x (FY actual)	✅ down

No directly comparable food-delivery peer has been covered on this site yet, so a peer-multiple sanity check against another public delivery marketplace isn't possible for this post.

The share price moved sharply within this reporting period even though the full-year change looks modest: from a €33.00 close at the end of 2017, it climbed to a €48.58 peak in July 2018, then fell 33.1% to close the year at €32.50 - effectively flat year-over-year (-1.5%) but only because a strong first half was fully erased by a weak second half, tracking the same reversal pattern seen in the underlying net result above. Delivery Hero has not split its stock since its June 2017 IPO, so these are the actual nominal prices quoted at the time.

A real DCF still isn't attempted here, for the same reason flagged in both prior FY posts: a company that just guided to a near-tripling of its own losses doesn't offer a cash-flow base a reader could reasonably project forward with any confidence. The FY2019 guidance itself is closer to a reverse-DCF input than an output - it tells you how much cash the market is already being asked to expect the company to burn, and whether the resulting growth justifies the ~5.0x forward revenue multiple is a bet on execution, not something this report's numbers can independently verify yet.

A profit that vanished within the same fiscal year it was first reported, next to a guidance number that tripled the company's own planned losses - that's not a business approaching breakeven, whatever the growth rate says.

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