New Zealand-based Buy-Now Pay-Later company Laybuy Group Holdings Limited, is set to list on the ASX next month after COVID-19 required the company to delay their plans to list earlier in the year.
Laybuy’s raise comprises a A$40m primary issuance, and an additional A$40m in existing shareholder securities and employee gifts. Proposing to trade under ASX: LBY, Laybuy are asking $1.41 per share, with the Company looking to list on September 7.
Founder Gary Rohloff and his family set up Laybuy in New Zealand in 2017 after recognising an opportunity in the sector as current BNPLs fell short of user-friendliness for both customers and merchants. With user-experience at the forefront of the businesses focus, the company has recently executed agreements with Mastercard to enable digital cards to be used by customers by the end of this year. The platform will incorporate the traditional lay-buy concept of paying items off in installments and the tap’n’go concept used by many already at checkouts.
Recognising that in Australia and New Zealand, the Buy-Now-Pay-Later sector is incredibly saturated with well established participants such as Afterpay, Zip Pay and Openpay, the company is focusing their sights primarily in the UK and other international markets. Consumers in the UK and the US have been slower to adopt the BNPL credit idea, with Australians and New Zealanders leading the world in its adoption.
Some BNPLs have done extremely well in Australia despite the economic impacts of COVID-19 not negatively impacting all sales. For example, Afterpay (ASX: APT) has recently reached a high of $91 per share with a market cap of over A$25.5 billion, the company also reported they have managed to halve their annual net losses.
One reason why the sector may have been so successful in Australia could be because young Australian consumers (BNPL’s largest market) as a rule, are not large users of traditional credit cards and don’t classify BNPL repayments as a type of bad debt. However, this may not be the case in the UK as 25-34 year olds are the demographic most likely to owe money on credit cards (54%) made up of mostly day-to-day living expenses (48%). While the figures show a different consensus between Australian and the UK’s younger population, the consumer segments undoubtedly share the same requirement for some kind of credit debt.
Laybuy also doesn’t operate in the same way that we see in the established BNPLs in Australia, the company credit checks their new consumers, mitigating the inherent risks a lending service possesses. Additionally, Laybuy’s repayment schedule is over six equal weekly payments, differing from Afterpay and Klarna’s fortnightly schedules. Although they are similar to other BNPLs in that consumers are unable to extend the repayment schedule and charge similar late fees.
Laybuy currently have 5600 active merchants and 470,000 active customers, which has grown 50% and 110% respectively in the past 12 months. To put that in perspective, Klarna has over 11 million monthly users and Afterpay recorded over 10 million active users this year.
The company has recorded FY2020 revenue of NZ$13,747,000 up 63% from FY2019 and 150% from FY2018, which shows the company has made big gains in establishing themselves as a brand. However, they are still yet to be profitable, making a net loss last financial year of over NZ$16 million, something that is still expected in young companies looking to list on the ASX or BNPLs in general.
Of the A$40m available to the company raised under the offer, 73% will be used to support the company’s UK expansion strategy such as marketing and staffing support, with the remaining 27% going towards the cost of the offer and working capital. It is good to see a substantial amount of the raised funds going towards expansion capital, which cannot be said for all other companies looking to list on the exchange.
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