Three years after debuting on the stock market, Just Eat is set to join the FTSE 100. The quarterly reshuffle will be assessed tomorrow, with any changes coming into force from mid-December. The takeaway giant becomes the first firm of its kind to make the cut, concluding a remarkable year of growth.
Just how has Just Eat done it?
The story and the strategy
Founded by a group of five Danish entrepreneurs in 2001, Just Eat is a marketplace for online food delivery and now operates in 12 markets around the world. It uses technology to bring together over 19 million customers with 75,400 restaurant partners internationally, serving everything from pizza to sushi, burgers to burritos. Its mission: to 'create the world's greatest food community'.
When it floated on the stock market in April 2014 with a valuation of £1.5bn, it was the first IPO to be listed on the London Stock Exchange’s high growth segment, an initiative aimed at medium-sized companies that have demonstrated fast revenue growth.
Part of its success it down to its ability to spot and gobble up the competition. At the beginning of 2016, Just Eat spent £94.7m to acquire Spain's La Nevera Roja, Italy's PizzaBo/hellofood Italy, Brazil's hellofood Brazil, and Mexico's hellofoodMexico. Later that year, it bought the British assets of food delivery startup Takeaway.com for an undisclosed price.
And it's about to take its biggest bite yet into the UK market, with a £240m takeover of rival Hungryhouse.
Just Eat is now trading around 819p, up about 40% in the year to date, to give a market cap of £5.6bn. That's higher than Sainsbury's.
‘Just Eat, like all good online businesses, is a cash machine. Local fast-food outlets are rarely technology experts, so Just Eat squares the circle, offering takeaway owners a platform to sell their curries, kebabs and pizzas online,’ says Nicholas Hyett, equity analyst at Hargreaves Lansdown. ‘Just Eat dominates the mass-market takeaway space in UK, while rivals like Deliveroo focus on providing the delivery service for a more upmarket slate of outlets.’
Just Eat has been buoyed by the growth of UK takeaway spend, as more Brits shun the stove for the smartphone. UK takeaway spend grew 34% in 2016 to £9.6bn, and the market is predicted to be worth more than £11.2bn by 2021. This all bodes well for Just Eat, as it looks set to become the 'first consumer facing tech business to reach the FTSE 100'.
Who’s going down?
Just Eat leads the pack of companies expecting promotion into the FTSE 100, with packaging giant DH Smith and life protection products producer Halma also tipped to rise. But as companies rise, others must fall. The two likely victims for demotion into the FTSE 250 are engineering support service Babcock International and visitor attractions firm Merlin Entertainment.
Merlin’s shares have slumped 33% since June this year, and it was lucky to avoid the chop last quarter. ‘Investors are concerned by the heightened threat of terrorism taking its toll on visitors, along with unfavourable weather conditions,’ says Helal Miah, investment research analyst at The share Centre. ‘The group have also recently "complained" of the cost pressures brought about by employment legislation, particularly in the UK.’
Babcock, meanwhile, has struggled to shake off concern that Brexit will reduce defence spending. It has also been tarnished by troubles elsewhere in the outsourcing industry: builder Carillion, for example, has been in a tailspin since July when it made a shock £845m write-down and warned on profits.
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