Deliveroo plc (ROO) Earnings Call Transcript & Summary

Hello. Good morning, everyone. I'm Will. I'm the Founder and CEO of Deliveroo. Thank you for joining us today for this morning's presentation of our full year '22 results. Before we get into the results, though, I am very excited to say that we're joined by our new CFO, Scilla Grimble. She joined our business last month. We've mentioned her a few times, really excited for her to partner with me on this journey. We also have our VP of Investor Relations, David Hancock with us. He's been on the last few calls. And I want to take this opportunity to thank him for his contributions as interim CFO before Scilla joined us a month ago or so. So thank you very much, David. And now let's get into what we're going to discuss today. So what we're going to do is we're going to start with a brief overview of the year before we run through some of the progress we made in '22, some of the details on the progress. Then Scilla will take you through the financial results in more detail. we'll set out our guidance for '23. I'll come back for a quick summary, and then we will get into Q&A. So let's get started. So overall, I'm really proud of the team's performance in '22. It was certainly intense. We had a really difficult hard macro environment here in the U.K. and Europe. We've had high inflation. We've had a war in the Ukraine. We have political unease in the U.K. then. Secondly, this is the first year out of COVID restrictions fully for almost all of our markets. And so in that context, I think we have delivered a very good set of results. So a few key takeaways for me: One, we've made excellent progress on our path to profitability. We delivered positive adjusted EBITDA in the second half of '22. Now that's well ahead of schedule. We said we would do this in the second half '23 or first half '24. So well ahead of schedule, we're really, really proud of this. And really, this is the result of great execution by the team on initiatives that we chatted about to all of you previously. So for example, this is optimization of consumer fees. This is efficiency gains in our rider network. This is better targeting of marketing spend. So I think we made a lot of progress on this in '22, but we did this at the same time as we strengthened our consumer value proposition, and we've executed well on the hyperlocal strategy. The combination of both led to market share gains in key markets. And I'm going to deep dive into a few topics on the CVP and hyperlocal strategy, hope you all will enjoy that. And then alongside the progress on profitability, we delivered a good year of growth. We had gross profit up 30%. We had revenue up 14%. We had GTV up 9% year-on-year or 7% in constant currency. I think this is a very good outcome given the difficult consumer environment. And then on the balance sheet side, we ended with GBP 1 billion of net cash. And today, we announced a further share buyback of GBP 50 million. Scilla will touch on that in her section. And then finally, we've set out our guidance for '23 on -- we expect GTV to be low to mid-single digits in constant currency with Q1 broadly flat and then growth improving throughout the year. And from a profitability perspective, we expect adjusted EBITDA to continue to improve. We expect a range of GBP 20 million to GBP 50 million with a weighting towards the second half. So let us now look at some of our progress throughout the year on the strategic and operational side. So first, I want to start by reminding all of you of our operating framework. 10 years ago, I started this business in Chelsea, in London. I guess that means it's our tenth year birthday. It's our tenth year anniversary of starting this business. So happy birthday Deliveroo, but back to the analyst presentation. So being in one neighborhood meant that everything was viewed through a hyperlocal lens. Now 10 years on, we're in 10 different markets. We're in thousands of different neighborhoods, but we still look at our business through a hyperlocal lens. That is how we run our business. Because at the end of the day, network effects for this business are very, very strong on the neighborhood level. They're not that strong on the national level or they're pretty weak, I'd say. And there's definitely almost no network effects internationally. So what this means is our core strategy has been the same. We want to focus on neighborhoods first with the greatest profit pool potential. We want to win them, neighborhood-by-neighborhood and then move on to others. Our business after all is an aggregation of neighborhood markets. Now what does this actually mean in practice? Well, it means we need to build the best consumer value proposition in neighborhoods that we operate in. And I'll come on and talk about CVP in the next slide. Having the best and most differentiated CVP in each neighborhood leads to more hyperlocal market share, which leads to more riders, it leads to more consumers and merchants and ultimately higher profitability than competitors in that area. And this is due to, a, order density, that's going to benefit logistics costs; b, pricing power with consumers and merchants that benefits revenues; and c, more marketing efficiency, which should benefit overheads. And when it comes to profitability, these hyperlocal network effects are key to driving higher gross profit. In this business, profit pool potential is a function of local population density, not necessarily size of city, but density is important, affluence is important, merchant supply, so independent merchant supply is important and also our market share, how we're doing there. So neighborhoods that are more affluent, have more independent merchants and our denser tend to have a higher profit pool potential. So focusing on neighborhoods with the -- focusing first on these neighborhoods that have the greatest profit pool potential is important. So that's the high-level strategic framework. We think about this business both with a hyperlocal approach and a focus on that hyperlocal CVP. And ultimately, that CVP will drive growth and will drive market share gains and eventually profitability. And then what we've done on the right side of this page here, we've also listed out some of the more specific levers we've had to drive profitability with. We set these out at our prelim results this time last year. So these are some of the specific levers we have to drive profitability. We set those out last year. And we made great progress on several of these levers in '22. We'll come back to talk specifically about them in a few slides time. First, let me go into more detail on the CVP. So as I said on the last slide, it's really the CVP of a neighborhood that actually matters. That's ultimately how we win these neighborhoods. But our business is -- you can think about it is, obviously, a collection of neighborhoods and this sort of roll up of each neighborhood's EVP rolls up to our overall CVP. So I'm going to sort of abstract a little bit and talk about it at a macro level, what we've done to improve the CVP. And we're not going to go into every pillar of the CVP. Availability and brand love are critical, but, ultimately, we'd be here all day if we went into details on all of them. So let me start with selection at first. We ended '22 with 158,000 restaurant sites live on the platform. That's up 22% from the end of '21. We launched McDonald's. We launched Caffè Nero in the U.K. Internationally, we spent a lot of our efforts in '21 signing up the big brands. So '22 was a year of bolstering our independent supply. On the Grocery side, we expanded selection to 18,000 partner sites live at the end of '22. That's up 64% from the end of '21. So we expanded our partnerships in the U.K. and Ireland with Waitrose, Sainsbury's, Co-op. We launched with Asda internationally. We continue to roll out with key partners, such as Carrefour in France, Italy and Belgium; Casino and Picard in France; Esselunga in Italy; and Park N Shop in Hong Kong. And also, we have continued to invest in a measured rollout of Hop and Hop as-a-service sites. But it's really not just about this number of restaurants or grocers, we have on the platform. We've worked really hard filling in some selection gaps. So we've added more -- a lot more vegan options in the app. We've made them easier to find, for instance. Okay, the next pillar. Consumer experience. Really, what I think about on this pillar is, how did we do on any given order. From the in-app experience, so how do we do on search, discovery, reorder to the order tracking page to the actual delivery, were we fast enough? Were we accurate on the timings and the items? How is the packaging? And if something went wrong, did we fix it? And so one area we've made a lot of, I would say, transformational improvements is in Grocery. And we're going to deep dive into some of those specific things that we've done to improve that offering for both grocers as well as consumers. So I won't go into too much of it here, but it is a huge part of our CVP, and it affects all five pillars here. And so when we started the Grocery vertical 3, 4 years ago, we launched with Co-op, 300 SKUs. We just basically use our restaurant interface to make that happen. So it's very clunky. There are a lot of operational problems. But 3, 4 years on -- actually, I'd say, in the last 12 months -- 12 to 18 months, there's a complete step change as a result of both transformational work and incremental steps. And in aggregate, the consumer experience is this night and day from where we started. So we're really proud of that. I also have in here transactional to emotional and that is part of the consumer experience as well. And I've talked about wanting to take Deliveroo beyond the functional to really capture the passion and emotion of our consumers and merchants. I think we're really at the beginning here, but a couple of cool features we launched last year. We have long-form customer reviews. We have some video content from merchants, and that's available in only certain neighborhoods. Now let me just talk about the reviews a lot. So believe it or not, before Deliveroo, I used to be a giant Yelp fan. I was a Yelp Elite member. I was -- Yelp Elite 11 and 12, in fact. And I used to absolutely love leaving reviews and reading them in detail. And I think our new review features, it gives you rich details of what our users think about our different merchants. And I have used it to discover a lot of new places. The video side is a bit less developed, I'd say. We're only live in a few neighborhoods. One of them happens to be where I live in London, but what we're doing here is effectively enabling merchants or FMCG partners to record short videos telling their story. So it can be about a dish or it can be about the history of their restaurant. And these are -- they're sort of like a stories function in our app. And I think it's going to be pretty engaging for consumers. Now I'm also going to talk about service. Now service is part of this consumer experience box here. And it is a critical part of the consumer experience. It's something I care about personally a ton. And I think they've done very, very well. It is absolutely a point of differentiation. And I think the food delivery industry has not yet cracked the problem, how do we consistently deliver a great end-to-end delivery experience each time? And it is a very difficult problem to solve, given you've got a 3-sided marketplace. There's a bunch of operational complexity, but it's a giant opportunity and one we are going after in '23 to make sure that we really, really up our game on the end-to-end delivery side. And then finally, on this page, we're going to talk about price value for a second. Value is going to have a different meaning for each consumer. It's our job to ensure that we're providing consumers access to our service at a variety of different price points. And this is even more important given what's going on with cost living in many of our markets. So we're working actively with grocers to match in-store prices. We're going to flag this in the app for our consumers to see. And with restaurant partners, we're helping them tailor their menus, to balance popularity and also mitigating cost inflation. We've extended our Deliveroo Plus collaboration with Amazon in the U.K. We've expanded to add France, Italy and the UAE. And what we've done -- this is a continuation of what we did in the U.K. We offer prime customers free Deliveroo Plus subscriptions for 1 year. So they don't pay any delivery fee on orders above a minimum value. And I think that take-up that's been very, very strong, as we've talked about before. And then there's something else, too, we're also helping consumers access rewards from their favorite restaurants. So for example, if you order from selected restaurants for the third time, you get an GBP 8 discount. Okay, that takes us through consumer value prop. Now let's deep dive on Grocery. All right. Let's deep dive on progress on Grocery. So I mentioned that we've made major steps in improving our Grocery offering in '22. Let's start with Range. We initially launched this Co-op partnership with 300 SKUs. We quickly increase that to 2,000 to 3,000 in our regular offering, but now we are offering SKUs up to 10,000. And the results have been encouraging. We've seen a 5% to 10% increase in basket sizes. We've seen a 6% reduction in amended orders. We've seen an increase in substitutions as there's more to substitute with. And then we're also piloting some, I would call them more finely grained menus. We have these subcategories now that this really helps browsability. So it's basically adding a sublayer to the current aisle shopping tiles in the app. So if you can see here, instead of just browsing for fruit, you can browse for raspberries, you can browse for citrus fruit, and so you can get a bit more granular, just like if you're in the baby category, you can go into nappies as well, right? So just adding more layers on. And we've seen positive initial results in the number of items added to baskets per session and the percentage of categories viewed per session, which is pretty encouraging. So another area where we've been making big advances is driving value in this Grocery segment, which is under that price value CVP pillar. Cost living crisis is having a huge impact on consumer spending power. So offering good value is critical. We've been working with our grocery partners to drive more value for the consumer. We were the first to offer in-store price matching with Morrisons for selected items. We've rolled this out with some other partners as well. Now one thing that was pretty amazing for me was in the first in-store price match campaign with Morrisons, we delivered a more than 20% increase in order volume once we have rolled that out. And this is something that benefits the grocers and consumers as well as us. There's also more to come. You'll see we're going to be improving different offers from grocers. So mechanics such as 3 for the price of 2 or buy 1 get 1 with 1% off, and we want to make sure we merchandise this well. We want to make sure that customers get the confidence they're not missing on any deals on Deliveroo versus going into physical stores. Another thing that has been, I think, really, really powerful and relatively new. These are the two areas I mentioned at prelims last year as something we were building and trialing. This is our substitutions feature and our dedicated picking app. So here's a quick update on each. So our substitution technology is now live in over 5,500 sites globally. There's a number of notable partners that are using this. It allows consumers to update unavailable item settings to either substitute with the best available item, remove unavailable items or cancel the entire order if they don't have one thing you want. And you can kind of see -- you can see how that looks on the left side of that screen shot. And then our APIs enable our grocery partners to see which of these options the consumer has selected to amend the order in real time. And you can see that on the right side there. So that's what the grocer would see on the right and what the consumer would see on the left. And this means that customers are hopefully not disappointed because they're offered an alternative that they've selected. And for grocers that have this tech, they're able to generate additional revenue and increase customer satisfaction. I'd say the thing I'm most excited about on the Grocery side, and one of the things I'm most excited about in our core Grocery business, is we have been rolling out a dedicated picking app for our partners. So there's the scanning tool within the app that allows pickers to scan items as they pick them. It reduces picking accuracy errors. It increases availability updates as well. So it's all integrated. We're live with a number of partners. We're going to roll this out to many more partners through '23, but the initial results are very, very significant. We have seen a pick time reduced by 22 seconds per unique item, which is huge. And we think this could drive significant labor savings for our partners, but also an incredibly improved consumer experience as order accuracy should be much higher and delivery should be executed faster. And then, of course, there's Hop. We continue to roll out with Hop. That's our Deliveroo operated dark store model. And during '22, we saw the pressures of -- in this industry. We saw a lot of the pure-play quick commerce guys have some difficulties as funding has dried up. We've seen players merging. And for us, we've always believed in the Hop. We believe that it is a great part of the CVP. It belongs on a platform with a wider network. So with preexisting consumers with a lot of merchants and lower-cost deliveries. And we have made really significant advancements in profitability of Hop, and we're very confident of its role in our marketplace. So excited about the progress we've made there as well. All right. I wanted to talk a bit about an example of what we mean by hyperlocal. And I'm going to use Italy as a case study. So let's just give you a little bit of history of food delivery in Italy. So historically, this -- it really only was a restaurant for filled delivery market. There was one major international player. They launched in, I believe, 2011. And food delivery itself, I don't think it was a major part of the culture. And so when we launched in '15, there were not that many sort of mid- to high-quality restaurants on offer for delivery. And in a country that is food obsessed, well, certainly, we wanted to change that. Now today, I would say the food delivery market is still underpenetrated versus, I would say, places like the U.K. And Internet penetration in Italy itself is significantly lower than other Western European countries. So we do see a lot of growth just occurring, I think, as the market matures. Now as a country, you had major cities like Milan and Rome, but it's such a local place. You have hundreds of moderately sized towns and cities. They all have varying density, culture and identities. 65% of the Italian population live outside the big cities. And also the penetration rates vary. You're close to 20% in the north, less than 5% in the center and South. So a lot of regional variances as well. So I think our point is here is it's been really important to have a tailored strategy, and we've had to look at things zone by zone, neighborhood by neighborhood, and our strategy has been consistent, as I talked about. Focus on areas where we see the greatest profit pool potential, first, win them zone by zone. And today, we're the #1 player in Italy, where we really are very, very strong in Northern Italy and particularly in Milan and Lombardia. We have 65% of the population coverage in Italy. That's the highest amongst any players utilizing logistics. And we've done this whilst we improve profitability. Italy's adjusted EBITDA profitable before allocation of central costs. And the success is due to this hyperlocal approach and the team that have executed it. So let me talk a little bit about how we've done it. We entered this market by initially launching in Milan in '15, Rome in '16. We've been building up strong positions in these major, major cities. But as we were growing quickly in these cities, we also wanted to build a sustainable model across the whole country by focusing on smaller, but dense neighborhoods as well as these large neighborhood -- cities. And at the beginning of '18, we started partnering with a major international food brand. This allowed us to expand into smaller towns and cities across Italy. And at that time, our competitors were just focused on the big cities, like Milan and Rome. We launched in the likes of the Piacenza. This is something an area where our competitors weren't launching. This is a smaller city, south of Milan. It's got less than 200,000 inhabitants. It's quite an affluent area and the cost of living is lower than Milan. So that combination definitely benefited our unit economics. For whatever reason, our competitors didn't really see the opportunity. And our team was busy at work and spending time in Piacenza to develop a competitive edge. But I would also argue that Piacenza was where we developed our playbook. So -- and over time, we systemized and institutionalized that playbook, but Piacenza was really where it was born. So we began building the best CVP at the hyperlocal level. We signed up a mix of well-known casual dining and QSR restaurants, spent a ton of time cultivating the local gyms. We balanced this portfolio, both with exclusive accounts and nonexclusive accounts. And what we started doing is just using data on sales, on marketing and our operational KPIs. We continuously identified areas of improvements week-by-week. So whether that's a neighborhood of Piacenza needed more riders or we were missing a certain cuisine in a certain neighborhood. We were on the ground executing. And I think that experience really allowed us to use data to identify our issues, allowed us to fix input metrics to solve for outputs. And I think doing it in that first kind of mid-sized city really was a big learning. And Piacenza is one example of how we differentiate our CVP at a neighborhood level, right? We've done this in a lot of places. And I think it's also worthwhile calling out Grocery. We've offered Grocery with Carrefour, Conad and Despar, we work exclusively with Esselunga as well. They partnered with our Hop service. We've added butchers, cheesemongers and bakers. These are more profitable than large grocers. And so we're effectively adding the same strategy. And so Grocery is just part of this hyperlocal strategy. And I'd say that overall, this Piacenza story was repeated hundreds of times across Italy. And I think we've made huge progress. This is a testament to Matteo, our GM in Italy and his team -- and we've transformed this market from one that was -- had a -- just -- it was a restaurant for fill those -- very small too, I think, a dynamic, diverse market now where it really is becoming a way of life in many parts of Italy, and we're proud to have done this. And we've gained market share consistently to get to where we are now, but we do this through hyperlocal focus. And we are the market leader in Italy now. So I want to just thank the team for what they've done. So we're excited about the future of the market. We're excited about other markets where we can replicate this as well. All right. Quick update on riders. I've talked a lot about how they value flexible self-employed work. And through '22, our rider attraction and retention rates were quite high despite the labor markets being strong in many of these markets. And satisfaction itself has remained strong. It is at 83% that are satisfied or very satisfied in the fourth quarter. So I think we have both qualitative and quantitative proof that people value this work and I also believe that engagements with trade unions is important, and I want to mention two examples. In May, we signed first partnership of its kind. We signed a partnership with the GMB Union, the third largest union in the U.K. The agreement explicitly recognizes riders as self-employed, but also provides real benefits for riders. In France, we are participating in a social dialogue. These are government-led negotiations between platforms and unions designed to improve the working conditions of riders without calling into question of self-employed status. And if we talk about regulation for a second. In Europe, we have this ongoing debate about the platform work directive. This continues. I talked about this on our Q4 call. Discussions are ongoing at the Parliament and Council level. There doesn't appear to be a clear timetable for final agreement. It's worth remembering, however, though, the original proposals by the commission are broadly in line with the way we're currently thinking -- or sorry, our current operating model. And we think core elements of these proposals are likely to remain in place. And so we, like other platforms, we will be engaged with regulatory bodies as well, and this is the case in a few markets. So in France, we're participating in constructive dialogue with social security bodies in relation to an ongoing investigation concerning engagement with riders. In the Netherlands, although we've exited, we have ongoing litigation concerning rider status as well. All right. Just want to wrap up here. I wanted to bring this back to what we achieved in '22. So we continue to grow this business in what has been a difficult consumer environment. We have balanced this with excellent progress and profitability. We've reached adjusted EBITDA profitability well ahead of schedule. And I want to just congratulate the Deliveroo team for executing really well. We've achieved a lot in '22. Obviously, we are executing in '23, and there's a lot more to do. At the prelims, we called out a bunch of levers that we had at our disposal. Some of these are listed on the right-hand side here of the slide. I'm not going to talk about all of them, but let's pick a few. So let's talk about consumer fees. We have ensured consumer fees appropriately reflect delivery distance. We've adjusted the balance between delivery fee and service fees. And we also have been educating consumers what additional services and benefits they're getting to justify those higher fees. Now we've been pretty paranoid about the fee optimization. So we've run multiple experiments for a long period of time to get a decent sense of the impact before rolling these changes out widely. And this has been a big driver in our progression in '22. And while I think there's more optimization to come, I think we're being quite thoughtful about the cost of living crisis, and so that's going to be, obviously, front of mind for us. Secondly, let's talk about advertising revenue. I know we really haven't -- there have been a lot of questions, and we haven't really given a specific answer. And so we plan on do that today. But this year, we saw the first real contribution from our nascent advertising business. Growing this revenue and profit stream, obviously, is going to be a multiyear effort, but we've got an encouraging start. We've had advertising revenue reaching 60 basis points of GTV in Q4 '22. So that's an annualized run rate of GBP 40 million or so. And it's worth noting at this stage, this is almost entirely from the restaurant side of the business. So these are sponsored position -- sponsored positioning ads that you can see in the app. So that's high vis carousels, that search results, things like that. But we also launched during the year a new platform enabling FMCG partners and other companies that advertise their products. And that's still in its infancy, but you can see that on some carousels, but also on the rider tracking screen. And so we expect this to become a more material contributor in '23. But definitely, I would say, by the fourth quarter last year was contributing. So lastly, I want to comment on the actions we've taken on overhead costs in '23. You will have seen we announced the redundancy program in Feb, which could see around 9% of colleagues leave the business. So let me explain a bit more about this. In recent years, we grew our headcount very quickly. There's really two reasons behind that: So one, in 2020, we had a significant headcount reduction, and this is related to the -- to a U.K. antitrust investigation, which placed us in a very, very precarious cash position. That was resolved by August 2020. And then secondly, at the same time, COVID became a real tailwind, and we wanted to take advantage of that through '20 and '21. And I think we hired too many people too fast. I think we got a bit carried away with some of this. And now if we look at our business, we're not seeing the same growth. We've exited some markets, and we need to look very hard at ourselves to become more efficient. And this is not an option. And so to counter this, we started taking action during 2020, midway through the year. We implemented a pause on all non-tech hiring. We raised the bar for adding new tech headcount. We stopped backfilling roles when people are off the business, but towards the end of the year, it was obvious that we had to do more. And this led to the redundancy process we commenced last month. And I want to say this is not some sort of short-term reaction to a challenging macro or stock market, the objective of this process is to deliver a permanent shift towards increased efficiency, reduced friction and decision-making, increased speed of decision-making and also cost savings. And hopefully, through all of this, this becomes a better place and more enjoyable place for employees to work as well and that we can solve consumers' problems faster and more comprehensively. I firmly believe these actions will help us achieve that. And so Scilla will talk about the financial impact later on, but I wanted to address this upfront. And as difficult as this decision was, it really is the right thing to do for the business. So to conclude, we said we would improve profitability by acting on the levers I've mentioned. We've delivered on that in '22. This gives us confidence we can, again, deliver in '23 and beyond. And you can see on the slide, we still have levers to pull to help drive both growth and profitability as well. So now I'm going to hand over to Scilla. She's going to take us through the financials. Thanks.

Thanks, Will, and morning, everyone. Let me start by saying how delighted I was to join Deliveroo a few weeks ago and that I'm looking forward to talking and meeting with you all over the coming months. Before we turn to the numbers, I want to highlight that all the P&L metrics I'll cover are for continuing operations, unless stated otherwise on the slide, that means excluding Australia and the Netherlands, which we exited in November '22 and Spain, which we exited in November '21. All cash flow and balance sheet metrics, though will include all operations. So let's look at some of our key financial metrics. As Will said, '22 was a strong year. Starting with GTV, we grew 9% or 7% in constant currency. This was driven by a combination of growth in orders and higher GTV per order, both from item-level price inflation and optimization of consumer fees. Revenue growth outpaced GTV growth, up 14% year-on-year, driven by the expansion of revenue take rate. This uplift in revenue, alongside efficiencies in the rider network, saw gross profit increased 30% to GBP 643 million. Adjusted EBITDA was a loss of GBP 45 million, an improvement of GBP 55 million year-on-year. We reached adjusted EBITDA profitability in H2 though with a result of GBP 7 million. This was a key milestone for us, reached well ahead of expectations and a good foundation on which to continue to improve profitability in 2023 and beyond. We're conscious though that adjusted EBITDA is not true profitability and are focused on reaching sustainable profitability and cash generation. So on the slide, you, therefore, see a free cash flow measure. In '22, this was an outflow of GBP 243 million, although this includes a few one-off cash outflows, which I'll come on to. Again, the shape is important with an outflow of GBP 169 million in the first half, improving to an outflow of GBP 74 million in the second. So significant progress on profitability and improving cash profile, and we ended the year with GBP 1 billion of net cash, which leaves us well positioned to capitalize on the opportunities ahead of us. And in recognition of these factors, we've today announced a further share buyback of GBP 50 million. I'll update you more fully on our approach to capital allocation with the interim results. Before we delve into the detail of the P&L, I want to take a quick look at the shape of the performance over the last year. On the left, you can see the encouraging shape of several of our metrics with orders up 5%; GTV up 9%; revenue up 14%; and gross profit up 30%. Of course, the ability to drive value through the P&L is critical, particularly at a time when the top line is facing consumer headwinds. And we'll look at each of these in a bit more detail shortly. On the right-hand side, you can see the shape of our profitability improvements. Since H2 '21, we've improved gross profit margin by 250 basis points from 7.6% to 10.1% in H2 '22. Adjusted EBITDA margins improved even more, nearly 300 basis points, say, without same period from negative 2.7% to positive 0.2%. So let's now look at how we've achieved this. So starting with our top line metrics. As I said earlier, revenue growth of 14% outpaced GTV growth due to the expansion of revenue take rate. We've delivered this through pulling the levers we described were prelims last year, namely our consumer fees and the start of scaling our higher-margin advertising revenue stream. Will has already touched on these earlier, so I won't dwell on them. While it's not a specific lever that we've pulled ourselves, we also saw an increase in commission revenue from higher GTV per order, which was largely as a result of item-level price inflation, clearly something our merchants control rather than us. I also want to highlight the shape of performance through the year. As you can see on the right-hand side, Q1 saw strong order growth of 19%, in part boosted by Omicron related COVID restrictions. Gradually, order growth slowed to 4% in Q2, 2% in Q3 and negative 2% in Q4 as consumer headwinds increased in many of our markets, in large part due to inflationary pressures. However, inflation, alongside the levers we've pulled on consumer fees, meant GTV growth held up better than orders, as you can see in the top right-hand chart. The bottom chart splits this growth by segment. we saw broadly similar shape in UKI and international growth rates, although this separated somewhat in H2. That reflects some tougher COVID comps for international and as we touched on at our Q4 call, some overall market weakness in certain markets. These Q4 trends have continued into the start of this year. We expect GTV growth to be broadly flat in Q1 in constant currency, reflecting consumer headwinds and that Omicron-related comp I mentioned. However, GTV and revenue growth should improve through the year as we deliver on our plans and the comparison base eases, and I'll come back to guidance shortly. Moving on to gross profit. We've been really pleased with the progress here with an increase of 30% to GBP 643 million. We saw improvements in both geographic segments. International saw particularly strong growth, up 44%, which reflects a combination of a comparatively weak H2 '21, as well as the good progress we've made driving forward profitability across our international markets in 2022. Full year group gross profit margin was up 150 basis points to 9.4%, increasing through the year from 8.7% in H1 to 10.1% in H2. This reflects the revenue take rate improvement as well as efficiencies in the rider network. We rolled out new meal prep time models that have further reduced rider wait time at restaurants. We've worked to better balance supply and demand in the network, and we've also aimed to capture efficiencies from order stacking without degrading the consumer experience. All that's enabled cost of sales per order to remain broadly stable at GBP 4.50 per order compared to GBP 4.40 per order in '21, despite rider wage cost headwinds in a number of markets. So stronger take rates and effective management of cost of sales has created leverage in gross profit, driving the margin expansion. Good progress then in '22, although we'll be very thoughtful about how much further will pull some of these levers in '23. For example, as Will said earlier, we're very mindful of the current cost of living crisis as we think about consumer fees, but we do expect the contribution from our ad revenue stream to grow. Now on to marketing and overheads, where costs grew 16% to GBP 688 million, although spend did fall slightly in H2 from H1. Marketing costs were down year-on-year, reflecting more targeted marketing investments, particularly in H2 in light of the weaker consumer environment, and you can see marketing drop from GBP 127 million in the first half to GBP 88 million in the second. Overhead costs increased year-on-year, mainly due to growth in our technology team. This investment supported a number of the improvements we've seen across the P&L, for example, the consumer fee optimization and the scaling of our advertising platform. Cost control became an increasing focus as we move through the year, and this has continued into '23 with the announcement of a redundancy process that Will touched upon earlier. This could see around 9% of our colleagues leave the business after consultations are completed during Q2. As with all companies, we will be impacted by wage inflation, which is currently running at about 6% in the U.K., where the majority of our employees are based. So given the timing of redundancy consultations, wage inflation and the shape of overhead growth in '22, we expect limited absolute reduction in people costs full year '23 on full year '22. But if we look at this for H2 '23, compared with H2 '22, we do expect to see a clear reduction. Moving on to adjusted EBITDA. I've already covered the progress we've made to reach a positive adjusted EBITDA in H2. What I want to focus on here is the right-hand side of the page that shows the significant improvements we've made in both geographic segments. The UKI has grown adjusted EBITDA from GBP 91 million in 2021 to GBP 158 million in '22, taking margin from 2.6% to 4.1%. And if you did allocate central costs on a percentage of GTV basis, the UKI would be profitable, which clearly shows the strength of this business. The International segment made an even bigger improvement, moving from negative GBP 28 million to positive GBP 48 million. And within this, every market improved profits. But as we've said before, adjusted EBITDA is just a milestone on the way to true profitability and cash generation. So on the next slide, I want to take you through the cash flow. We continue to have a very healthy balance sheet and are well capitalized to go after the opportunities in front of us. We closed 2022 with net cash of GBP 1 billion, about GBP 300 million lower than the prior year. So looking at the key elements of cash flow then and starting with adjusted EBITDA, here you see a GBP 71 million loss as it includes the GBP 26 million adjusted EBITDA loss from discontinued operations. Looking ahead, as we've said, we expect adjusted EBITDA to be in the range of GBP 20 million to GBP 50 million for 2023. So a significant positive swing for our cash flow in the year ahead. We spent GBP 80 million on capital items, GBP 50 million on capitalized development costs, largely projects developed by our internal tech team and GBP 30 million on CapEx, which reflects the rollout of our additions and Hop sites. In '23, CapEx will be lower given the slower pace of rollout of additions. We also had an outflow from working capital and exceptional items of GBP 85 million. We said at interims that GBP 40 million of the working capital movement was a one-off outflow due to timing of employee tax and social security payments for share awards related to the IPO. And there were also some significant cash outflows in respect of exceptionals, which account for the rest of that GBP 85 million outflow. The major items here were costs related to Australia, the Netherlands and Spain as well as smaller amounts related to vehicle settlements and some other restructuring costs. So excluding these factors, you can see the underlying movement was minimal. Cash interest is next, not overly material in '22 at an GBP 11 million inflow or be it second half skewed given the rate environment, but we expect interest income in the region of GBP 30 million to GBP 40 million for 2023. Then finally, we have the cash outflow from the share buyback. At the GBP 75 million program announced last year, we completed GBP 66 million in '22, with the remaining GBP 9 million falling into January '23, and I expect the further share purchase program of GBP 50 million announced today to commence shortly and be completed during '23. So to round that off, we expect to materially improve our cash flow in '23. Finally, then to guidance. We ended the year in a strong position, and we'll look to find the right balance between growth and profitability during 2023 and beyond. We're guiding to GTV growth in constant currency for the year to be low to mid-single digits. And we expect GTV growth in Q1 to be broadly flat with growth improving through the year as we deliver on our plans and the comparison base eases. We expect adjusted EBITDA to improve and be in the range of GBP 20 million to GBP 50 million weighted to the second half. Despite macro uncertainties, our record over the last year gives us confidence of delivery in this range. And with that, I'll hand you back to Will to wrap up.

All right. Scilla, thank you. And to conclude very briefly. So against this difficult market backdrop, business performed really well in '22. We have delivered on our own breakeven targets well ahead of schedule. We reached adjusted EBITDA profitability in the second half of '22, well ahead of schedule. As I said, we continue to grow the business in challenging market conditions. And we've done this while we continue to improve our CVP and gain share in key markets. So thank you all for listening and looking forward to the Q&A. Operator, over to you. Thanks.

[Operator Instructions] The first question comes from Andrew Ross of Barclays.

Welcome Scilla, I have got two, so the first one is on advertising. Thank you for giving that disclosure of a 60 basis point run rate in Q4. Just I'd like to ask what you think that number might be in '23? And now that the FMCG platform is up and running, whether you may want to be more specific on the long-term ambition for how the advertising could be. Then the second one is just to complete the free cash flow bridge below the EBITDA guidance so you've already given some helpful comments on CapEx, working capital and interest. But if I could press you on any cash exceptionals this year and how we should think about the stock-based comp?

Will here. Could you go on mute? I just hear some -- thank you. Thanks very much. So on advertising, I'll take this one and then Scilla, if you don't mind talking about the free cash flow question. So as we said, in Q4, we got the 60 bps of GTV. And for the overall year, it's going to be obviously a bit lower than that as we scaled that up during the course of this year. On '23, we're not guiding precisely on what ad is going to be, but I can say that we expect it to grow very strongly. We expect it to be accretive to the GP margin, all those things being equal. . And I guess the other thing I'd say is, as I said on the presentation, this was almost 100% restaurant ads. And we launched our FMCG initiative in the second half, that's picking up. So I guess if I put all this together, really restaurants is still early as we just ramped that up from the beginning of the year. FMCG was sort of nonexistent in Q4. And putting all of that together, we're really excited about the opportunity long-term. And we do expect this to be a much bigger part of the business in '23 than in '22, but we're not guiding too specifically what that looks like.

Okay. And Andrew, just in relation to your question on free cash flow bridge below EBITDA. So in terms of the cash exceptionals, with the exception of the redundancy costs, and I would expect that those, obviously, we're still in consultation, but I expect them to be sort of high single-digit millions. There's nothing else at this stage to flag in terms of digitalization of any of the P&L charges. Then can I just take your question on share-based comp, I'm presuming that's a P&L question rather than a cash question.

Yes, I guess, just thinking about -- I know it's not technically a cash item, but it's something we've invested to focus on. So can you get the P&L number?

Sure. So if you look -- I mean, I think the thing to think about is just the number that we disclosed for '22, so the GBP 69 million round numbers. So in the RNS, we do detail that, that includes that share-based payment and accrued national insurance just because of what's happened year-on-year, so exit '21 versus exit '22 in terms of our share price, we did get a fairly significant release of the national insurance accrual. So in the region of about GBP 15 million. So if you kind of adjust back for that in terms of '22, that gives you, I think, a good starting point for the charge for '23.

Our next question is from Andrew Gwynn of BNP Paribas Exane.

So, yeah, first question actually is [ capital ] orientated. But actually talking about the capital allocation, you said we'll save that conversation until the interims. So maybe just a couple of hints as to what the topics for discussion might be. And the second, obviously, I mean certainly with myself, I've been concerned about a bit of a race to the bottom over the years within the food delivery sector, particularly around choice. So do you think that we're now sort of through that? You obviously have a lot of focus here on grocery. And my understanding is grocery is more difficult to make profitable, certainly at the EBITDA level. So do you think we're now sort of where we need to be from a choice perspective, and then specifically around the QSRs?

So do you want to take the -- your everyone save your question, Scilla will take it. I'll answer the second.

I'm not -- I've only been here a few weeks. So as I said, we'll come back and talk about capital allocation more fully at interims. And it will be no surprise, I think, in terms of the things that you would expect me to cover in terms of how we think about spending of the shareholders' capital, both in terms of sort of how we're thinking about organic options and what that means in terms of cap structure.

And then, Andrew, Will here, I just wanted to maybe better understand your question a bit, is your question, are there more restaurants and merchants to add to the platform in the long run? Or is your question on something around competition? I apologize, I wasn't crystal clear.

Yes, apologies. More in a sense -- obviously, the industry has added more and more choice and the risk on some of that choice has been, in many cases, very low or even negative gross profit and then particularly about sort of QSRs being added to the platform. So do you think that now the industry, and Deliveroo, specifically, you're at a place where the choice is broadly where you want it. We shouldn't expect significant changes, lots more, say, McDonald's in the mix?

I think we and other players are mostly working with all the major QSRs at this stage. I don't really see that changing. I think on the grocery side, I think we're pretty well penetrated in the U.K. with major grocers, but we added as the last year -- we're going to add probably a few other people. I think internationally though, certainly, that's more of an opportunity for us to add more merchants. And I would say that on sort of the grocery profitability side, yes, no question, the groceries are not at 70%, 75% gross margin business, so it's quite different. However, I guess, the way we sort of operate is what do we think consumers are willing to pay to get a GBP 30 basket in 20 to 25 minutes, right? And so there's always going to be this trade-off between unit profitability and TAM and navigating that in the right way is something that we've been trying to figure out for some time. I think what we mentioned -- and David, correct me if I'm wrong, I think this was at the half year in '21?

Yes. We said gross profit per order on in the U.K. was GBP 2.40, I think, in Restaurants and GBP 2.10 in Grocery.

Yes. And so that -- I don't know exactly what it is today. I don't think it's like remarkably different. But certainly, that may impact obviously the size of the price, right? And so we're going to be trying out a lot of different things to see what that ideal -- a balance between unit profitability and TAM is. And so I think we've made a bunch of progress on that over the last year.

Next question is from Joseph Barnet-Lamb of Credit Suisse.

Excellent. And once again, welcome Scilla. So two questions from me. I guess the first one, with regards to low to mid-single-digit percentage GTV growth, can you just quantify what that actually means numerically to you guys? And with regard to the phasing of growth through the year, you said sort of Q1 flat, if you can help us understand your working assumptions, the scale of improvement in Q2, that would be great. And then the second question, obviously, we've seen cost of sales per order remained broadly stable with GTV rising. It sort of feels very simplistically, like general inflation was an FY'22 phenomenon and wage inflation is an FY'23 phenomenon. And you've spoken about wage inflation within sort of central costs. Could you give some color on how you view COGS per order into FY'23? Is there any risk that you could need to raise that effectively to secure riders?

So do you want to take the first one and the second one, and I'll jump in a bit as well on the second one.

Sure, nice to hear you again. So low to mid-single digits. So look, I mean -- so the reason why we gave sort of phraseology rather than specific numbers is it feels a little bit artificially precise given in these markets to give a numbers range. But I think from a straw poll, so to speak, around the table. Low would be, in our view, sort of 1 to 3, mid would be 3 to 7 and high would be 7 to 9. So I think you can kind of therefore get a sense of what we were meaning in terms of low to mid. Then I think your second question was in relation to what we're seeing in Q1?

Well, as I think you said Q1 was going to be flat. If you could give us any sort of narrative around sort of how you expect the uplift in Q2 to look like, any color you can give?

So I'm probably not going to give you a whole lot of color more beyond what we said within the presentation. So a couple of things to bear in mind, as we highlighted in terms of Q1. So we're comping a very high COVID-related Q1 '22, particularly at the beginning of that year. And what I've said in the presentation was that what we're seeing in Q1 really is a continuation of some of the trends we saw in Q4 in relation to the sort of order volume, order value mix. And also the UKI holding up a bit stronger than international ones, given some color in Q4 in relation to that international piece. And then as we go through the year in terms of that ratchets up, if you like, within the range in terms of the GTV guidance from flat to the low to mid-single digits, that's a combination of things that we're continuing to do ourselves as Will described, and that comp base easing as we go through the year.

And then Joseph, on your question around cost of goods sold and also overheads. So the way I am sort of thinking about it is the cost of goods sold line, we can influence very heavily through driving more efficiencies in the rider network. So what does that actually mean? That means less time on a single order for riders, the ability for them to do more orders in an hour just driving out inefficiencies in that system. So by keeping that number flat last year, we thought that was a pretty good achievement. Do we sort of expect further sort of gains on that? I think we will be watching wage inflation, obviously, very closely. At the same time, we're pretty confident that we can drive more efficiencies throughout the year. So I guess those two things just sort of counteract each other.

The next question is from William Woods of Bernstein.

Two questions. The first one is just on the bottom of the -- or on the EBITDA guidance. Obviously, at the bottom end, it suggests limited margin improvement from H2. And the midpoint only just 20 or 30 basis points or something. Are you finding it much more difficult to push towards profitability in the first quarter of this year? Or are you slowing down the push to profits? And then the second question is just, again, on free cash flow. Should we expect free cash flow breakeven in H2 '23?

So I think they're probably based for me, William, although, I'm sure Will will chip in. So look, in terms of that range of [ 20 to 50 ], I mean, I think the -- the first thing is to point out that we're obviously confident in our own plans as I'm hoping is coming across in terms of the presentation and our responses. And therefore, we're confident in that range of guidance given. But obviously, we don't operate in a vacuum. So that range also reflects the guidance that we've given in relation to GTV guidance. And obviously, as we go through the year, and we'll see how consumer confidence and the inflation mix plays out. And then -- sorry, then I'm not going to give you probably a half-on-half split in relation to cash flow profile. But I think it's fair to say if you -- given the guidance that I gave on the cash flow bridge. So hopefully, that was sort of helpful. I can see that if you were at the top end of the range, you might get in terms of our guidance on EBITDA, you might get an interest income, you might get to a place where you're thinking that free cash flow for the full year was broadly negative. And clearly, if you were at the midpoint of that range...

Positive.

Sorry, broadly flat. Thank you. And if you were at the midpoint of that range, you'd be slightly negative.

The next question is from Chris Johnen of HSBC.

A couple of questions. First, a broader one with respect to the sort of return to more normal growth. I mean, obviously, the sector has had a bit of a, let's call it, COVID super bump for a lack of a better word. But on top, a lot of other things change with the increased focus on profitability, the minimum order values have sort of rationalized. Overall, unit economics are more rational at a level where it should be, but it's come at the expense of growth. I was just curious on your thinking as to when this will be done? Is the end of 2023, the end of, let's say, distortions for a variety of reasons, whether it's comps or cost of living crisis, just to pick your brain on that. I'd also be curious to hear if you have any views as to how the cohorts have changed, whether it's easier to read past cohorts now or whether this will take more time? And then second question, I'll be curious to hear. I mean you've commented on Italy, but I'll also be curious to hear whether there's any other update with respect to markets where you think you lost or won market share in 2022?

Yes. I will, I think, take these. I think -- yes, you're asking the question I'm asking myself all the time, which is, when growth will return? I strongly think that this has been very linked to inflationary pressures, the slowdown in growth. Obviously, some of this was decisions we've made on our own in the industry, so i.e., optimizing on the fees, things like that, but the overall food inflation numbers are just huge still, right? In the U.K., I think we're at 18% still, in France we are up above 15% now. And until that really subsides because keep in mind, we don't set our prices on our platform, our restaurant partners do. And very frequently, you'll see restaurant partners mark up prices on top of the increases they put through their in-house menus. And so when you're in a situation like that, it just -- yes, of course, there's things we can do. We work with certain partners to demonstrate value to customers. We offer certain discounts on certain days to help with certain types of customers. We're pretty targeted about that. But overall, if menu prices on the online platforms are above 20%, 25% higher than they were a year ago, that is just a difficulty for demand, especially wage growth hasn't kept at pace, right? And so for me, the biggest thing is, hopefully, the inflationary cycle will subside at some point. I mean, we have positive sort of signals on that. And once that happens, I think we're back in more of a normalized growth pattern. Certainly, I hope so, but I do believe that, that is the case. I do believe it really is cost of living driven. And then I think your second question was really around what are we seeing in different markets? So I guess, maybe point out a few. France is a market where we gained a quite a decent amount of share in '22, but I would flag that overall, France -- the French market has been less strong than we would have liked and that is a market issue. And I think one of the things that has been pretty interesting to me about France is, if we actually just look at the physical grocery industry in France, you're seeing a pretty tough time. France, additionally -- the French consumer has been accustomed to about negative 1% to negative 2% deflation in grocery since 2012. And now that number is up to 15%, 16% and that's happened over the course of '22. And so when you have -- as dramatic a change as that, I think it impacts the market. But from a share perspective, it's fine. But certainly, we hope inflationary pressures reduce. And I would also call out that France sort of lagged other countries in terms of the rate of inflation. And so you're kind of seeing a lot of this stuff hit throughout '22 and '23. I hope that helps.

The next question is from Luke Holbrook of Morgan Stanley.

Just a couple, if I may. Just the first, I noticed in the press release that you put out this morning, you mentioned the 4% plus adjusted EBITDA margin target for 2026. Just really trying to work out the levers to getting there what the market is missing in terms of does that come out of a higher gross profit margin than the market is currently expecting? And then just secondly, on exceptional items that is around GBP 70 million last year. Just trying to understand how much of that is we should consider it recurring in nature, maybe into '23, '24? And I'll leave it there.

David, do you want to take the first question on long-term EBITDA?

Yes, sure. So I think that the levers, our view on that is still same as this time last year when we set out that path to profitability and listed out the levers. So some of those being above gross profit in terms of the consumer fees, which obviously, we made good progress on in 2022. The advertising revenue and some of the cost of sales levers being some of the strongest levers above gross profit and then below gross profit on improving our marketing efficiency and driving leverage on the overhead side. I think that the progress we made in 2022, as I said, was skewed to things like the consumer fees. We think there is still plenty more opportunity to go across the other levers, indeed. Even on consumer fees, I think there is more that we can do, but we want to be very thoughtful about that in 2023, given the cost of living pressures. Maybe just in terms of overhead leverage, clearly, in a weaker top line environment. You get a bit less natural leverage of controlling those costs as the top line grows. You need to work a little bit harder to drive that efficiency. Hence, the actions that we announced in terms of redundancies in the announcement in February. So I do think that over this period out to 2026, as we described, we think there is more to go across the levers that we enumerated. In terms of what the market is missing? I think it's fair to say that as an industry, historically, maybe the guidance that people have given in the longer term move to the right overtime. And so I can understand why there is some reluctance maybe to put these things all into numbers at the moment, but we feel very confident about the levers we have in our control and our ability to deliver against them.

And then, Luke, just on your second question in relation to exceptional. So yes, total exceptionals in the year were [ 92, ] but [ 22 ] of those is related to our exit from markets. So in respect to the remaining [ 70 ], I mean, you can see in the notes, some of it was restructuring, but most of it related to legal and regulatory costs. And if you look at the provisions note, you can see that increase in provisions. So probably nothing more to say on that. In terms of the go forward, as I sort of -- when I was replying to Andrew earlier, we will have the costs associated with the redundancy program, and I expect those to be in the high single digits and just for clarity, and they will be taken as an exceptional charge. The rest by its nature is quite difficult to guide on because exceptional costs are one-off. So hopefully, that's helpful.

The next question is from Georges Pilakoutas of Numis.

First one, just going back to order growth. What's [indiscernible] that you kind of be upper end or lower end of your GTV guidance, perhaps touch on category spend versus market share? And just how you think inflation is going to play through the year and how that's going to impact AOVs versus orders? Second one is on central costs. Are you able to quantify the reduction from the central headcount reduction. [indiscernible] to kind of perhaps touch on India? Is that kind of ramping up? Is there any kind of meaningful savings to touch on that? Does that come into central costs or into more divisional operating costs? And then a quick third one, if that's okay, just can you discuss the pace of the buyback that you're expecting to kind of to be mindful of where the share price and cash position is?

So I think these are for you.

Okay. So George, I'm going to try and step through these. You may need to refresh my memory as I'm going through. But I think the first one really was in relation to the shape of the GTV guidance kind of through the year and the sort of component parts within that. So I think we've covered off what we've seen so far in terms of Q1. You're also very well aware in terms of the shape of the comps last year. So there is that, which is pushing through in terms of why we'd expect it to improve during the course of the year. But then on top of that, as we have been saying, we will be continuing to deliver on our plans. So improving CVP, further CitySprint, expansion of grocery, as Will talked about. And as we do more of that, of course, that will continue to drive more benefits as we go through the year. It's quite difficult to call out exactly the mix as we go through the year on inflation versus AV because frankly, I'm not sure I'd be in this chair if I had a perfect visibility on how inflation was going to play out. But as Will sort of touched on, we're continuing to see some of that inflation come through markets, particularly in France. And to some extent, you'll get to assist the offset if one is hotter than we're anticipating. So that's probably all I'm going to say in terms of shape of GTV. I think your next question was then in relation to costs in particular. And I think people costs as we went through the year, is that right?

Yes.

Yes. So I think -- so again, I'm sorry, I'm going to have to take you back a little bit in terms of history to get some understanding of the shape. So as Will touched on in response on the questions and I touched on, remember that we effectively post the CMA review, we invested back into people. And off the back of that, that meant that the shape of '21 was lower in the first -- sorry, the shape of '22 was lower in the first half and ramps up into the second half. So the right way to judge full year '23 before any actions is effectively an annualized second half cost. What we've also said is, obviously, the consultation impacts from the end really of Q2. So we get the benefit of that more in the second half. We've got wage inflation running at about 6%, but we've also not been sort of sitting on our hands and we've been taking advantage of natural attrition and all the things that you expect us to do in relation to closing vacancies and so on. So what I'm basically saying, George, in a long-winded way, maybe is to think about it in terms of the exit rates for '23 versus the exit rate for '22. I think you should expect low double-digit run rate savings from the redundancy and vacancies, but partly offset by wage inflation.

Low double digit in percentage terms in terms of the reduction.

Yes, sorry, percentage, yes.

And then George, just the question on India. So I had a chance to go to India for the first time last week and spent a bunch of time with our developers there. And yes, I was incredibly impressed with their passion and capability. This is our -- obviously, it's an investment for us in Hyderabad. I think what we're trying to figure out is how do people in India work best with embedded teams in the U.K.? So spending a lot of time figuring that out. I think as a sort of a global technology company having devs in different markets is pretty common. And so spent a bunch of time just kind of trying to build our brand out there where we don't have a consumer presence. And I'm quite bullish about the people that we've met out there and their capabilities and their ability to contribute to our teams here.

And then finally, in terms of the pace of buyback. So obviously, we announced a GBP 75 million program with the interims last year, and we completed that with in January. And I think that gives you a reasonable proxy, George, in terms of the pace with which we're able to execute these things.

The next question is from Giles Thorne of Jefferies.

My first question is on Grocery and Hop. You made the point in the prepared materials that the synergies of operating a dark store alongside a food delivery platform are significant. Is there any more color you could give or any metrics you could share that would bring that to life? And given you speak about these synergies, but having a more measured rollout, are you inclined to push a bit harder, especially some of the pure-play dark store operators are currently retrenching. And then secondly -- sorry, Will, I'll get them both out. And secondly, I guess it's a similar nature question around your attitude towards competition. But this time in advertising, so you're talking about scaling it. You're talking about the contribution that could come from FMCG. I'd be interested to hear what conditions -- under what conditions you would be inclined to selectively weaponize some of those income streams in markets where your peers have been a lot slower to the punch on the FMCG side of things. And there's an opportunity for you to take share in food delivery? Or is this just going to be rigidly allocated towards hitting your profitability targets?

Yes. Maybe I'll take the second one first. I think the way we think about it is going to be a balance of profitability and growth. And there are going to be some markets where we're pushing harder on growth, and then there's going to be some markets where we're more focused on profitability. And I would say the ads revenue stream is just one of those things we look at. We look at rider costs. We look at commission levels, we look at our consumer fees. And we're really excited about the ads product because it's incremental, and it obviously drops down to the bottom line. But I wouldn't say it changes our attitude towards competition. it's just another thing that we look at. And if I look back, Deliveroo has been around for 10 years now, kind of what we have to work with today is pretty different than what we had 10 years ago. But I think our strategy is still the same. Let's develop the best CVP in neighborhoods and let's gain market share there, and then let's press profitability. So I don't think that's going to change, but this is definitely something else that we're -- we think drives meaningful contribution to the bottom line. And then on sort of the Hop product. So I'm just trying to think, when did we launch the first one, I guess it's been over a year, I think at this point, [indiscernible] Q4 '21. What have we learned? We learned that we can make money on it, right? I think that's the critical thing. I don't think anyone had any doubts about the customer experience. That was always going to be good. We've just been optimizing both on the forecasting side, on the purchasing side on how we lay out the stores, working with our partners to just get a better experience. And I'd say it's a really, really big part of our CVP in areas where we have high market share, in areas where we can drive a lot of more density, it makes complete sense. I think your question on, does it belong in a platform or a stand-alone? Yes. I mean, my view is pretty simple. I don't know that I have a lot of metrics to back it up because I don't know the metrics of my competitors, but I'm pretty sure I can do deliveries cheaper than stand-alone players. I'm pretty sure I have a bigger customer base. I'm pretty sure I can negotiate perhaps better deal with grocers. So I put all that together and I really don't have a great sense of people's operational capabilities that I don't know. I'm pretty proud of what we've done. I think the team is great here. I put all that together, I definitely think about that as an advantage over the pure-play guys.

And why not push you a bit harder against them, Will?

I think we are still -- we will build more stores, but we got to make money from them, right? And I think the bar for making money has gone up a lot and the bar for return on investment quickly has gone up a lot. And we're not immune to that, and that is something that doesn't just apply to Hop, but applies to our marketing spend applies to the developers we hire, applies to everything we do, right? And that's no different.

The final question is from Marcus Diebel of JPMorgan.

Two questions from my side. The first one is on the U.K. Will, could you talk maybe a bit more about the competition here? I know it's an ongoing topic, but it's interesting. I mean, when you look at one competitor, [ Uber Eats ], they seem to gain some share on both orders in GMV, I mean is that from your assessment right? And then secondly, given the kind of like focus on vouchering, still, what does it mean for your expense line and also your marketing line? And then the second question, very simple. Could you talk a bit more about white label? I mean we have been following this since the IPO, but if you can just share some light on how customer acquisition is going in that segment. That would be very interesting.

Yes. I mean I'd say, Marcus, I'm probably not going to dive too deep into hypergranular competitive dynamics. But what I would say is that we've got competitors around the world. Sometimes people push harder, sometimes people push less. I don't really get too concerned about sort of -- kind of a short-term market share shift. I think we, in the U.K., gained significant amounts of market share in '22. There's times when that's higher. There are times when that's lower. As I look into '23, I think we've done an outstanding job on the share side in the U.K. But it's just one of those things that's in the back of my head as opposed to sort of reacting to short-term movements. I think what we're focused on is long-term CVP. And yes, you can always change dynamics with some vouchering and things like that. And certainly, in a cost living crisis, like some of that stuff will maybe stick more than others. And so we do some of that as well, right? It's not like we're -- like we don't do that. But I think the important thing is that we've got a really big long-term plan for the U.K. market and Carlo is leading that. I think the team and him have done an outstanding job throughout '22 and '23. Yes it is a competitive market. But overall, I'd say I don't think that it's more competitive than it has been. It's just sometimes you have some players pushing harder and sometimes that ceases. It's a bit erratic, right? So I think that's kind of my view on the U.K. And then what was the second question, Marcus?

No, just the second is on white label. I'm just to see the developments we have been kind of like, obviously, following this since IPO. Just would be interesting to hear, did you -- not by name, obviously, but did you add larger ones, smaller ones more customers moving towards white label established customers? That would be quite interesting what the mix of that is.

Yes. I wouldn't say white label is a huge part of our business. I would say that we have added large enterprise customers. That's basically who we're working with, so some of the biggest chains internationally we do work with. I think what we found, though, is customers still, I think, want to transact through our marketplace. We offer more choice -- there's -- they've got their own benefits on our platform. And we want to do this as a service for our partners, and we've been building a better product for it. But no, I wouldn't say it's something that like I would call out as a giant part of our business today.

This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Shu for any closing remarks.

I Just want to welcome Scilla to the team. I guess that's probably the thing I want to say the most, and I look forward to partnering with Scilla. And also, I want to thank the Deliveroo team for a great '22. I think we've demonstrated -- I think we've given proof to a lot of the initiatives that we talked about last year, and we're making good progress. And obviously, things aren't the easiest in the economy or the financial markets, but we're really optimistic about what we can do in '23 and beyond. So thank you very much, and we'll all talk soon.

Ladies and gentlemen, this concludes today's conference. Thank you for joining, and you may now disconnect.