Laybuy Group Holdings Limited 

Increasing Presence in the UK: Laybuy Group Holdings Limited (Proposed ASX Code: LBY) is a buy-now-pay-later (BNPL) player that provides a payment platform to its customers which allows them to split their payments, both online and instore, across six, weekly, interest free instalments. Commenced in the year 2017, the company has established itself as a leading BNPL provider in New Zealand, with a growing presence in Australia and in the high growth UK market. As at 30 June 2020, the company had around 5,600 Active Merchants and over 470,000 Active Customers on its platform. In the New Zealand market, the company’s competitors include famous names like Afterpay Limited (ASX: APT) and Zip Co Limited (ASX: Z1P). The company’s growth strategy is focused on increasing its market share in already established geographies and rapidly growing in the United Kingdom and other international markets. Further, the company intends to leverage its strategic partnerships and opportunities for platform improvements. It is worth noting that the competition in the UK market is relatively low as compared to Australia and New Zealand.

Details of the Offer: In order to support its growth, the company recently conducted an offer that comprises a A$40 million primary issuance; a A$40 million sell-down by existing shareholders and an employee gift offer. Under the offer, the company intends to issue 28,407,789 new shares and 28,368,794 sale shares at an offer price of A$1.41 per share. The offer was opened on 12 August 2020 and closed on 25 August 2020. The shares are expected to commence trading on ASX on 7 September 2020 under the ticker ‘LBY’.

Key Offer Statistics (Source: Company Reports)

Use of the Proceeds: The company is expected to receive around $80 million from its Offer. From this amount, around $18.2 will be used to fund and support the company’s growth in the UK receivables book, and ~$7.7 million will be used for sales and marketing in the UK. In addition, around $3.3 million will be utilised for supporting the growth of the business in the UK. The proceeds will also be for funding general working capital requirements and paying the costs of the Offer. Further, $40 million will be used for the payment of proceeds by SaleCo to selling shareholders.

Use of Proceeds (Source: Company Reports)

Key Risks: The company operates in a highly competitive environment where there is a risk that new BNPL entrants or existing competitors may deliver a superior solution and customer experience offering. The company is also exposed to the risk of fraud and bad debts. Further, Cyber-attacks also pose a threat to the company. The company’s business is heavily dependent on consumer spending, which could get impacted by the outbreak of COVID-19. 

Financial Performance: Over the last three years, the company has witnessed significant improvement in its top line. For FY20, the company reported total revenue of NZ$13.74 million and a net loss of NZ$16.13 million.  As per the pro forma consolidated statement, the company had current assets of around NZ$75.5 million and borrowing of ~NZ$6 million as at 31 March 2020.

Historical Financial Performance (Source: Company Reports)

Outlook: Due to the increasing consumer demand for credit alternatives, the outlook for BNPL industry remains positive. The company is currently focused on growing its presence in the United Kingdom and Australia while solidifying its position as a leading BNPL provider in New Zealand. Under its partnership with Mastercard, the company expects to launch a digital card in New Zealand, Australia, and the United Kingdom by the end of 2020. Amid COVID-19 pandemic, the usage of electronic, digital, and non-traditional payment methods has significantly increased, improving the outlook for BNPL players like Laybuy Group Holdings Limited. With its unique consumer offering, skilled technical team, experienced management executives and well laid-out growth strategy, the company seems to be well placed for future growth opportunities while the risks are to be borne in mind when evaluating key prospects.

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