I’ll make no apologies for starting with Takeaway.com, because it was one of my top performers in 2018. Food marketplaces like these are mostly winner-takes-all, or winner-takes-most, depending on the region. I tend to have the view it’s the former, which, post the sale of Germany in late December, has almost played out across Europe. The margins, returns and cash flow that are generated in these markets, once won, are significant. The Netherlands, for example, makes a 53% earnings before interest, taxes, depreciation and amortization (EBITDA) margin, and they still only have 27% market share.
However, in totality, Takeaway will only turn a profit at the EBITDA level for the first time in 2019, so this isn’t an investment for one year – it’s for the next 5–10. There has been a massive structural shift in eating habits, driven by time, convenience and the breadth of restaurants, which has grown with delivery.
Whilst this shift is happening, the graph might be helpful to illustrate how we managed the weight within the portfolio. I had the opportunity to build the weight up to over 4% in what was a misunderstood sector through 2017 and early 2018. After a brief pullback in early 2018, the share price soared to nearly €70 and the valuation became extended. As you can see, I reduced the position size before the sharp correction. Maybe you’re asking why I didn’t sell it all? A fair question, but I believe in the longterm fundamentals; I’m not a trader, and we saw significant upside, especially in Germany. While the correction therefore might have been fair as the market got ahead of itself on the growth over the longer term, this is a business that I believe can double (conservatively).
In December, Takeaway announced an agreement to buy the German assets from Delivery Hero (the other food delivery business I own in the funds) and the share price rose 30% – this is a very accretive deal in terms of short-term cash burn and longer-term margin potential, highlighting the value still on offer.