Deliveroo PLC

LSE:ROO

Earnings Call Transcript 2022-Q2

[William Shu, executive]

Hello, everyone. Good morning. I'm Will. I'm the Founder and CEO of Deliveroo.

[Adam Miller, executive]

And I'm Adam, I'm the CFO here at Deliveroo.

[William Shu, executive]

We also have David Hancock here with us. He is currently VP of Investor Relations, but he'll be stepping into the interim CFO role when Adam leaves in mid-September.

[David Hancock, executive]

Good morning, everybody. Happy to be joining the call, and I look forward to talking and meeting with you over the coming months.

[William Shu, executive]

Thank you all for joining us today for this morning's presentation of the '22 interim results. Let's take a look at what we'll discuss today. We'll start with a brief overview of the half before we run through a summary of the key business highlights from the last 6 months. Adam will then take us through the financial results in more detail and provide a reminder of our financial guidance. I'll then come back for a quick summary before we move on to Q&A.

So let's get started. Overall, I'm pleased with our progress in the first half of '22 despite a difficult macro backdrop. We've continued to grow year-on-year despite tough comps in H1 '21 and an increasingly difficult consumer environment. We have also continued to develop our consumer value proposition, expand that. We have been executing on our path to profitability as well. So we'll go into some of those details throughout the presentation.

But in terms of key takeaways from today, there are a few. So let's start with growth. GTV was up 7% year-on-year in constant currency but really importantly, this has been done at the same time whilst we've been gaining market share in key markets, and we're also improving our customer value prop. So let's look first on profitability. So back in March, we laid out the long-term path to profitability. We talked about the levers. We talked about the time line. We said also we would make material half-on-half improvements in adjusted EBITDA margin. So second half of '21 compared to first half of '22. And we also said that we're confident in our ability to adapt financially to a rapidly changing macro environment. We have done that. So despite lower top line growth than what we had originally planned for in H1 '22, we reduced our adjusted EBITDA loss to GBP 68 million. That's down from GBP 106 million in the second half of '21. And then we see improvements above and below gross profit. So if we think about that on a margin basis, that's going from negative 3.2% in H2 last year. to negative 1.9% in H1 '22. And you can see that we've also put in what the implied percentage would be based on the midpoint of full year guidance. Now I think it's important to say that these financial improvements have come while we've continued to enhance our CVP. I'd say on the grocery side, we've expanded or we've entered into new partnerships in the U.K. and Ireland with Waitrose, Sainsbury's, Co-op, ASDA, SPAR and internationally with Auchan in France, Esselunga Italy and ParknShop in Hong Kong as a few examples. Of course, there are many more.

We now have close to 7,000 grocery sites live in the U.K. and Ireland. We have close to 9,000 sites live across our international markets. So we now have grocery at 10% of total GTV globally in the first half of '22. That's up from 8% in the second half of '21. And on the restaurant side, we've added a lot more restaurants to the platform. I think one key one to call out is McDonald's in the U.K. That's for the first time we do -- we've rolled out with McDonald's. I think that was starting in June or July. So it's a very recent thing. But we have also developed our nonfood proposition. So we've got new and expanded partnerships with the likes of WHSmith, LloydsPharmacy. We have alongside existing partnership with Boots as well. So I think all of these developments are enhancing the value we offer to consumers. It's helping us deliver what we think is good operational progress. And so we'll talk about that on the coming slide. So let's start with our marketplace -- you guys will always see this slide. I think it's really important to remind everyone, this is a complex 3-sided on-demand marketplace. And -- we've got riders. We've got our merchant base, so that's restaurant and grocers and we have end consumers. We think about all of them as customers of Deliveroo. And we always have to balance the interest of the 3 sides as well as Deliveroo and ultimately, the strength of our performance is driven by how well our proposition works for each group. So let's get on to the different groups. So if we look at the consumer side, we've had 7.8 million monthly active consumers transacting on the platform in the second quarter. That's up from $7.6 million in the second quarter of '21, but it is down slightly from $8.1 million in the first quarter of '22, and we'll talk about that more in detail shortly.

Rider satisfaction has remained strong at 80% across our global network of about 180,000 riders. We have continued to add restaurant selection. Now we have 160,000 partner sites live on the platform at the end of June. That compares to 148,000 at the end of '21 and 137,000 at this time last year. The grocery side, I talked about the progress we've made there, but we have now 15,000 partner sites live at the end of June. That's up from about 9,000 this time last year, and we've continued with a rollout of hop sites on a measured basis. So these improvements to the 3 sides of the marketplace, this drove our financial performance. So orders grew by 10%, GTV was up 7% to GBP 3.6 billion. So we are continuing to see growth despite this tough comp base and challenging macro environment. Revenue is up 12%. That is really due to a few things. I'd say there's consumer fee optimization. We've seen more commission revenue. We're also starting to see contribution from our nascent advertising platform. Gross profit is up 16% and the gross margin itself is 850 bps. That's as a percentage of GTV and that's an increase on 70 bps versus H1 '21 and up 130 bps versus H2 last year. Now that is due to the revenue improvements I just talked about as well as keeping cost of goods sold flat per order while GTV per order has increased.

So adjusted EBITDA was a loss of GBP 68 million compared to the GBP 106 million loss in the second half of '21. As I said before, we expect further improvements in the second half to that number. So overall, we've seen continued engagement from each side of the marketplace, which has resulted in improving financial performance.

So we saw in the previous slide that for the half year, orders grew by 10% and GTV by 7%. And if we look at that by quarter, it's quite clear that growth has slowed during the half. And so what we've done here is -- an we have the year-on-year growth rates here, but we've also shown you the 3-year CAGR numbers for Q1 and Q2, so against the 2019. This is a more normalized pre-pandemic base. And you can see that the rate of growth did slow a bit in Q2, but it's within the range of what we would expect looking at 3-year CAGRs.

But needless to say, we definitely plan for more growth in Q2 than what we saw. And we believe this year-on-year Q2 numbers that we're showing here, this isn't just being driven by a comparison base but there's definitely increased consumer headwinds in Europe and the U.K. Now at the same time, I think it's also worth pointing out that the comparison base does get easier here from Q3. Most of these markets that were locked out in H1 '21 had lifted those restrictions by the end of Q2 '21. So we do expect things to get easier than the comp side.

Okay. Now probably worth us talking a bit about GTV per order. So what we just said was that year-on-year GTV growth for the half was slightly below order growth. This is -- really reflects the reduction in GTV per order as H1 '21 has benefited from higher basket sizes during lockdowns. But we do see a different story sequentially though. And what we've done here is we've broken out quarterly GTV per order since Q1 '20. And if you look from Q3 '21 to Q2 '22, you'll see that GTV per orders actually increased. And this sequential increase is mainly driven by item level inflation. We talked about consumer fee optimization a bit earlier. So that's also a factor, but it's mostly the item-level price inflation.

So with regards to inflation, just as a reminder, food prices are set by the restaurant and grocery partners, not by us, with the exception of Hop. And we said at the beginning of the year, we didn't expect food price inflation just flow through directly to basket size on a one-for-one basis. And that is indeed what we've seen. We clearly see many price inflation, but what we also see is that consumers are actively managing their basket sizes a bit. So some people are deciding to order fewer side dishes or not ordering a drink. And that's partially going to offset the menu price inflation but not fully.

So if you look on the chart here, then the net effect is we continue to see basket sizes increase sequentially. And you can see that if this happens in the third quarter, then this year-on-year headwind on GTV growth that we saw in the last 4 to 5 quarters will flip to becoming a tailwind.

So let's look at our consumer base now. Average monthly active consumers grew year-on-year by 16% in the first quarter and 4% in the second quarter. Sequentially, total MACs in Q2 declined slightly compared to Q1 when normally we would expect to see MACs increase sequentially. Now one thing to be clear on here is what we mean by monthly active consumers, just to clarify, the 7.8 million number is the average monthly active consumers during the quarter. I think it's worth highlighting because we have seen different approaches to measuring active consumers, including counting consumers active if they placed an order at any point in the last 12 months. That's not what we're doing and that would get us to quite a different number. But given this is a high-frequency category, we've always believed that monthly is the most appropriate measurement.

So coming back to our numbers. The quarter-on-quarter decline is being driven by a few factors. First, we've had lower acquisition of new consumers this year than in previous years. And this is consistent with our comments earlier that we're not going to chase top line growth against a very difficult consumer headwind. And the second one we've seen is we've had slightly lower retention of existing customers than in prior years.

And when we dig into that, what's interesting is that it's the lower frequency consumers where we've seen the weaker retention. And I think that suggests that we see higher resilience from the more affluent consumers who generally order more frequently. Of course, for us, it's difficult to disaggregate what we're seeing so far in terms of consumer behavior what is a result of post-COVID behavior versus inflation or cost of living, but it's obviously something we're going to monitor closely going forward and try to have a better view, a more clear view in the future.

As we turn to average order frequency, though, you can see that this headline blended number has been pretty stable over the last 6 quarters. But let's dig in and go a little deeper. So what we've always told you in the past and what we've shown, I think, previously, is that every cohort has seen frequency increases over time. That's usually driven by improvements to the CVP and getting used to the platform. During the pandemic, we saw the cohort frequency increases accelerate significantly ahead of historical trend lines. And in the last few quarters, we've seen a reversal of this super normal frequency boost.

And as you can see on this chart, frequency fell slightly in Q2 compared to Q1. Again, hard to say how much of this is driven by post-COVID behavior or inflation or cost of living, but it's clear that we did see more of an impact in the second quarter. And I think it's also important to add, although you don't see it on this chart, monthly average frequency for each cohort remains well above pre-COVID levels. Now I've also been asked about the behavior of different consumer segments, and I kind of referenced it a bit earlier. If we take the U.K., initially, we did not see a major difference between consumer demographics. But towards the end of the half, we have seen some signs in more affluent consumers are holding up stronger relative to less affluent consumers. And these are pretty recent data points, but we're going to continue to monitor this.

So now let's move on to our 2 geographic segments. We'll start with the U.K. and Ireland. Despite the slowdown in the year-on-year growth, what we're seeing is that third-party data and also reported GTV numbers from us and competitors, I think this points to continued market share gains in the U.K. and Ireland. We've also made good progress in terms of profitability in UKI. We've increased gross profit margin by 70 bps in the half, so up to 980 basis points versus 910 in H2 '21.

I'm going to talk about a few of the initiatives we're working on now. So we've continued to enhance our restaurant selection in UKI. We've expanded total sites by about 5,000 in the first half, increasing the base of restaurants by 9%. And then in May, we announced that McDonald's would become available on our platform in the U.K. during Q2 '22. Now these rollout of sites only started towards the end of June. So there's, I think, basically no impact in the Q2 numbers from McDonald's and also not in the sort of restaurant selection numbers I mentioned a second ago. So -- but we rolled out very quickly. So as of today, we're live in almost 1,000 sites. We'll be continuing to add to this number over the coming months.

On grocery, we've continued to develop our on-demand grocery offering. We now have almost 7,000 grocery sites live with major partners and smaller independent retailers in the UKI. And we've continued with our rollout of our own managed Hop stores in partnership with Morrisons, Waitrose and Co-op. And we've, I think, made a huge amount of improvements on the operational and profitability side of this program during the first half. We've also -- I think this is pretty interesting. We launched something called Hop as a Service. And partners will use the Hop technology in their own locations with their own staff to pick and pack orders that are fulfilled by the Deliveroo network. So we're rolling that out with a few grocers. That's pretty exciting. So overall, we've seen good momentum in the U.K. and Ireland in the first half of '22 despite a somewhat difficult consumer backdrop.

All right. I'm going to move on to the International segment. At a headline level, this is a pretty similar story to the U.K., but obviously, with 9 markets underneath that, there's a lot of variability. So we'll talk about that. But we are seeing market share gains across key markets. We're rolling out enhancements to our value prop, but it's been a softer Q2 than I think we would have liked. And I'd say, compared to the U.K., this Q2 slowdown is even more pronounced than International.

A few reasons for that. So many international markets were still in full lockdowns until later into Q2 or even through -- passing through Q2. And then this year, Q1, we saw additional lockdowns restrictions in Hong Kong, which eased early in Q2. So you've got a lot of interesting factors in the comp base. Now what we've seen, though, overall, growth spend relatively stronger in markets like Italy and the UAE, relatively weaker in markets like France and Australia.

And we think this largely reflects overall market conditions as we monitor third-party data sources the best we can. And those sources are also saying that we do think we are gaining share. And I think this is -- we believe this, as the company as well, that we're gaining share in both faster-growing markets like Italy but also in slower growth markets like France. France, however, I don't think we've mentioned this before, but it did grow almost at triple digits in '21. So there's a lot of growth there.

Now like I said, this national market share is really only relevant if it's made up of strong hyperlocal positions in the cities and segments that really can generate the most cash flow over time. And I think the team have done that by pretty focused -- being quite focused on what they're going after on a neighborhood-by-neighborhood basis. I'm very proud of the job the team has done on that basis.

Now this operational progress has led to, I think, good financial progress with the gross profit margins and our International segments up 210 basis points in the half, going from 9 -- going from 480 basis points in the second half of '21 to 690 in the first half year. We're seeing good momentum on that. And we'll go into more detail on the gross profit side when Adam talks about financial performance later.

Grocery, I think we've made a large amount of progress. So rolled out with key partners such as Auchan in France, Esselunga in Italy and Choithrams in the UAE. Now we're seeing almost 9,000 international grocery sites. We've also launched Hop sites in Italy, in Hong Kong and the UAE. And I talked about this Hop-as-a-Service concept earlier. We've been rolling these out with Auchan in France. So that's very exciting.

Now I'd say on a different note, we have decided to begin consulting on a proposal to exit our operations in the Netherlands. And as we've said before, our aim is to reach a top-tier position in the markets we operate in, of course, focusing on the right hyperlocal positions. And given our commitment to being disciplined on capital allocation, we regularly think about when can we reach that position, and can we do it?

And I think in the Netherlands, it's quite clear that we don't have a strong local position. We have also been there coming up on 7 years. So I think we've had an ample amount of time to understand that market. Netherlands has represented about 1% of our group GTV in H1 '22. And I do think that for us to get to a very strong market position there, it's going to require a disproportionate level of investment and team focused with some pretty uncertain return. So that's why we are beginning to consult on that proposal.

Now I guess I'll just say that these are proposals -- these are just proposals as exit at this stage. We're communicating with the relevant stakeholders to commence this process. We're working through a potential date for the final day of operations in the Netherlands towards the end of November. Should we decide to leave -- now I spoke to our Dutch employees last night to tell them this news, which is one -- which is very hard for me personally but obviously much more hard for them. I think the team has done a really good job since 2015. I know a lot of the original team members, some of them are still there, and this is really difficult. But the bottom line is I think it's the right thing to do for the business. And these are the calls I have to make. So I do want to thank the team again for their commitment and hard work, and yes, thank you.

I want to finish this section with a recap and update on the rider proposition. Just -- you've heard me say this again, but we offer true 2-way flexible work. We offer this work is because it's what riders want. Flexibility is the #1 reason why they work with us. And again, just this is an update of a chart from last time, we see clear evidence of the popularity of the work we offer. We have robust rider supply in the U.K. and Ireland despite, again, continued record levels of employment vacancies.

So in the U.K., you can see the lines sort of flattened out for vacancies, but they still exist in many, many industries. So our riders could get a job, I think, anywhere else in many different industries, but they're choosing to stay with us. You can see the retention rate has remained really healthy. We've -- and I think the supply of riders has increased significantly throughout COVID.

But in the second quarter, we saw a modest contraction in the active rider base. That's a result of us onboarding fewer riders during this period because the demand has been softer. We still see over 11,000 weekly applicants, though, across the half. And this is, again, despite employment vacancies being at their highest. And so that's a quantitative evidence that people want the job. And as we said, the retention numbers continue to actually improve. So we're still seeing high numbers of riders joining Deliveroo and then staying with us, making a choice to do this self-employed flexible work when alternatives are there, right?

We also want to keep enhancing our rider proposition. So we signed this voluntary partnership with the GMB Union in May. GMB is the third largest union in the country. This deal is the first of its kind in our sector, and we're pleased to be working with them. It recognizes riders as self-employed. It commits to working with the GMB on important areas such as rider pay, health and safety and also well-being. And we think this strengthens our offer to riders and shows the growing appreciation of the value in self-employed work.

So let me hand over to Adam. He's going to talk to you about the financials now. Thanks.

[Adam Miller, executive]

Thanks, Will, and morning, everyone. I want to start by taking a high-level look at the progress we've made on our path to profitability in the half. You will see on the left-hand side of the slide, we've improved both our gross profit margin and adjusted EBITDA margin. Gross profit margin has increased to 8.5% in H1 this year, up from 7.2% in H2 2021 and up from 7.8% in H1 2021. These improvements have largely been driven by consumer fee optimization and, to a lesser extent, by growth in advertising revenue. And we expect further improvement in the second half of this year. The adjusted EBITDA margin has improved from negative 3.2% in H2 last year to negative 1.9% in H1 this year. And based on our guidance, there's a further sequential improvement implied in the second half.

The right-hand side of the page shows the drivers of this improvement in adjusted EBITDA margin in H1. As Will touched on earlier, growth in revenue outpaced GTV in orders, and we have seen revenue as a percent of GTV increase from 27.8% in H2 last year, 28.5% in H1 this year. This 70 bps improvement was mainly driven by optimization of consumer fees and increased revenue contribution from a relatively nascent advertising business.

Moving down the P&L, we've been able to hold cost of sales per order of flat at around GBP 4.40 while GTV per order has increased. This, alongside the revenue improvements, has enabled us to increase gross profit margin by 130 basis points from H2 '21 to H1 2022.

Now looking at marketing and overheads. We've seen marketing and overheads in UKI and International remain broadly flat sequentially. We'll talk in more detail about this in a little bit. Where we have seen an increase is in other marketing and overheads. These are effectively our HQ or central costs. A large portion of this increase reflects the growth in our technology headcount. The continued investments we're making in technology helped to support the improvements across the P&L, for example, the consumer fee optimization and the scaling of our advertising platform that I mentioned earlier.

The net effect of this is overall marketing overheads as a percentage of GTV has remained flat at 10.4%, meaning adjusted EBITDA margins improved by 130 basis points from negative 3.2% to negative 1.9%. In aggregate terms, there is a reduction in adjusted EBITDA loss of GBP 38 million in H1 2022 compared to H2 2021. As I noted earlier, we're expecting another sequential improvement in both adjusted EBITDA margin and absolute adjusted EBITDA loss in H2 this year. Being able to achieve this despite lower-than-planned top line growth is a validation of the team's ability to manage the P&L effectively in this environment. So we're making good progress on the levers for our path to profitability, and there's more to come.

Now let's take a deeper dive into some of these levers, starting with revenue. As a reminder, revenue split broadly into 3 buckets: commission revenue, consumer fees and advertising revenue. Commission revenue from our restaurant and grocery partners is the largest component of our net revenue, and this is the product of basket size or AOVs and commission rate. Consumer fees are the amalgamation of delivery and other consumer fees, for example, service fees or small order fees, along with any subscription revenue that we collect from our Plus program. Advertising revenue is a small but growing part of our current model. This comprises sponsor positioning for our restaurant partners as well as advertising partnerships with FMCG companies on the grocery side.

When we laid out our path to profitability, we highlighted consumer fee optimization and increased contribution from advertising revenue as the main revenue levers. These are both helping to increase take rate by 70 basis points in H1 2022.

Starting with consumer fees. We're still early in the process of optimizing pricing, and we want to do this in a thoughtful way, ensuring we always look at this through the eyes of the consumer. Consumers want to know what value they receive for the price they pay, which is why continued improvement of our CVP is critical. We want to be able to justify any increases in fees and that may be offering consumers things that are more relevant to them or widening the selection available to them. It's also fair to say that Plus pricing hasn't always historically tracked in lockstep with pay-as-you-go pricing, and so we see room for more optimization here going forward.

Moving on to advertising revenue. We launched our sponsor positioning product for restaurants in 2021. This represents a small proportion of revenue as a percent of GTV, and there's a lot more room to run on this. We've also now launched our Deliveroo media and e-commerce platform, which will enable FMCG brands to advertise to millions of our consumers with relevant offers across our app and website. This only launched at the end of H1 so it has not contributed to any of the revenue improvements seen in the half. We remain excited by the opportunity here, but our priority remains to consumer experience and so we'll continue to be mindful of this as we roll out our advertising product.

We've also seen commission revenue increase this half as a result of higher basket sizes due to inflation and upselling. While this doesn't impact take rate, it has contributed to higher aggregate revenue in the half.

I'm not going to dwell on this slide as we've discussed the key drivers on the previous slide, but suffice to say here that the increase in revenue take rate at a group level is being driven by increases in both the UKI and International segments. And you can see that our take rates are similar across both segments.

So let's move on now to gross profit. We highlighted in our full year results that gross profit and gross profit margin both dipped in H2 last year due to us accelerating the pace of investment in many areas above gross profit in order to drive growth. We signaled that H2 2021 would be the lowest point for gross profit margin as we move forward towards adjusted EBITDA profitability and ultimately towards generating positive free cash flow for the company. In H1 of this year, aggregate gross profit was up 27% sequentially compared to H2 of last year. The 8.5% margin for H1 this year represents a 130 basis points improvement versus H2 last year with increased take rate and cost of goods sold efficiencies contributing to this fairly evenly.

We have already talked to the revenue levers that have contributed to the 70 basis point increase in take rate. At a group level, we've managed to keep cost of goods sold per order flat at around GTV 4.40 per order. Over the same period, GTV per order increased from GTV 21.40 to GTV 22.10, meaning cost of goods sold as a percent of GTV has seen a 60 basis point improvement.

On to the next slide. So turning to gross profit by segment. Again, I'm not going to spend a lot of time on this slide. But like revenue, you can see that the trend we see at a group level is also what we see at a segment level with improvements in both our U.K. and International segments. We said at the full year results in March, particularly regarding the International segment, that we expected that Q3 '21 would be the low point in gross profit margin and that we've already seen improvements in Q4 2021 and Q1 2022. As you can see clearly here, that continued through H1 2022 with International gross profit margins improving 210 basis points from 4.8% in H2 last year to 6.9% in H1 this year. We've also improved both aggregate gross profit and gross profit margin in the UKI segment.

Next up, we'll take a look at marketing overheads and adjusted EBITDA. We've talked previously about the step-up in marketing and overheads in late 2020 and continuing into 2021 with uncertainty in the early stages of COVID in the CMA antitrust investigation, resulting in us exercising a high level of conservatism around our deployment of capital until Q4 of 2020. Throughout 2021, we were in a position to invest where we saw the ability to drive durable long-term value. As such, marketing overheads increased sequentially in both H1 2021 and H2 last year. Coming into H1 this year, we were still selectively increasing spending in the early part of the half but began managing this in line with what we are seeing on the top line in order to ensure that we grew our cost base appropriately.

Let me take each of these buckets separately, starting with marketing. This has remained broadly flat now for the last 3 periods. This represents an improvement sequentially in terms of marketing as a percent of GTV and it's worth highlighting what is going on in this line. So let me take everybody back to kind of end of 2021 as we were going through our budgeting process.

We plan to increase marketing spend year-on-year in line with our original plans for growth. Obviously, the market context has changed a lot since then, and we've taken the steps to manage the P&L given the softer consumer environment that we've seen, particularly in Q2. We've made conscious decisions to pull back on marketing spend, consistent with our stance that we won't chase top line growth against the backdrop of consumer headwinds.

The actions that we've taken are not really fully evident in the chart because part of the marketing spend here is committed ahead of time. So there are some lagging effects here, but you'll certainly see this come through in the H2 numbers. On the overhead side, these did increase sequentially in H1 this year. Now we touched on this earlier when we showed that segment level overheads have been broadly stable and the increase has come in central overheads. And a key driver of this increase has been growing our technology team.

We've been talking about this for a little while, but we think the right thing to do for the business is growing this team as this team builds the technology that underpins efficiencies across the P&L in things like optimizing consumer fees and growing our ads business. But we certainly are making sure we want to do this -- or making sure we do this in the most efficient way, for instance, by leveraging our India engineering center that we opened in March of this year. So overall, strong focus on cost control with more benefits to come through in the second half on marketing that are incremental what we achieved in H1.

Finally, let's talk quickly about adjusted EBITDA. We've seen a significant improvement in adjusted EBITDA loss with a GBP 68 million loss in H1 this year compared to GBP 106 million loss in H2 last year. Further improvements in gross profit and marketing and overheads in the second half, we'll see adjusted EBITDA margin sequentially improve again in H2 as per our guidance for the full year of negative 1.5% to negative 1.8%. This implies a margin of negative 1.4% and an absolute loss of GBP 50 million in H2 this year at the midpoint of our guidance.

We're well aware that reaching adjusted EBITDA profitability is just one step on the way to generating positive free cash flow, but it is an important milestone on that journey.

On the next slide, we'll go through our cash position and look at some of the items below adjusted EBITDA. We continue to have a very healthy balance sheet and are well capitalized to go after the opportunity in front of us. At the end of December 2021, our cash and cash equivalents were GBP 1.3 billion and we closed June 2022 with a balance of just over GBP 1.1 billion. The largest driver of the movement was the adjusted EBITDA loss of GBP 68 million, and we also had GBP 43 million of cash outflow from capitalized development costs and from capital expenditure.

Cap debt costs reflect our continued investment in technology assets being developed by our technology team, while the CapEx primarily relates to the rollout of our additions in Hop concepts. Also in the half, we saw a working capital outflow of GBP 50 million, of which around GBP 40 million related to the timing of employee tax and so security payments related to employee share options. Essentially, in December, we are still holding cash for these upcoming payments, but the payments themselves were actually made on schedule in Q1.

And finally, we've announced a share purchase program of up to GBP 75 million for the express purpose of mitigating dilution from share-based compensation plans. The program is expected to begin shortly and to be completed no later than the announcement of the group's preliminary '22 results in March 2023. So in short, we continue to have a very strong cash position, and just as a reminder, we have no outstanding debt and we do have a revolving credit facility that we could choose to draw down on in the future if we wanted to.

I'm now going to conclude with a recap of our guidance. In our Q2 trading update in mid-July, we revised our full year '22 growth guidance to reflect the increased consumer headwinds that impacted the first half of the year and the more cautious economic outlook. Today, we're reiterating that revised guidance for full year 2022 GTV growth in the range of 4% to 12%. As we pointed out before, the comparison base gets easier from the end of Q2 due to the timing of markets exiting lockdown restrictions in the prior year. And while we don't make a habit of disclosing monthly growth rates, we can say that year-on-year GTV growth rates for both June and July were above the 2% growth rate for the whole of Q2.

In terms of profitability, we remain confident in our ability to continue to adapt financially to the rapidly changing macroeconomic environment through gross margin improvements, efficient marketing expenditure and tight cost control. This means that despite lowering our top line guidance last month, we're still confident in maintaining our full year '22 adjusted EBITDA margin guidance in the range of negative 1.5% to negative 1.8% with a further sequential improvement in the second half from the negative 1.9% we saw in H1. It's worth noting that maintaining the adjusted EBITDA guidance and margin terms represents an absolute -- an upgrade in absolute pound million terms. Now turning quickly to our guidance for the medium and longer term. No change here, including to the path to breakeven and profitability remaining unchanged.

We've been asked a few times about the 20% to 25% medium-term GTV growth guidance. So I wanted to address that here briefly. This guidance is based on both top-down market modeling and bottoms-up cohort modeling. Despite the current macroeconomic weakness, we believe that the assumptions and inputs regarding category penetration and user frequency and retention remain valid in the medium to longer term.

Now we can't say right now when growth will get back to that 20% to 25% range. It may not happen in this consumer environment. But the underlying drivers remain, and so we're keeping this guidance for now, but we will continue to monitor and refine our assumptions on this front. And certainly, we remain confident in delivering on our path to profitability even absent this higher GTV growth for the time being and are maintaining those time frames that we mentioned here in the bottom right hand of the slide.

With that, back to Will now to finish up.

[William Shu, executive]

Thanks, Adam. So to conclude briefly. Against a difficult macro environment, business performed well in H1 '22. I think we've begun to deliver very good progress on the path to profitability that we set out in March. I'm confident in our ability to drive the business to adjusted EBITDA breakeven by H2 '23 or H1 '24 at the latest. And importantly, these profitability improvements have -- these have been achieved while we continue to gain share in key markets and improving our consumer offering.

So thank you all for listening. Looking forward to the Q&A. Operator, over to you.

[Operator]

[Operator Instructions] And our first question is from the line of Andrew Ross from Barclays.

[Andrew Ross, analyst]

I've got 2 if that's okay. The first one is on advertising and the delivery media and e-commerce platform. I appreciate you've just launched that. But is there anything you can share with us in terms of KPIs you are tracking since you launched? I'm particularly interested in what demand there is and advertisers, how consumer engagement may have changed and then your confidence around that giving you meaningful contribution into next year and beyond.

And then the second one is a near-term question. So both June and July have accelerated versus Q2 at 2%. Can you give us a sense as to how much be accelerated? Are we thinking kind of mid-single digits at constant FX is sensible? I appreciate you don't want to comment on specific months, but just a ballpark would be helpful.

[William Shu, executive]

Andrew, it's Will here. I'll take the question on advertising revenue and, David, maybe you can take the question on, I guess, the last few months. So on the advertising revenue, we launched a restaurant advertising platform a little over 6 months ago. So it's a pretty nascent product for us. What this -- if you just go into the Deliveroo app, you can see it. There's sponsored positioning carousels. We're experimenting with, I would say, maybe more vibrant ways of advertising the content from our partners as well and giving our independent restaurants a stronger voice to tell their story. On the metric side, I would say the thing that really we are monitoring very closely is what is the true return for our partners and making sure we're being very transparent about that, making sure they understand all the assumptions that we're making. And so far, I have been very pleased with the progress we've made so far.

The uptake has been very, very good. The engagement from our partners is good. And the other metric we track very, very closely, is this detrimental to our existing consumer base? And I think right now, we don't believe it is, and we actually think that we can target these ads in a way that will help enhance the experience. But it is early. But so far we are excited and, obviously, this is a different margin profile of revenue. We're also going to be launching later at some point our FMCG advertising platform as well to help FMCG partners reach people. So that's not shipped yet, but that's something we're working on, which just has slightly different -- it will look, I'd say, relatively different to the restaurant side, but we're excited about that. David, do you want to talk about recent...

[David Hancock, executive]

Yes. Thanks, Will. So on the June, July exit rate, we don't typically share monthly growth rates because they could be a bit volatile, certainly more volatile than the quarterly growth rates just given the kind of figures of the weather from 1 year to the next or how many weekends fall in a month in 1 year or the previous year. But I think given that we talked about a comparison base getting easier during Q2, we thought it was helpful to give you some steer on this just in terms of that comparison base. So during last year in Q2 across the U.K. and also in the International markets, we saw progressive reopening and the ending of lockdowns in stages through kind of April, May and June. So that's why the comparison base is getting easier. And most markets were out of lockdowns by June. And essentially, the 12% growth we saw in Q1 slowed to 2% in Q2. What we said in the outlook comments is that, that June July growth rate had increased a bit was stronger than the 2% in Q2. I think if that was only 1 percentage point stronger, we would call that similar rather than stronger. So you can interpret it a little bit more than that. And I think the range that you talked about in terms of mid-single digits is a reasonable ballpark.

[Operator]

The next question is from the line of Rob Joyce from Goldman Sachs.

[Robert Joyce, analyst]

I might try 3 if that's all right. So looking in the half, if I look at the growth versus where you expected and the cost [indiscernible] the OpEx, the gross profit is probably tracking ahead of where you anticipated things. Just wanted to see if that is the case. And as we look into the second half, are there anything changing competitively that you think could derail that. Second one is just on that cost base. I mean, it seems that you laid out that some of that cost, you couldn't really adjust to the slightly slower top line environment you've seen. Does that give you an opportunity to do some more of that cost into the second half of the year and early '23? And does that give you a bit of a [indiscernible] confidence on that EBITDA number for the year? And then finally, in terms of the exit from the Netherlands, just looking across the broader portfolio and seeing a bit more a rationality and people working to rationalize or state across the industry. Are there any sort of growth profit negative countries left in the portfolio that you might think about exiting from there?

[William Shu, executive]

Thanks, Rob. I don't think I could hear everything, but hopefully I think I got -- I think we got the gist of it. I think your first question, I'm just going to repeat it back to you so I make sure I heard it right. You were saying the gross profit -- sorry, the gross margin improvements, were those sort of ahead of plan? And ultimately, do we -- what do we think about the second half in terms of that trajectory, do we see competitive pressures, maybe coming in the way. I would say we've been pleased with the improvements in the first half. I think we talked about where those came from, which has been a combination of consumer fee optimization, the nascent restaurant advertising platform kicking in, also holding cost of goods sold relatively flat. I think as we go into the second half, we don't really see -- we don't see material sort of headwinds on a competitive side to really change our positive feeling on that.

And then I think your second question was more around the adjustment of OpEx. And Adam, if you don't mind taking that one.

[Adam Miller, executive]

Rob, so yes, so on the cost base, I think it's a combination of a couple of things. I think we did adjust in the first half, particularly in Q2, as we saw the top line coming in lower than we had originally planned coming into the year, which I think was kind of evident given the fact that we revised our growth guidance downwards a few weeks ago. If I maybe take each of the components of the marketing overhead base in turn. So on marketing, we were able to adjust some of that spend in Q2. There is some of that spend that has a lagging effect and that you prepurchase that and have less optionality to adjust that. But we have made those adjustments in H2, and we would expect that marketing relatively half-on-half is kind of flat to slightly down from H1 to H2.

If I think about the overhead piece, this is something that we've been talking about now, I think, for a few quarters in a row and that the primary area of investment for us is on the technology side. That -- we believe that investment drives improvement across the P&L. We talked about a couple of them today in terms of the improvements we made above gross margin in both the consumer fee optimization and also in the rollout of the advertising platform. But there are more benefits across the P&L that team drives. So we do want to continue investing selectively there. But again, I think we think about the overall cost base, how that scales in line with top line growth, we want to make sure that is scaling appropriately. So we would expect overheads to be kind of flat to slightly up in the second half, but the net impact of this Q being broadly flat half-on-half, which has been, if you kind of look at the sequential change relative to the increase from H1 to H2 last year, the H2 to H1 increase this year is materially smaller. We would expect again kind of a flat to -- essentially flat increase or flat movement sequentially this year.

[William Shu, executive]

And then, Rob, I'll take the Dutch question. I think your question was what -- kind of what we were -- maybe could you repeat your question again? Sorry, Rob. I actually didn't really get it.

[Robert Joyce, analyst]

Apologies, the line is not great. If you look at the broader portfolio, are there other gross profit negative come through out there that might be for further consideration in light of that recent decision as well?

[William Shu, executive]

Yes. Just to clarify a bit on the Netherlands. This is not a gross profit negative market at all. It's actually in quite a decent shape. I think the issue that we've had in the Netherlands, as we've been there for about 6 years or so, 6.5 years, and ultimately, I had some pretty high expectations given the population density and the cycling culture and all of that for this to be a strong market. I think the team has done a really good job of executing, but we just haven't been able to make the traction that we would like. And at the end of the day, it's overall a very small market. It's also a super small market for us. And so for us, this was less an economic -- this is less an economic decision, I would say, and more one of team focus. And ultimately, this is something that is painful for us and the team for sure. I know the team has worked so hard on this over the years. But we do think it's the right decision to make. And we will continue, obviously, focusing our efforts in our other markets.

[Operator]

The next question is from the line of Giles Thorne from Jefferies.

[Giles Thorne, analyst]

First question is just coming back to current trading. Obviously, things on household disposable income are moving pretty quickly at the moment. So I'd be interested to hear on any pricing sensitivity you're feeling or seeing from consumers in the face of rising consumer fees. And any comment as to how Plus can help alleviate some of those price sensitivity problems?

Secondly, not surprisingly is then on the other side of things, rider cost inflation, it feels like the supply of riders is unchanged. But obviously, input costs for those riders, especially the ones on scooters, is going up radically. So some comment on how that is feeding through to you would be useful.

And then finally, Hop as a Service. I'd be interested in the roots of the idea. Was this kind of a pursue on your side over reservations around the proprietary Hop model? Or was it pulled from the partner side or something in between? Some comment there would be useful.

[William Shu, executive]

Thank you, Giles. Let me take these questions. But David and Adam, feel free to jump down on the first one. I think on the sort of just consumer behavior around pricing sensitivity, maybe worthwhile just for me to maybe go into a little more detail of the different components of that. We don't set the price of food in -- we don't set the price of food -- with the exception of our Hop business, our 1P Hop business. And so restaurants and grocers have taken up price, and you can see that in the average basket size. Now not all of that flows back down to us simply because we have seen consumers either trade down to a slightly less expensive item or they may not order an extra drink. That's the kind of behavior we're seeing. But overall, basket sizes were up because those prices have gone up.

I think on the consumer fee side, we have talked about fee optimization a bit. But fees have grown at a CAGR of around 3% since we launched the business in 2013. So that's been pretty consistent. And the other thing I'd say is from the second quarter '21 to the second quarter of '22, the average consumer is paying 5% more. So we are in the U.K., and that's much less than inflation. So we feel that taking fees up in this way is actually adding value to the consumer. The overall inflation rate is significantly higher. Is there anything you want to chat, David, about Plus or pricing sensitivity and anything else that I'm missing here?

[David Hancock, executive]

No, I think the -- you can see a little bit in the GTV per order exhibit that we showed in the note and -- sorry, in the announcement and in the slides that the GTV per order has been increasing sequentially since Q3 of last year. But the inflation that you're seeing, if you compare, say, Q2 of this year to Q3 of last year, where we started to see that increase, is running below the headline rate of inflation. Now obviously, it's not a perfect mathematical comparison because you're not comparing Q2 to Q2, but that normalizes for the end of lockdown restrictions and party sizes. But you can see in those numbers that consumers are adjusting their behavior a little bit to offset some of the inflationary impact. Disaggregating what is consumer fee driven versus overall basket price inflation, it's pretty hard to disaggregate. But we're certainly seeing some consumer response to the overall inflationary environment amongst some consumers. And in terms of the Plus specifically, I think Plus is something which drives value for consumers. It's a program which I think also is helping drive frequency historically. And so we're pretty happy with how Plus is performing, and it's certainly part of the overall value proposition for consumers.

[William Shu, executive]

And then just on the rider questions, Giles. I think that rider supply, I think applications have been relatively flat. Retention has been very strong, but the overall number of riders has actually dropped. You can see that on Page 13. And the reason it's dropped is we have onboarded less riders as demand has been softer. And given the natural churn of the fleet, which you can see up there, that's resulted in an overall lower number of riders, We target the amount of time they spent on an order, and we made sure we pay the national minimum wage plus cost on that. And so that part, I think, has been appealing to riders. And as fuel costs go up, we adjust that formula. Yes. And I think that this is reflected in the fact the retention has actually, I think, gone up over -- since January. So I think the sort of flexibility but also our commitments, especially with the GMB, has been, I think, quite positive for riders.

On the third question you had, which it was around Hop as a Service, I don't actually remember what we announced on the market or not on this, David or Adam. But effectively, what this is, is we are a technology provider to retailers who want to carve out a space in their own, call it, supermarket. They want to stock 1,000, 15,000 SKUs. And then we are the technology provider to help them run that as well as the demand gen network as well as the logistics network. And so we have rolled out a few of these partnerships. We have, for example, in France, we're working closely with Auchan to take this to a number of stores, and we've rolled out a few. We are also working with another big retailer in the U.K. We have actually launched a site. I don't believe we've I don't believe we've actually spoken to the market about this, David, right? Yes. So we're working with retailers on this. The question is, is this something we have come up with or the retailer has come up with? I think it's both. We actually believe in our 1P Hop model right now, I feel much more secure about the path to profitability than I did, say, 6 months ago. But I will reaffirm that we do believe this is a model on the 1P that is something that works really well in denser urban areas, right? And so that hasn't changed. We just have more confidence in the underlying model there. But I think where Hop as a Service is interesting for some of our retail partners is they don't need as many orders to break even simply for the fact that they already have the space and they're using the same personnel in the store to manage that sort of delivery network. So that, I think, from an economic standpoint, is quite appealing to some of our retailers. And I think we just want to enable as many solutions as we can for retailers, whether that be on the 1P basis or from a technology basis.

[Operator]

The next question is from the line of Andrew Gwynn from BNP Paribas Exane.

[Andrew Gwynn, analyst]

Two questions, if I can. So first, just on the buyback. Obviously, change of strategy there, I suppose, firstly, the amount initially just using to offset share-based compensation. But why not do more given where the share base -- or share price is, sorry. Second question, just coming back to issue or a kind of market repair point, so raising consumer fees. We've clearly heard of that happening in the U.K. Does it happen more globally, say, in Australia, particularly [indiscernible] a more difficult market for you?

[William Shu, executive]

David, do you want to take the buyback question? And then I think, Adam, maybe you can take the consumer fee question?

[David Hancock, executive]

Yes. Thanks, also. On the buyback question, I think as people know, share-based awards are an important part of the compensation philosophy that we have. We do believe that drives alignment with shareholders, and that's why we incentivize people in that way. It does also bring the issue with it of shareholder dilution, and that's something we take very seriously. I think we've talked a lot about the path to EBITDA profitability. Ultimately, we want to drive free cash flow per share, and the per share component is an important part of that, and that's why it's important that we manage this. The share base -- sorry, the share buyback is a is a tool that we have to manage that dilution. As you said, it's a tool we haven't deployed before, but we think it's the right thing to do for shareholders. I think the quantum, as you said, I think were somewhat driven by a time frame and by the liquidity that we have in the shares. So we think up to GBP 75 million is the right place to start. We will see how things evolve over the next 6 months. But the intention is to start that program. We'll evaluate whether we want to continue with a share buyback after this program. It's not something we've made a decision on at this stage, but we think this is the sensible quantum everything that's going on at the moment to initiate this program.

[Adam Miller, executive]

And then I think the second question, just if I understood correctly, I think it was just on consumer fees and consumer pricing, is that something that's just happening in the U.K. or in other markets. I think the answer is the latter. Obviously, every market is different and sort of the starting price and the competitive environment is different and the components that we think about optimizing are different. But if you just kind of step back for a second and look at the increase we saw half-on-half in gross profit margin in the International segment of 210 basis points, certainly, consumer fees were a driver of that. So it's something that -- when we think about optimizing consumer pricing, it's something we're looking at across the board in every market on a hyperlocal basis.

[Andrew Gwynn, analyst]

But also the question is, are your competitors doing the same thing in the key markets? So we know certainly in the U.K., just doing that. But in Australia, are we seeing a similar sort of market repair going on with everybody raising [indiscernible] fee?

[William Shu, executive]

Yes. I mean, I think the broad trend is probably there, Giles -- Andrew, my bad. Sorry.

[Operator]

Next question is from the line of Georgios Pilakoutas from Numis.

[Georgios Pilakoutas, analyst]

First one, I appreciate you're seeing an acceleration on a year-on-year basis. Can you talk about on a 3-year basis when do you expect the business to be back into growth accelerating? Second one, what was different in the Netherlands that seems to have prevented 1P from taking off in the way that it has been in essentially every other market? And then a third one, if that's okay, it's just on provisions, contingent liabilities. It kind of references something changing in the market. Can you just elaborate a little bit, please?

[William Shu, executive]

Yes. I will -- George, it's Will. I'm going to answer the Netherlands question, and I think, David, do you want to take the accelaration -- 3-year acceleration question. And then, Adam, you can take the last one? Yes. Okay, great.

I think that in the Netherlands, I don't fully know. But I think -- I suspect some of it was some of the factors that maybe were slightly similar to Germany, which was a more price-conscious consumer and a consumer that was fairly used to the existing sort of infrastructure food delivery. At the same time, that was the U.K. 10 years ago as well, and the U.K. has changed dramatically, right, and other markets such as Italy as well. I think the team has done a good job on the execution side. I think our selection is good. And we've made good progress in areas like Amsterdam. But as we sort of stepped out of some of the city center areas, it did become more difficult. And I think predominantly, I think this is due to consumer price consciousness more than anything else. And you're right, we really haven't really seen this around the world in too many places. But that at least is my theory. And Adam, David, I don't know if you guys have anything to add to that? No. Okay.

[David Hancock, executive]

Then on the first question around the 3-year CAGR. So obviously, we showed on the slide the deceleration -- of a slight deceleration in Q2 versus Q1. I think for the rest of the year, the guidance that we've given, the 4% to 12% full year GTV growth guidance, at the top end of that range would imply acceleration on a 3-year basis; at the bottom end of the range would imply further deceleration on a 3-year basis. Where we come out in that range somewhat depends on how the environment evolves for the rest of this year, but we're certainly not underwriting kind of across the range that we need to well to get better to see the broad range and even the midpoint of the range for the remainder of the year. But we will have to see how that evolves. And we'll be able to obviously share a bit more of that as we get through Q3. Within the quarter, September is the most important month. June, July, August, with the holiday period is a bit more difficult to read as well. So we'll get a better steer of that, I think, when we get to the Q3 in October.

[William Shu, executive]

I just -- George, one more point on the Netherlands that I just kind of remember. I think from a sort of relative investment standpoint. I don't think we necessarily pushed as hard in the Netherlands because the market itself just wasn't that big. So I don't know if that has something to do with it as well, but maybe that's helpful context. Adam, do you want to take the last one?

[Adam Miller, executive]

Yes. So I think the last question was just around movement in provisions in the half. So I think this is something that does move half-on-half. If you go back to the half year 2021 to the full year results, you saw kind of provisions come down. You saw an increase in provisions this half. That's a net impact of a number of puts and takes. We don't typically comment on any specific provisions or dependent liabilities because, obviously, that could prejudice the outcome of any proceedings that are in process, but that sort of half-to-half movement is something that you see kind of go up and down on a periodic basis.

[Georgios Pilakoutas, analyst]

Okay. Could you maybe talk a little bit about what's changed in France? I feel like there was a kind of a paragraph in the statement around France in particular.

[Adam Miller, executive]

Yes. So I think what we referenced in the RNS in France was there was a first instance decision that was negative for us in regards to a criminal case. This was for a period from 2015 to 2017. Deliveroo definitely rejects this judgment. We are appealing this. This is at a circuit court level. And so we are kind of going through that appeals process. That was the piece that we referred to in France.

[Operator]

The next question is from the line of Navina Rajan from Morgan Stanley.

[Navina Rajan, analyst]

Just a few questions from me. I think, firstly, just on the margins for the first half. I'm wondering if you can give us any color on the quarterly movement to some sense of sequentially where you saw the biggest improvement in Q1, Q2, given the fact you implied second half margin to the midpoint of guidance looks pretty doable. So just trying to get a sense of how sort of Q2 fares versus Q1 on the EBITDA level.

Second question for me is on the U.K. restaurant side. It looks pretty good, 5,000 sites, given that doesn't include McDonald's. So any color on the mix of the regions or any disclosure and that would be useful. Where do you see the scope of additions in the U.K. generally given the fact you've got quite a good part of the independent base? And then my last question is on just active. If you have any color on how June and July tracked versus the Q2 average. How are you thinking about sort of further step down in the second half versus the first half?

[William Shu, executive]

Sure. It's Will here. So let me see here, Adam, you want to take the question on gross profit Q1, Q2? I'll answer the one on U.K. restaurants. And then I guess, David, you can take the June, July stuff?

[Adam Miller, executive]

Yes. Yes, Navina, so yes, so thanks for the question on gross profit margin. I think we don't typically break out profitability by quarter, but maybe just some color on kind of how over time. So we said a few months ago the full year results that the kind of the net year for gross profit margin was Q3 last year, and this had improved sequentially Q4 on Q3 last year. We're still on this trajectory of improvement. So Q1 was ahead of Q4 and then Q2 is also above Q1. So we feel like that trajectory of improvement is still kind of the pace that we're on, but we haven't broken out any particular quarters.

[William Shu, executive]

Yes, I'd say on the U.K. restaurant side, outside of the McDonald's sort of rollout, it's been pretty broad-based in terms of where the restaurants are coming from. I can't really think of -- I don't know all the details, if I'm very honest with you, but I'm thinking off the top of my head. I don't really see any sort of stark geographic difference in where those restaurants have been added. And then, David, do you want to...

[David Hancock, executive]

The last one on the monthly actives. I think the comments I made around looking at these things on a monthly basis, there is a bit of volatility. So I think we wouldn't go into the specifics on what July monthly active consumers was like compared to June. But I think directionally, we clearly have that slight step-down in Q2. In Q3, we're always a seasonally weaker quarter because of the holiday period in the Northern Hemisphere. So it's -- you really need to look at the sequential trends also with a seasonality lens as well, but that's something that we'll be able to share more detail on Q3 when we get to report in Q3 in October.

[Operator]

The next question is from the line of Monique Pollard from Citi..

[Monique Pollard, analyst]

Just a couple of questions from me, please, if I can. The first was just on, obviously, the better exit rate that you commented on, get some color on that is really helpful, but June, July better than 2Q. Just wondering if you can comment on whether the driver of that has been predominantly average transaction values or order growth, particularly in the context of what's going on in inflation and consumer behavior, that would be helpful. And then second question I had was just on Grocery. So obviously, Grocery is now 10% of GTV, up from 8%. Just wondered if you could comment on both whether the growth in that segment has improved given we're seeing private competitors struggling to get funding and exiting markets and whether that is part of what gives you confidence. Will, you're saying that you're feeling more confident on the profitability of that sort of Hop 1P segment and whether that increased confidence on the profitability also comes from what's going on with the private competitors?

[William Shu, executive]

Got it. Great. Thanks, Monique. David, do you want to take the question on ex rates?

[David Hancock, executive]

Yes. I think I'm going to give the slightly unhelpful answer that I gave to Navina as well, which is given the volatility that you can have between months, I think we're not going to drive into more detail on those numbers. There definitely is an improvement June and July in the overall GTV growth compared to [ Q ] , but I think getting into the [ weeds ] of that on a monthly basis is just a bit too much volatility to -- there's a risk of trying to over interpret those numbers. So I think we'll -- that's something we'll be able to give more color on in the Q3 numbers.

[William Shu, executive]

And on the grocery side, yes, I think overall, it's been quite resilient. I think part of that is we've been adding new merchants to the platform. So like I said, Esselunga in Italy, ParknShop in Hong Kong, rolling out with more partnership with Auchan in France, but also just sort of bettering some of the propositions we're developing with the grocers. So for example, on Morrisons, we have a price matching initiative with Morrisons. So we've looked at 200 essential and popular items, so these are things like egg milk, eggs, milk and bananas, and we ensure that they're price matched to the in-store price. And that's across all the Morrisons stores we work with on our platform. And I think initiatives like that really help consumers at a time when things are a little tougher. And that's been, I think, really successful.

On the sort of competitive dynamics for some of the dark store players, yes, I think it's no secret that -- all of them have scaled down rather significantly. And we obviously pay attention to that. But I think for us, our sort of confidence in profitability is really independent of that. The way we sort of think about it is we have the monthly active users. We have the rider network to make this work, and we've plugged this in. And I think the team in Hop and the Grocery team have done an exceptional job sort of integrating that -- those 2 sides. And so our view, like I said, I have stronger confidence on the profitability side than I did 6 months ago. I still believe, for us, this is an urban environment type of product, and we look forward to working with retailers on this but also working with retailers maybe in areas where we can utilize their space, and we could be the technology provider and the demand gen network. I think that is really exciting. So we're having a lot of discussions on that. But overall, yes, I think the grocery side has been a real bright spot, and I think we're looking forward to doing more with more retailers.

[Operator]

So we will now take our last question from Marcus Diebel from JPMorgan.

[Marcus Diebel, analyst]

I have only one question. Thanks a lot for giving kind of like all your comments on profitability. That's helpful. One question I have was on the medium-term developments. You reiterated the [ 20%- 25% ] growth. Obviously, visibility remains low, as you said. What I'm after is that do you need these kind of growth levels to get to H2 profitability in '23. You're guiding H2 '23 to H1 '24. If, for argument's sake, growth is materially lower given obviously what happens currently to the consumer, what does it actually mean for the profitability? I mean, we heard some food delivery players who basically have better economics the less GTV they make, given higher vouchering activities. You don't voucher a lot, not much at all. But yet at the same time, you need the volumes to come through. So just how should I think about it? If we're not -- if you don't see this catch-up in growth in the medium term, which I see as '23, '24. What does it actually mean for your guidance towards profitability? Any further comments would be very helpful.

[David Hancock, executive]

Yes. Thanks, Marcus. So I think what I would say is that we're pleased with the progress we made in the first half of this year. And particularly when you look sequentially H1 versus H2 of last year, it's a very meaningful improvement in the gross profit margin. As Adam said in an earlier answer, we think we have good momentum through into the second half both on the gross profit side and on the cost actions we've taken, which we maybe didn't see the full benefit from in the first half. And I would say this progress is in the context of a top line development that was weaker than we set our guidance coming into the beginning of the year and when we did our budgeting. So I think that is some evidence that we are able to make progress in a weaker top line environment. When we talked at the full year results in March about the levers of that path to profitability, there is some of that which is leveraging overheads and driving efficiency on overheads. And part of that is top line dependent. But we think there are a lot of levers that are within our control on the gross margin side and also on the marketing and overhead side. So I think in terms of the overall progress, a lot of that is within our control. And we certainly think that we have the levers to deliver on the guidance that we've given. We are confident we have enough levers to reach breakeven in the second half of 2023 or latest in the first half of 2024. And so, yes, the external environment is a bit uncertain, but we feel confident in the levers of getting to that breakeven point and beyond.

[Marcus Diebel, analyst]

Perfect. So it's almost independent of GTV growth -- not independent, but you would obviously be able to digest even much lower rate, given your comments.

[David Hancock, executive]

Yes, yes, yes. I think there is a lot which is within our control in a range of different environments.

[Operator]

So this concludes our Q&A session.

[William Shu, executive]

Operator, can I just make one more comment, if that's Okay. Oh, you're going to pass it back to me? Sorry. Okay. I just wanted to make a concluding comment. So before we close, I do want to say a big thank you to Adam, Adam Miller, our CFO. This is going to be his last earnings call with Deliveroo. And Adam, you've had a huge impact on the company over the last 3-plus years. It's been a great pleasure working with you, and I want to wish you all the best for the future. So thank you, Adam.

And then finally, I do want to thank everyone for joining and asking the good questions. We hope to see many of you over the next few weeks. And for those of you taking some time off, I wish you a good rest of the summer, and then we will speak again with everyone at the Q3 trading update in October. So thank you.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.