It’s not often a company watches its share price more than halve while its income more than doubles.
But that’s exactly what Gary Rohloff has had to do with his buy now pay later company Laybuy over the past eight months.
Laybuy listed on the ASX in September last year with an IPO price of A$1.41. Its shares rose as high as A$2.15 on its first day of trading. But after releasing its maiden result on Thursday its shares closed on A56c.
That’s despite Laybuy’s income rising from $13.7 million to $32.6m in the year to March 31.
Chief executive Rohloff, who launched the business in 2017 from an idea about how to find a better way to buy a pair of jeans, is sanguine about the situation.
“We can only control the things we control and that’s what we keep focusing on.”
Laybuy is not alone in seeing its share price come off; rival Afterpay’s shares have fallen from a peak of A$157 in mid February to just under A$95, while Zip is down from just under A$14 a share to around A$7.
“The whole [buy now pay later] market has come off by 50 per cent since January – that is just cyclical. It has had a good run but it is risk off high growth stocks as a result of inflation and rising interest rates in the US. But it is cyclical and we have got to keep delivering our numbers and there will be a re-rating in time.”
Like others in the sector, Rohloff’s business has thrived in a period where consumers have been forced to shop online through pandemic-driven lockdowns.
The business has seen its income from merchant fees – what it charges retailers to use its service – rise from $7.1m to $17.8m and its merchant numbers rose from around 5000 to 9000.
While its customer numbers also rose by 350,000 to hit 756,000, late fees – the amount of money the company gets from customers who don’t make their payments on time also rose from $6.6m to $14.8m over the year.
Laybuy’s gross merchandise value (GMV) rose from $227m to $589m and Rohloff says it is on track to hit $1 billion GMV in the next year.
But this super-fast growth has not come without a cost; the company has widened its loss from $16.1m to $41.3m and is chewing through its capital.
Rohloff who comes from a retail background, says running a business at a loss has been an adjustment for him too, but its investment has to be ahead of the curve.
“I came out of a retail background and I’m a bit old school – I’m not used to running a business that doesn’t make money. It has taken a bit to get my head around, to be honest.
“But our investment has to be ahead of the curve because the market’s expectation is that we continue to grow at hyper pace and in order to do that we have got to invest ahead of that growth in infrastructure and people and marketing support that goes with it. It is a function of the sector and the business we are in right now.”
Laybuy has more than doubled its spend on marketing and employment as well as its platform expenses in the past year. It raised $98.2m from a pre-IPO convertible note as well as the IPO itself but had just $3.4m left to draw at the end of March prompting a further A$40m capital raise through an institutional placement and share purchase plan.
The plan needs sign-off at a shareholder meeting on June 10 but already has the support of major shareholders Rohloff and his wife and investor Pioneer.
The money will be used to further its UK expansion plans.
Rohloff said the retail market in Britain was worth £400 million and pre-Covid about £75 billion was done through e-commerce.
“As they come out of Covid and we start rolling out our tap to pay solution that is an in-store solution – the available market is huge. And we just want to focus on growing our solution in the market.”
It has about 20 people in the UK and is looking to hire another 10, which will bring the company’s total number of employees close to 100.
Last month Laybuy signed a partnership with three different providers – Rakuten, AwIn and Sovern -that will open up access to another 5000 retailers in UK including ASOS, Nike, Marks & Spencer, easyJet, Booking.com and eBay over the next six to eight weeks.
“That takes us from 2000 retailers to over 7000. That is a significant uplift for us.”
Code of conduct for NZ?
In New Zealand, its home market, Rohloff said it continued to grow 65 per cent in the past year and Rohloff is leading talks for an industry code of conduct.
That follows a move in Australia to introduce a code of conduct which came into force in March and means companies have to adhere to new rules such as caps on the number of late payments a person can accrue, and mandatory financial checks before purchasing.
Any disputes under the code will be handled by the Australian Financial Complaints Authority, where a designated committee will have the power to name and shame companies providing shoddy lending to customers.
It also prohibits providers from allowing people under the age of 18 to use a BNPL product, or for a lender to place additional pressure on someone in financial hardship.
Rohloff said he had met the New Zealand Government about three weeks ago with its proposal and it had been favourably received.
“We had a great meeting with the minister about three weeks ago. We were able to understand his position and he was able to understand our business model a lot better. We are now entering into a discussion withofficials so that he has all that information in front of him to make that decision.”
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