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Laybuy lists on ASX after raising £44 million from IPO

written by Bella Palmer
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The company has a partnership with Mastercard, allowing it to issue digital cards, with plans to issue digital cards in New Zealand, Australian and United Kingdom markets, enabling tap and go style payments

Buy now pay later contender Laybuy will have its shares quoted on the Australian Securities Exchange (ASX) today, after raising A$80 million (£44.27 million) from its initial public offering. It will list with a market capitalisation of $246 million (£187.06 million).

The company was launched in New Zealand in 2017 and claims a “market leading” position in that market, as well as a small presence in the Australian and United Kingdom markets.

At June 30, the company had 5600 active merchants (up 50 per cent over 12 months) and 470,000 active customers (up 110 per cent).

It has a partnership with Mastercard, allowing it to issue digital cards. It plans to start issuing digital cards in all three markets later this year, enabling tap and go style payments.

The company says the elements of its offering that differentiate is that customers must make six weekly payments, it never charges interest (although it does charge late fees) and it is “currency agnostic”.

Spending limits are based on the customer’s credit score, ranging from NZ$120 (£61.13) to NZ$1500 (£764.08). It has a feature called Laybuy Boost that allows customers to increase the value of their purchase above their limit by paying the excess over their limit upfront.

In the year to June, Laybuy earned revenue of NZ$13.7 million (£6.98 million) – up from NZ$7.1 million (£3.62 million) the previous year.

Operating expenses jumped from NZ$5.7 million (£2.90 million) to NZ$16.2 million (£8.25 million) and receivables impairment expenses went from NZ$1.7 million (£0.87 million) to NZ$9.2 million (£4.69 million).

The loss for the year was $16.1 million (£12.24 million), compared with a loss of NZ$3.6 million (£1.83 million) the previous year.

Laybuy co-founder and chief executive Gary Rohloff said the big increase in the impairment expense was due to fraud costs associated with its entry into the UK market.

Rohloff said: When you go into a new market you can get knocked around. We found that out when we entered the UK. We now have software that is similar to that use by Uber and Airbnb to detect and minimise fraud.

A key metric for buy now pay later companies is the net transaction margin. In Laybuy’s case, the margin has bounced around. The NZ$9.2 million (£4.69 million) impairment expense left it with no net transaction margin in 2019/20, while the margin was 2.2 per cent in 2018/19 and 1.1 per cent in 2017/18.

Rohloff said impairments are a cost of new business. As BNPL providers settle down and get more repeat business from established customers, impairments come down and the margin improves.

He expects Laybuy to operate on a long-term average net transaction margin of 2.5 per cent.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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