A Pandemic Tailwind, Financing a Korean Acquisition
Delivery Hero's half-year report for the six months to June 30, 2020 tells two stories that happen to be true at the same time. The operating story is COVID-19: orders grew 93.1% to 519.1 million, GMV» grew 61.2% to €5,145.8 million, and Total Segment Revenue» grew 93.7% to €1,126.8 million, as lockdowns pushed food and grocery spending onto delivery platforms across every market Delivery Hero operates in. The financing story is Woowa Brothers: on January 15, 2020, weeks after announcing its intent to acquire South Korea's largest food-delivery platform, Delivery Hero placed €1.75 billion of convertible bonds across two tranches, then - just eight days after this period's June 30 close - placed a further €1.5 billion tranche disclosed as a subsequent event. Between the two placements, Delivery Hero raised €3.25 billion in convertible debt within roughly six months, on top of a €587.8 million equity capital increase completed in the same half. Set against that scale of financing, the adjusted EBITDA» loss of the segments widening from -€171.1 million to -€319.8 million - a real, disclosed deterioration - reads less like a business getting worse and more like a business spending deliberately, during a demand spike, to fund a much larger acquisition. Whether that's the right call depends entirely on what Woowa is actually worth, which this report doesn't yet show, since the deal hadn't closed as of June 30, 2020.
The Prescription
Delivery Hero should keep using periods of unusually cheap capital and unusually strong organic demand - like this one - to fund category-leadership acquisitions in markets where being first or biggest is durable, the same logic behind Woowa in Korea and, disclosed as a subsequent event, InstaShop in MENA grocery delivery. Both deals target markets where Delivery Hero already has adjacent share (talabat in MENA, foodpanda-style leadership elsewhere in Asia), reducing integration risk relative to a cold-start market entry.
What it should stop doing is redefining its own segment structure without restating prior periods for comparability. This report introduces a fifth reporting segment, "Integrated Verticals" (covering Dmarts dark stores and virtual kitchens), moving revenue that used to sit inside the four regional segments into a new bucket - without restating H1 2019's regional figures onto the new structure (see Beyond the Usual). This is now the third consecutive year Delivery Hero has changed a comparability convention in its own report - a redefined "like-for-like" basis in the 2018 half-year report, a first-time IFRS 15 revenue-recognition change in the same report, and now an unrestated segment split. Individually, each is a legitimate accounting or reporting choice. Collectively, a reader trying to track any single metric across Delivery Hero's history keeps hitting a basis change that isn't flagged loudly enough to catch on a skim.
Key Financial Metrics
H1 2020 vs. H1 2019, continuing operations unless noted, reported in EUR (H1 2020 also shown in USD)
FX: EUR 1 = USD 1.1236 (June 30, 2020 close, this period's actual period-end date).
| Metric | H1 2020 (EUR) | H1 2020 (USD) | H1 2019 (EUR) | YoY |
|---|---|---|---|---|
| Revenue | €957.5M | ~$1,075.9M | €510.9M | ✅ +87.4% |
| Total Segment Revenue (before vouchers) | €1,126.8M | ~$1,265.9M | €581.8M | ✅ +93.7% |
| Gross profit | €167.2M | ~$187.8M | €168.3M | ⚠️ -0.6%, margin fell to 17.5% from 32.9% |
| Adjusted EBITDA (total segments) | -€319.8M | ~-$359.3M | -€171.1M | ⚠️ loss widened 86.9% |
| Operating result | -€455.0M | ~-$511.2M | -€239.8M | ⚠️ loss widened 89.7% |
| Net loss, continuing operations | -€443.2M | ~-$497.9M | -€202.3M | ⚠️ loss widened >100% |
| Net result (incl. discontinued operations) | -€443.2M | ~-$497.9M | €721.2M | ⚠️ swung to loss - H1 2019 included a €923.5M one-time gain on the German business/Takeaway.com deal |
| Cash flow from operating activities | -€232.0M | ~-$260.7M | -€118.3M | ⚠️ outflow widened 96.1% |
| Free cash flow (proxy: OCF less capex)* | -€310.5M | ~-$348.9M | -€159.7M | ⚠️ outflow widened |
| Cash and cash equivalents (period-end) | €2,579.4M | ~$2,898.2M | €699.4M (Dec 31, 2019) | ✅ +268.9% |
*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 (-€58.8M) and intangible assets (-€19.7M) in H1 2020.
| Balance sheet | Jun 30, 2020 | Dec 31, 2019 | Change |
|---|---|---|---|
| Total assets | €4,727.5M | €2,672.7M | ✅ +76.9% |
| Total equity | €2,110.1M | €1,869.5M | ✅ +12.9% |
| Total liabilities | €2,617.4M | €803.2M | ⚠️ +225.9%, mostly the convertible bonds |
The gross profit margin compression (32.9% → 17.5%) is the single most important number in this report that the headline growth figures don't show: delivery expenses (own riders plus external couriers) more than doubled to €632.8 million from €287.6 million, as Delivery Hero's continuing shift toward its own-delivery model - a real structural bet, not a one-off cost - absorbed most of the revenue growth before it ever reached the EBITDA line. Every metric above except revenue and cash moved the wrong direction; the cash increase is not organic performance, it's the convertible bond and equity proceeds landing on the balance sheet mid-integration of a large acquisition that hadn't closed yet.
Adjusted EBITDA margin actually improved slightly on a percentage basis (-28.4% of segment revenue vs. -29.4% a year earlier), but every absolute-euro loss figure - EBITDA, operating result, net result, operating cash flow - widened, because the business scaled almost twice as fast as its cost base narrowed as a share of revenue.
Key Operational Metrics
Actual reported figures unless noted
| Metric | H1 2020 | H1 2019 | YoY |
|---|---|---|---|
| Orders | 519.1M | 268.8M | ✅ +93.1% |
| GMV | €5,145.8M | €3,191.7M | ✅ +61.2% (+62.6% constant currency») |
| Implied take-rate (Total Segment Revenue ÷ GMV) | 21.9% | 18.2% | ✅ up - driven by Integrated Verticals' gross-merchandise-based revenue recognition, not a pure like-for-like improvement |
| Employees (headcount, period-end) | 27,071 | 24,617 (Dec 2019) | ✅ +10.0% |
Order growth (93.1%) meaningfully outpaced GMV growth (61.2%) this half - the opposite of the usual pattern, where basket size holds roughly flat and GMV tracks orders closely. The gap reflects COVID-era demand shifting toward smaller, more frequent orders (groceries and everyday items via the expanding Dmart network) rather than larger, less frequent restaurant orders - a genuine change in order composition, not a data artifact. Headcount growth (10.0%) ran well behind order growth for a fourth consecutive reporting period, consistent with the delivery-personnel operating-leverage pattern flagged in both prior posts.
Segment Results
H1 2020, five reportable segments as of this report (four regional plus a new Integrated Verticals segment); H1 2019 comparatives restated onto the new structure where shown
Delivery Hero now reports five segments: MENA, Asia, Europe, and Americas (the same four regions since the IPO), plus a new fifth segment, Integrated Verticals, introduced January 1, 2020 to separately show orders where Delivery Hero itself is the seller (Dmarts dark stores and virtual kitchens) rather than a commission-earning marketplace.
| Segment | Revenue (H1'20) | YoY | Adj. EBITDA (H1'20) | Adj. EBITDA margin | H1'19 margin |
|---|---|---|---|---|---|
| MENA | €368.1M | ✅ +19.4% | €18.8M | ✅ +5.1% | -3.1% |
| Asia | €481.5M | ✅ +221.7% | -€229.2M | -47.6% | -63.2% |
| Europe | €133.6M | ✅ +70.8% | -€7.9M | -5.9% | -12.3% |
| Americas | €95.0M | ✅ +108.1% | -€79.1M | ⚠️ -83.3% | -125.3% |
| Integrated Verticals | €52.3M | new segment | -€22.5M | -43.0% | n/a (new) |
MENA is the standout: after the multi-year margin deterioration first flagged in the FY2017 post and still sliding as of H1 2018, which finally tipped MENA into its first-ever negative half-year margin at H1 2019 (-3.1%), the segment swung back to positive this half, at +5.1%. That's a recovery to the kind of profitability MENA reliably posted from the 2017 IPO through FY2019, not a first for the segment or the company - MENA was Delivery Hero's only profitable region as far back as H1 2017. Asia and Americas both improved meaningfully in percentage terms (Americas' margin improved from a historic -125.3% low to -83.3%, still the worst of any segment but a real recovery), while Europe held roughly flat. The improvement across MENA, Asia, and Americas is broadly attributable to the same COVID-driven order surge lifting revenue faster than costs scaled - not necessarily a structural, permanent improvement, since the same restrictions that drove the surge are also what's being "closely monitored" for reversal once economies normalize (see the Outlook language in this report).
Beyond the Usual
A new segment quietly moves revenue out of the regional numbers, unrestated
Effective January 1, 2020, Delivery Hero introduced a fifth reportable segment, "Integrated Verticals," covering revenue from orders where the Group itself acts as principal - primarily Dmarts (small dark stores) and virtual kitchens. Revenue and adjusted EBITDA from these operations previously sat inside the four regional segments on a commission basis; they're now reported separately, on a gross-merchandise basis. The report explicitly states that "the prior-period information is not restated to the new segment structure" - so a reader comparing MENA's or Asia's H1 2020 regional margin against the H1 2019 figure published a year ago is, for some portion of the business, comparing two different definitions of what belongs in that segment. The company does provide both old- and new-structure comparatives for this transition period specifically, which is good practice - but going forward, only the new structure will exist, meaning any reader tracking a regional segment's multi-year trend needs to know this reset happened here.
This new segment also changed how Total Segment Revenue is calculated: Integrated Verticals revenue is recognized on a gross-merchandise-value basis (the full order value), not a commission basis, which is part of why the implied take-rate (Total Segment Revenue ÷ GMV) rose to 21.9% from 18.2% - a shift in accounting composition, not solely commercial pricing power.
The Woowa acquisition's own hedge slipped its expected closing date
To hedge the USD-denominated cash portion of the Woowa Brothers purchase consideration, Delivery Hero entered a deal-contingent FX option with a €2.5 billion notional and an April 2021 expiry in 2019, ahead of this half. As of June 30, 2020, the fair value of that option had risen to €56.0 million (from €41.8 million at December 31, 2019), generating a €14.2 million gain recognized in other financial result this half. More tellingly, the report discloses that the estimated closing date for the Woowa transaction itself was "slightly amended and is now considered to be most probable in the first quarter of 2021" - having previously been expected in the second half of 2020. A deal announced in December 2019 taking over a year to close isn't unusual for a large cross-border regulatory approval process, but it does mean the €1.75 billion of convertible bonds raised in January 2020 specifically to help fund this deal sat on the balance sheet as cash for well over a year before the acquisition it was raised for actually completed.
Three layered derivative positions on the shares Delivery Hero itself sold away
Delivery Hero disposed of its German food-delivery business to Takeaway.com in 2019 in exchange for Takeaway.com shares, then almost immediately began hedging its exposure to those same shares through a series of "collar" transactions - Collar I (April 2019), Collar II (May 2020, purchasing 8.4 million additional Takeaway.com shares), and Collar III (June 2020, a further 0.8 million shares) - each combining short call and long put positions to cap both the downside and upside of the retained stake. Delivery Hero retains the right to repurchase the shares utilized under these arrangements through 2022–2024, and as of June 30, 2020 the net financial asset from these three collars stood at €71.4 million. Separately - and disclosed in the same footnote - a legal dispute exists over the collar arrangements themselves, where the report states the "worst-case outcome might force Delivery Hero to cancel and reverse" them, with any resulting cancellation amount tied to the Takeaway.com share price, interest rates, and volatility at the time of a potential cancellation. Delivery Hero assesses this outcome as "not probable," but it's a real contingent exposure layered on top of an already-complex derivative structure most readers would have no reason to expect from a company whose core business is food delivery.
Delivery Hero is carrying three overlapping equity-collar positions on shares from a business it sold away in 2019, plus a disclosed (if assessed-as-unlikely) legal dispute that could force those collars to be unwound - a level of derivative complexity worth tracking given how it's grown with each successive collar since 2019.
A €3.25 billion debt load arrives in a single half, for a deal that hadn't closed
Delivery Hero placed €1.75 billion of convertible bonds (Tranche A and Tranche B) on January 15, 2020, then disclosed a further €1.5 billion placement (also two tranches) as a subsequent event on July 8, 2020 - together, €3.25 billion of new convertible debt inside roughly six months, on top of the €587.8 million equity capital increase completed the same half. The January tranches alone carry a combined carrying value of €1,626.6 million as of June 30, 2020 and added €14.8 million of interest expense this half - a cost that didn't exist a year earlier. This is by far the largest financing event in Delivery Hero's public history, and it was raised specifically to fund the Woowa Brothers acquisition (see the deal's own hedge slipping its closing date, above) - meaning a genuinely large amount of new leverage is now sitting against a business whose largest-ever purchase hadn't yet closed as of this report's authorization date.
Delivery Hero raised €3.25 billion in convertible bonds within about six months to fund a single acquisition that still hadn't closed as of this report - a scale of leverage worth watching closely once Woowa's actual contribution to the P&L becomes visible.
A contingent-consideration release from last year's Zomato UAE deal
Other operating income this half includes a €9.8 million gain from the partial release of a contingent consideration liability tied to the 2019 acquisition of Zomato UAE - meaning Delivery Hero is now paying less for that acquisition than it originally provisioned for, likely because Zomato UAE didn't hit whatever performance milestones the earn-out was tied to. This is a small, quiet footnote line, but it's a useful data point on how Delivery Hero's own MENA-market bolt-on acquisitions have performed against their original deal terms.
A subsequent-event grocery acquisition at a premium to its own annualized GMV
On August 14, 2020 - after this period's close - Delivery Hero acquired 100% of InstaShop, a Dubai-based online grocery marketplace operating in the UAE, Qatar, Bahrain, Egypt, and Lebanon, for an expected consideration of USD 360 million, including a USD 132 million earn-out tied to InstaShop hitting operational targets over the following three years. InstaShop's own disclosed metrics put its Q2 2020 annualized GMV at roughly USD 300 million (up 330% year-on-year) with a positive EBITDA margin already - a genuinely profitable, fast-growing bolt-on, priced at roughly 1.2x its own annualized GMV before the earn-out, materially cheaper on a GMV basis than Delivery Hero's own ~1.7x multiple (see Target Valuation Range below).
Target Valuation Range
The market is implying an enterprise value of roughly €17.29 billion - ~9.0x H1 2020 annualized IFRS revenue, or ~6.4x FY2020 Total Segment Revenue guidance (1.7x annualized GMV) - the market is pricing Delivery Hero for a Woowa- and COVID-fueled growth story that hasn't yet shown up in the P&L: shares have roughly doubled since June 2019 even as every absolute loss figure in this report widened, and €3.25 billion of new convertible debt was raised against a deal that still hadn't closed. Call this fairly valued only if both the pandemic-era order growth holds and Woowa delivers on its own numbers once consolidated; overvalued if either slips. 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 this period's June 30, 2020 end (a Tuesday, so the actual period-end trading day) at €90.96 per share. With subscribed capital of €199.1 million at €1.00 nominal value per share (199,100,000 shares outstanding, up from 188,800,000 at December 31, 2019, mainly from the H1 2020 capital increase), and netting period-end cash of €2,579.4 million against the convertible bonds (€1,626.6 million carrying value), lease liabilities (€124.8 million combined non-current and current), and the short-term convertible loan portion (€4.8 million):
| Market cap → enterprise value | H1 2020 |
|---|---|
| Share price (period-end) | €90.96 |
| Shares outstanding | 199,100,000 |
| Market capitalization | €18.11B (~$20.34B) |
| Total liabilities (convertible bonds + leases + convertible loan) | ~€1,756.2M |
| Less: cash and equivalents | €2,579.4M |
| Enterprise value | ~€17.29B (~$19.42B) |
| Peer-multiple sanity check | FY2019 | H1 2020 | Change |
|---|---|---|---|
| Revenue basis | FY2019 actual | H1 2020 annualized, ~€1,915M / FY2020 Total Segment Revenue guidance midpoint €2.7B | - |
| Enterprise value | ~€12.80B | ~€17.29B | ⚠️ up |
| EV/Revenue | ~10.3x (net revenue, trailing) | ~9.0x (IFRS revenue, annualized) / ~6.4x (Total Segment Revenue guidance) | ✅ down on net-revenue basis |
| EV/GMV | ~1.72x (FY actual) | ~1.7x (H1 annualized) | - flat |
No directly comparable food-delivery peer has been covered on this site yet, so a peer-multiple sanity check against another public delivery marketplace still isn't possible for this post.
The share price moved substantially across the two years covered by this window: from a €32.14 close at the end of November 2018, it rose steadily through 2019, then jumped sharply from roughly €48.00 (late November 2019) to €70.56 by December 30, 2019 - coinciding with the announcement of the Woowa Brothers acquisition - before continuing to climb through the COVID-19 period to close at €90.96 on June 30, 2020, up 41.9% from the year-end close and up roughly 128% from its level two years earlier. Delivery Hero has not split its stock since its 2017 IPO, so these are the actual nominal prices quoted at the time, not retroactively adjusted figures. Given the size and clear drivers of this move (a specific acquisition announcement plus a global demand shock), it earns this dedicated discussion rather than folding quietly into the multiples above.
A real DCF still isn't attempted here, for the same reason flagged in both prior posts: operating cash flow was more negative this half (-€232.0 million) than in any prior period on record, and free cash flow (-€310.5 million) doesn't yet give a base worth projecting forward, especially with the Woowa acquisition's own financial contribution still entirely unconsolidated as of this report.
A pandemic that doubled orders and a balance sheet that took on €3.25 billion of new debt for an unclosed acquisition are, this half, the same story told from two different statements - and neither the P&L nor the cash flow statement yet shows whether the bet on Woowa was worth what it cost to make.
Delivery Hero SE's Half-Year Report 2020 (unaudited condensed consolidated interim financial statements and interim group management report as of and for the six months ended June 30, 2020, prepared by the Executive Board August 26, 2020) and its H1 2020 Results presentation, via Delivery Hero's investor relations page.