LONDON (Reuters) - British takeaway platform Just Eat will spend an extra 50 million pounds ($69 million) this year to battle competition from rivals such as Deliveroo and Uber Eats, its new CEO said on Tuesday, sending its share price sharply lower.
Peter Plumb, who joined Just Eat in September, said the company needed to address intensifying competition.
“There is a large and complementary opportunity to offer delivery services to certain markets,” he told reporters after the company reported full-year results.
“And at the same time we will develop our apps, brands and the technology we will provide (to) restaurants to further grow our core marketplace by increasing awareness of the brand and improving the customer experience.”
Just Eat’s platform connects customers with local takeaway restaurants, which generally provide their own delivery service, unlike competitors Deliveroo and Uber Eats.
Plumb said that the increased investment would mainly go towards extending Just Eat’s own delivery services. It also plans to work with more branded restaurants after trials with Subway, KFC and Burger King last year.
The level of investment, however, was far above market expectations and shares in Just Eat fell 11 percent in early trading. By 1042 GMT the shares were down 7.4 percent at 788 pence, still the biggest faller on the FTSE 100 index.
Northern Trust Capital Markets analyst Ameet Patel said the Just Eat had effectively signalled “a material shift in business model from one that’s marketplace-focused to one that needs to focus on deliveries”.
“We think today’s update is a reality check that brings an abrupt end to earnings and rating momentum for now at least,” Patel said.
Just Eat, the shares of which had risen more than 70 percent over the past year, reported 2017 revenue and core earnings above its guidance.
It posted a 45 percent rise in revenue to 546 million pounds and 42 percent increase in underlying core earnings to 164 million pounds for 2017, both ahead of expectations.
Its UK operations performed strongly, it said, processing half a million orders on the evening of the final of TV talent show The X Factor in December, which it sponsored.
Just Eat, which has grown rapidly in recent years to enter the FTSE 100, said the extra investment would also support its growth in Canada, Australia and New Zealand, as well as developing markets.
For 2018 it forecast underlying core earnings of between 165 million pounds and 185 million pounds. The market had expected a figure of 226 million pounds.
($1 = 0.7220 pounds)
Editing by Kate Holton and David Goodman