Buy now pay later company Openpay Group released a December-half financial report yesterday that details unsustainable cash outflows, failure to meet the conditions precedent of a receivables funding facility, retreat from the UK market, slowing customer acquisition and over-reliance on revenue from late fees.
Openpay earned total income of A$15.2 million for the six months to December – an increase of 11.6 per cent over the previous corresponding period. Employee benefits were almost twice that, at $24.1 million.
Late fees made up 20 per cent of total income.
The receivables impairment fell from $5.9 million in the December half 2020 to $4.9 million in the latest half. The impairment expense represents 6.3 per cent of net receivables of $78 million.
The company made a loss of $41.9 million, compared with a loss of $25.5 million in the previous corresponding period.
Net cash outflows from operating activities rose from $37.1 million in the December half 2020 to $60.4 million in the latest half.
Cash and cash equivalents on the balance sheet fell from $52.1 million to $32.1 million.
The company has a US$271.4 million asset-backed revolving credit facility for receivables funding, “which is subject to certain conditions precedent that are not currently satisfied.” It did not provide further details.
In January, the company announced that it would make changes to its business in the UK, where it has been operating since 2019. Yesterday, it confirmed that it will “materially reduce its origination and physical presence in the UK market, including withdrawal from the retail vertical”.
The company said margins in the UK are lower than margins in Australia and the US and it would have taken a long time to achieve profitability there.
It has also decided not to proceed with the acquisition of UK BNPL company Payment Assist, which was announced in June last year. Instead, it will partner with Payment Assist.
A big problem for the company is that while it continues to pour money into growth initiatives, the growth is slowing. Active customer numbers grew 33 per cent year-on-year to 301,000 in Australia and New Zealand and 313,000 in other markets.
That might look like a big number but BNPL company have been growing customer and merchant numbers by 50 to 100 per cent and their business plans have been based on those metrics.
The company put on a brave face at its results briefing yesterday, with interim chief executive Ed Bunting saying new businesses launched last year – its US operation and a B2B offering called OpyPro – would enhance growth.
Bunting said the strategy change in the UK would release capital and deliver savings. In addition, the heavy “cash burn” related to launching in the US was largely completed.
He said the company was continuing to shift its focus away from the low-margin pay in four BNPL segment to areas such as healthcare, where the spend is bigger and repayment periods longer, resulting in higher margins.