Talabat eyes new sectors, focuses on growth: CFO

Khaled Al Fakesh, CFO of Talabat Holding PLC

Talabat Holding plans to maintain growth rates in gross merchandise value (GMV) between 17% and 18% for the upcoming year, with a medium-term growth projection at 14%-15%, CFO Khaled Al Fakesh told Argaam.

He expects this growth to be reflected in the net profit margin, which is projected to reach 5% to 5.5% in the coming year.

Al Fakesh confirmed that the company prefers investing in the countries where it is currently present rather than pursuing regional expansion, aiming to reach 71 million consumers in these markets.

He revealed that the company, which opened its initial public offering (IPO) today on the Dubai Financial Market (DFM), plans to expand into the pharmacy, cosmetics, and pet food sectors in the future.

Q: Why did you choose DFM for Talabat’s IPO?

A: The company’s regional headquarters and management are based in Dubai, which is an international financial and economic hub. Listing on DFM made sense, as it is the most suitable option for the company’s offering.

Q: Can you give us a brief history and development of the company?

A: Talabat was founded in 2004 by a group of young Kuwaitis. It was acquired by the German company Delivery Hero in 2015. Since then, the company has grown and expanded, now handling over one million orders daily.

Talabat offers delivery services beyond food, including groceries and retail items. The company serves six million active customers monthly across eight countries in the Gulf and North Africa.

Q: What are the company’s expansion plans? Why has not Talabat entered the Saudi market yet?

A: There is no hindrance to enter the Saudi market. However, the company believes that its presence in eight countries, with a combined population exceeding 185 million people, including 70 million target consumers, still offers significant growth and expansion opportunities in the markets where it currently invests. From the company’s perspective, investing in these markets is better than regional expansion.

Talabat currently targets those 70 million consumers. If the company succeeds in converting them into active customers, its growth opportunities are up to 12 times higher, without even accounting for future population growth.

Q: How do you view surrounding risks, such as competition?

A: Competition is not new. There are many competitors in our markets. However, the company has a strong network of stakeholders, including partners, customers, and drivers. A large customer base attracts more customers, which in turn attracts more partners, and requires more drivers to be hired. This growth cycle is hard to compete with.

Additionally, Talabat offers initiatives and deals that are difficult for competitors to match. Over the past 12 months, the platform provided customers with offers and discounts worth approximately $400 million, funded by its 65,000 partners.

The advertisements placed by partners on the Talabat platform generate revenue five times equal their spending. This high return on investment keeps partners (restaurants) advertising on the platform.

Q: What is the share of advertisements in Talabat’s profit and revenue?

A: Half of the company’s profits come from these (digital) advertisements. Revenue from these ads accounts for 3.2% of sold goods.

Q: What about other risks beyond competition, such as regulatory and legislative risks?

A: There are two main types of risks: competition and regulations. Regulations often pertain to the classification of drivers and their rights with the company. However, these risks are not present in the countries where the company operates.

As for regulations related to driver safety and environmental standards, the company has been proactive in implementing them. Therefore, they do not pose a threat or weigh on Talabat. Additionally, the company maintains strong and solid relationships with government entities in all the countries where it operates.

Q: What are your forecasts for the company’s profitability in 2024 and 2025?

A: We expect the company to maintain growth rates between 17% and 18% for 2025, and between 14% and 15% in the short term. This will be reflected on the profit growth rate, which we estimate at 5-5.5% of the total gross merchandise value (GMV), contributing 40% to the company’s revenues.

Talabat announced its intention to distribute dividends of no less than $100 million (AED 367.2 million) in April 2025 for Q4 2024. Additionally, it plans to pay dividends of no less than $400 million (AED 1.46 billion) in two installments in October 2025 and April 2026, based on the financial results for the year ending Dec. 31, 2025.

It will then adopt a dividend policy of distributing 90% of net profits, subject to the board of directors’ decision. This in turn reflects the anticipated profit growth.

Q: Why did you choose to split the company’s capital into a large number of shares?

A: The capital value of a tech company often doesn't reflect its true worth, as these companies typically lack significant physical assets to support a large capital base. This is one of the reasons Talabat has a large number of shares.

The pricing of the share offering is generally determined by supply and demand, based on the price-building process. However, the company aims to ensure that its listing on the DFM is successful in all aspects, including valuation and liquidity.

Q: Are you planning to change the company’s business model, such as venturing into activities unrelated to delivery and advertising, like establishing or acquiring restaurants?

A: There is no intention by the company to establish or acquire restaurant brands or to compete with restaurants. The company's strength lies in food and grocery delivery technology. There are many growth opportunities within our core business. The food sector is a key part of the company, along with the broader nutrition and retail sectors.

In the future, the company plans to expand into the pharmacy, cosmetics, and pet food sectors.

Q: What is the nature of the cloud kitchen model you adopted?

A: The goal behind establishing cloud kitchens (shared kitchens) is to help platform partners expand their businesses without incurring significant costs for restaurant setup. A small fee is paid to rent a sub-kitchen within the cloud kitchens. The company builds fully equipped kitchens with the necessary permits and rents them at an affordable price for the partners. The operational costs are the responsibility of the partners, which reflects the company's ability to provide these spaces.
 

Q: What is your response to the claims that delivery companies like Talabat are burdening restaurants and driving up prices?

A: There is no monopoly in the delivery sector. Goods and food are accessible to everyone, not just through Talabat or other delivery companies.

The commission charged to restaurants by the company is offset by exempting them from delivery costs. These fees are based solely on the value of the food, while delivery, advertising, and driver costs would be higher for the restaurant if it handled these operations itself. The restaurant only incurs costs when there is an order and pays nothing when there are no orders.