The share price of the UK-based Deliveroo PLC (GB:ROO) gained 8.5% in today’s trading as the company plans to return up to £250 million to its shareholders through a tender offer. The company initially revealed its intention to return excess capital to shareholders during its first-half earnings report for FY23. Today, the company has detailed its plan to purchase up to 217.4 million existing ordinary shares, with a price range set between 115p and 135p per share.
The stated price range reflects a premium ranging from 6% to 24% over the closing price of its class A ordinary shares on Wednesday. The tender offer is set to commence on Friday and conclude on October 27, 2023, with shareholders anticipated to receive the proceeds in early November.
Deliveroo functions as a marketplace, facilitating the delivery of food and essential items from local partners to customers in the UK. The company has expanded its operations globally and is currently active in 10 countries, serving a vast customer base.
Shareholders’ Return Backed by Earnings
In 2023, the company plans to return a total of £300 million to shareholders, equivalent to approximately 30% of its net cash at the beginning of the year. This is well supported by the company’s substantial cash position of £948 million as of June 30, 2023, affirming its confidence in its ability to generate additional cash flow.
In the first half of 2023, the company achieved a noteworthy revenue milestone, surpassing £1 billion, representing a 5% increase over the previous year. This was mainly driven by a higher GTV (gross transaction value) per order of £24.2, which increased by 10% from the previous year. Additionally, adjusted earnings increased to £39.4 million, compared to negative earnings of £51.6 million in the previous year.
In terms of outlook, Deliveroo has revised its full-year EBITDA guidance, now forecasting a range of £60 million to £80 million. This is a significant increase from the earlier guidance range of £20 million to £50 million.
What is the Forecast for Deliveroo Shares?
Today, analyst Luke Holbrook from Morgan Stanley reiterated his Buy rating on the stock, predicting an upside of 16.6% in the share price.
According to TipRanks consensus, ROO stock has received a Hold rating based on four Buy, two Hold, and two Sell recommendations. The Deliveroo share price target is 140.75p, which is 17% above the current price level.
