Deliveroo has gone into voluntary administration in Australia, citing poor profitability in a highly competitive market.

In a statement, Deliveroo said there were four global players in Australia and Deliveroo did not hold a “broad base of strong local positions”.

The company determined it could not reach sustainable profits in Australia without major financial investment, and the expected return was not in line with Deliveroo’s risk/reward thresholds.

Deliveroo instead decided to stop operating in Australia, with its subsidiary placed into voluntary administration by its director.

An important message from Deliveroo pic.twitter.com/uFaqNB4mRz

— Deliveroo (AU) (@Deliveroo_AU) November 16, 2022

Michael Korda, Andrew Knight and Craig Shepard of KordaMentha have been appointed as voluntary administrators.

KordaMentha confirmed in a statement the decision had been made to wind up the company and as a result, cease trading immediately.

“Administrators had no alternative but to cease operations immediately in the absence of financial support,” Michael Korda said.

“This was a difficult decision and not one we have taken lightly,” Deliveroo’s chief operating officer Eric French said on Wednesday.

“We want to thank all our employees, consumers, riders and restaurant and grocery partners who have been involved with the Australian operations over the past seven years.

“Our focus is now on making sure our employees, riders and partners are supported throughout this process.”

Deliveroo has also written to its customers with its “sad announcement”.

“We have enjoyed serving you the amazing food that Australia is known for, working with thousands of brilliant restaurants and riders,” the message read.

“You will still be able to access your customer account for up to six months from this date onwards.”

In the first half of this year, the Australian branch represented about three per cent of Deliveroo’s total gross transaction value.

It negatively impacted the company’s adjusted earnings before interest, taxes, depreciation and amortisation margin by about 30 basis points.

Deliveroo Australia will put forward a deed of company arrangement to the administrators, setting out compensation packages for creditors, including severance payments for employees, and compensation for riders and certain restaurants.

The company was launched in Australia in 2015, with its headquarters in Melbourne.

It has more than 12,000 partner restaurants, 15,000 riders/drivers, and employs about 120 staff.

The business only recently expanded into grocery and liquor delivery.

“Deliveroo was unable to achieve sufficient market share in Australia to develop a sustainable business,” Mr Korda said in a statement.

“To do so would require significant ongoing investment in the Australian market.

“Given this, Deliveroo Australia’s UK parent has advised that it has decided to cease funding Deliveroo Australia.

“Without ongoing funding, the director of Deliveroo Australia resolved to place the company into administration.”

Mr Korda said administrators had no alternative but to cease operations immediately given there was no financial support.

“Our priority is to execute an orderly wind-down of the Australian operations to achieve the best outcome for all stakeholders,” he said.

The first creditors meeting for Deliveroo Australia will be held on November 28.

The future of Deliveroo Australia will be decided at the second meeting of creditors, which is likely to be in December.

This article originally appeared on news.com.au. It has been reproduced here with permission.

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