Due to economic concerns, Deliveroo’s Director has placed the company’s subsidiary in Australia into voluntary administration and will cease trading imminently.

The decision was announced on 16 November and was said by Deliveroo to be driven by the company’s “disciplined approach to capital allocation”.

Commenting on the decision, Eric French, Chief Operating Officer for Deliveroo, said: “This was a difficult decision and not one we have taken lightly.”

According to the online delivery company, the Australian market is highly competitive with four global players. However, Deliveroo has said that it does not hold a broad base of strong local positions.

Delving deeper, the company has said that in H1 2022, the Australian business represented approximately three percent of Deliveroo’s total Gross Transaction Value (GTV) and negatively impacted its adjusted EBITDA margin (as a percentage of GTV) by approximately 30 basis points.

With input from the local Australian leadership, Deliveroo has concluded it cannot reach a sustainable and profitable scale in Australia without the help of financial investment.

However, even with financial investment, the company has said that the expected return is not commensurate with Deliveroo’s risk/reward thresholds.

As part of the administration process, Deliveroo Australia will put forward a Deed of Company Arrangement to the administrators for Deliveroo Australia Pty Limited (DAPL) in due course. The administrators include Michael Korda, Andrew Knight and Craig Shepard of KordaMentha.

The Arrangement will set out the appropriate compensation packages that Deliveroo intends to provide for its creditors. According to the company, it will include guaranteed enhanced severance payments for employees as well as compensation for riders and for certain restaurant partners.

Looking to the future, French stated: “Our focus is now on making sure our employees, riders and partners are supported throughout this process.”