Widening losses, slowing growth and the loss of an industry heavyweight from the board are an unusual recipe for success, but Deliveroo’s shares were up again this week as the City welcomed its progress on margin improvement.

The tech delivery platform managed to grow revenues, orders and gross transaction value (GTV) in the first half of 2022, despite what it called “challenging market conditions”.

Revenues increased 12% to £1bn, with GTV up 7% to £3.6bn, as its commissions and consumer fees rose and it made more money from advertising. However, GTV growth slowed as the half progressed, tumbling from 12% in the first quarter to just 2% in the second quarter as consumers tightened their belts amid the cost of living crisis.

In the UK and Ireland, revenues rose 13% to £544.4m, outpacing GTV growth of 8%, thanks to orders increasing 12% to 80.1 million. Deliveroo said it also made market share gains despite the consumer headwinds.

Pre-tax losses at the group widened to £147m, compared with £95m a year ago. However, Deliveroo highlighted an improvement on the second half of 2021, when losses totalled £203m.

The group also stressed it had also made “good progress” on its path to profitability as its adjusted EBITDA loss improved from £106m in the last six months of 2021 to £68m in the first half of 2022.

Margin improvement was driven by higher fees paid by consumers, an increased contribution from advertising revenue and a reduction in marketing spend.

Positive sentiment around its better-than-expected margins was tempered by news of Next boss Simon Wolfson deciding to step down from the board. Wolfson joined in January 2021 ahead of its flotation on the London Stock Exchange later in the year, but has stepped back due to his board role no longer being “compatible with my executive and other commitments”.

AJ Bell said it was a “pleasant surprise to see Deliveroo beat estimates”, given investor nerves over tech stocks and fears over growth rates. However, it added: “If you dig deeper into its latest results, there are still reasons to be cautious. Growth has slowed in the past quarter and the principal reason it managed to beat estimates was by cutting back on marketing spend.”

While acknowledging Deliveroo’s previously announced lower growth expectations, Jefferies commented: “Deliveroo appears to be walking the path to profitability well, something to be applauded given how difficult trading conditions must currently be.”

The broker said its grocery division will be a key driver as it pushes towards profitability. “As the pure-play dark store operators re-trench, Deliveroo is positioned to prosper through its multi-modal… we see the grocery category as the dividing line between operators.”

Deliveroo shares closed up 7.4% on Wednesday to 98p on the news, having recovered from mid-June lows of 77.6p, but remain more than 50% down year-to-date.

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