Just Eat Takeaway sees significant growth but competition is heating up, and Foxtons says London property activity picking up

“After a big rebound in the US tech sector overnight the FTSE 100 enjoyed a more prosaic start to proceedings on Wednesday morning, trading a touch lower but still above the 6,700 mark,” says AJ Bell Investment Director Russ Mould.

“For the first time in a while the heavy presence of resources firms on the index is a hindrance rather than a help, as the FTSE underperforms its European counterparts with some of the heat coming out of the recent commodities mini-boom.

“Given the focus on inflation and the part it has played in recent market volatility in the bond and equity markets, the latest print of US inflation, due later, could be a big moment in determining the direction markets take next.”

Just Eat Takeaway

“The pressure is just about to ratchet up on Just Eat Takeaway as direct rival Deliveroo prepares to join the London market.

“So it’s a good job its latest annual results delivered in much the way you might have expected given the boost to ordering in at home created by the pandemic, with revenue up 40%-plus and a big increase in the number of eateries using the platform.

“The reported £5 million paid to rapper Snoop Dogg to appear in its TV adverts indicates just what a competitive landscape it operates in – with Uber Eats and Deliveroo battling Just Eat for our takeaway spend.

“This means heavy marketing costs across the board and investment in increasing its in-house delivery capabilities, wiping out any profit the company might have made during its bumper year.

“At least this investment appears to be paying off with the company pointing to market share gains and further order growth acceleration in 2021. This is central to its strategy – not unjustifiably Just Eat believes that in order to deliver strong margins long term it needs to be the clear market leader in its various geographies, which include North America, the Netherlands and Germany.

“By doing so it hopes to benefit from a ‘network effect’ where being the dominant player means it is the most likely to be used by restaurants and consumers, thereby further reinforcing its position and enabling it to charge outlets more.

“While the ambition is a laudable one, achieving it will be a tall order. After all Deliveroo has backing from Amazon, albeit with some constraints from the competition authorities. What if Amazon decides to go it alone or another new entrant with deep pockets comes into the market?

“Just Eat Takeaway could see a souped-up version of the marketing war it already faces with significant implications for its future profitability.”

Foxtons

“With a focus on London, estate agent Foxtons was initially seen as a likely loser from the pandemic. People thought everyone would up sticks and leave the Capital, realising the rise of remote working would make it possible to live in the countryside or by the sea and not have to endure a long commute.

“Foxtons’ full-year results would suggest more resilience than originally expected, even though some of the levers for its earnings growth has shifted slightly.

“Yes, there has been some exodus from London which has caused an increase in the supply in retail properties. That’s pulled down prices and while this has affected Foxtons’ cut it has made up for this by arranging greater volumes of rental transactions.

“As for sales, there is perhaps a misconception that London is a smoke-polluted grid of properties stacked on top of each other. There are plenty of places on the edges offering access to parks, woodland and golf courses, meaning someone could still move out of the centre and still stay within Foxtons’ sales area.

“While the likes of BP are talking about their staff working a few days from home every week, there are other companies such as Barclays who don’t believe remote working will be a long-term trend.

“As the economy reopens, we could see more emphasis on people to get back in the office, particularly if building and maintaining in-person relationships are crucial to driving business. If true, London’s residential property market could quickly bounce back.”

These articles are for information purposes only and are not a personal recommendation or advice.