Cat Rock Capital criticised Peter Plumb’s strategy in an open letter in December
Thursday 24 Jan 2019 Author: Lisa-Marie Janes

We believe the reign of online delivery platform Just Eat’s (JE.) chief executive officer Peter Plumb may have been cut short following pressure from US shareholder Cat Rock Capital.

Plumb, who is leaving with immediate effect after less than 18 months in the role, was under fire from Cat Rock, who has a 2% stake in Just Eat.

The shareholder criticised Plumb’s failure to introduce appropriate financial goals or hold management accountable via remuneration packages.

Key requests include linking management’s remuneration with publicly disclosed three-year financial targets and aiming for at least 20% organic order growth.

Shares in Just Eat have slumped 17.9% to 654.2p over the last year after revealing it would be investing £50m for delivery services in March 2018. Previously it had principally been an online platform for takeaway outlets who handled the deliveries themselves.

This was already viewed as an expensive investment by the market and was hiked to a range of £55m to £60m in July, causing the shares to fall further.

Just Eat revealed earnings before interest, tax, depreciation and amortisation (EBITDA) will be between £172m and £174m in the year to December 2018. In 2019, EBITDA is forecast to hit a range of £185m to £205m, roughly in line at the top end with consensus forecasts for £204m.

Sales are forecast to rise from £780m to between £1bn and £1.1bn this year.

The company has not responded to Cat Rock’s open letter in the trading statement, which included a recommended sale of the iFood business in Brazil in order to return capital to shareholders.

WHY IS PEEL HUNT NO LONGER A FAN?

Despite the relatively reassuring trading update, not everyone is convinced.

Broker Peel Hunt has been a fan of Just Eat since 2013 but changed its tune in October 2018 following rumours that rival Uber Eat may acquire Deliveroo.

Even if Deliveroo is not acquired, Peel Hunt analyst James Lockyer is concerned as Uber Eats could gain more traction via smartphone apps and benefit from a richer dataset compared to Just Eat.

Lockyer also argues Deliveroo has bigger pockets to help it thrive in a new market that Just Eat may not be able to match.

The analyst is confident Just Eat made the right move investing in delivery (albeit three years too late), but flags investing in technology and using its data to help customers is essential if it is to prosper going forward.

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