Afterpay Announces UK Expansion

Australian payments solution Afterpay has today announced its expansion to the UK. The company entered a trading halt this morning ahead of the announcement. It is raising $108 million in new equity, acquiring UK payments company ClearPay.

“Now celebrating more than 2.3 million active customers and an annualised underlying sales run rate of over $3 billion, we are now more inspired and energised than ever to expand Afterpay’s application to additional verticals and geographies,” Chairman Anthony Eisen in his message to investors.

ClearPay is a UK based payments company through which customers can purchase items up to £450 in value and make repayments in three interest-free monthly instalments, a similar model to Afterpay. The Group is undertaking a fully underwritten Institutional Placement to eligible investors, to raise at least $108.1 million to fund Afterpay’s international expansion strategy. The Group previously expanded to the US, commencing operations there in May 2018.

FY2018 Results

The international expansion announcement comes following strong results from the 2018 financial year. The Group recorded an increase of earnings before tax, depreciation and amortisation, foreign currency translation, share-based payments (non-cash) and one-off items from $5.8 million to $27.7 million or 380 percent. This increase is primarily due to the strong growth in revenue derived from the increase in numbers of merchants and customers using Afterpay and the first-year combination of the Pay Now business. It also posted an increase in revenue and other income from $29 million to $142.3 million across the 2018 Financial year. By the end of the period, Afterpay reports that more than 16,500 retailers had integrated with the Afterpay platform (growing to 17,700 retailers as at 23 August 2018).

The Pay Later business has also experienced strong growth during the year with underlying merchant sales increasing from $561 million to $2.18 billion for the twelve-months of 30 June 2017 and 30 June 2018, respectively. This represents a sales growth of 288.6 percent year-on-year. Integrated merchants continued to grow strongly up by 176.7 percent from 6,000 merchants reported at 30 June 2017 to approximately 16,600 current live merchants at 30 June 2018. The Afterpay customer base continues to grow with approximately 2.2 million unique registered end-customers. More than 92 percent of customers are active and returning customers.

Average customer purchases increased from $0.7k for the 2017 financial year to $1.1k for the 2018 financial year. The growth in the Afterpay brand contributed to $88.3 million of the $113.9 million revenue from ordinary activities, with Pay Now contributing the remaining $25.6 million.

The Group reports a statutory pre and post-tax loss of $7.6 million and $9 million, respectively, for the year ended 30 June 2018. The overall statutory profitability of the Group was materially impacted by the one-off share-based payments expense (non-cash) associated with the new Group Head and one-off expenditure incurred during the period related to international expansion, Merger finalisation and additional funding establishment costs.

“The acquisition of ClearPay will allow Afterpay to accelerate its entry into the UK market and enable further deployment of Afterpay’s global system,” the company said.

It’s been an exciting road for the company, which was only founded in 2015. It listed on ASX in 2016, issuing 25 million new shares at $1.00 each. Shares last traded at $18.55 before closing ahead of the UK announcement.

Last month it was named FinTech Organisation of the Year for a second year in a row, with CEO and founder, Nick Molnar named Emerging FinTech Leader of the Year.

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