Laybuy axing staff in push to regain profitability
Kiwi buy now, pay later operator Laybuy is to cut its headcount by a third — around 45 workers, mainly from its Auckland head office — as it focuses on making the business profitable.
The company had been seeking an injection of capital through either bringing in a new investor or a restructure of its UK arm to sell all or part of it.
But on Thursday night it announced to the ASX that it had ditched those plans in favour of cost-cutting measures.
Gary Rohloff, Laybuy founder and managing director, said the decision to reduce the size of the company had not been an easy one given the rapid growth experienced in recent years.
“This is an incredibly difficult time for our team and we are committed to supporting them through this process in any way that we can. While this is a heartbreaking decision . . . it is the right decision for the company.”
The company listed on the ASX with an initial offer price of A$1.41 in September 2020.
But its shares have fallen sharply since then and on Thursday closed on just A$0.15.
Buy now, pay later companies grew strongly during the Covid-19 pandemic as consumers turned to online shopping.
But the sector as a whole has faced a negative turn from investors as rising interest rates and high inflation increased concerns about consumers tightening their belts amid potential for a global recession.
Rohloff said the current market conditions and negative investor sentiment towards the tech sector meant it needed to shift its focus from getting funding to drive growth towards becoming profitable in the short term.
“The plans announced today means that Laybuy will not require any new capital in the medium term and will be a profitable and self-sustaining business by the end of this financial year.”
Laybuy made an after-tax loss of $51.58 million for the year to March 31, 2021 in its audited accounts. Rohloff said its Australasian business was already profitable if it excluded its head office operations.
Unaudited accounts released earlier this year show its Australasian business made a profit before tax of just $131,000 while its UK business made a $23.64m before-tax loss and its head office added a further $28m in costs.
Its UK business was also hit by a rise in fraud this year which the company said it had got on top of.
“We are seeing very strong results in our fraud prevention strategy, which has resulted in a significant reduction in losses to fraudulent activities, particularly in the UK, and this has allowed us to reaffirm our commitment to the UK market.”
Earlier this month Laybuy announced it could look to exit or sell part of its UK business despite a focus on it being a driver of growth for the company.
Rohloff said a strategic review by European financial adviser firm Nor Capital did explore a sale or partial sale of the business but concluded this was not in the best interests of its people or shareholders.
“There was strong interest in the business, with a number of investors expressing an interest in acquiring a part of the business. The review concluded that given our strong pathway to profitability, shareholders were best served by focusing on achieving profitability in the short term,” he said.
“Maintaining our presence in the UK will also allow us to take advantage of the opportunities in that market where BNPL is still in its infancy but is experiencing significant growth and where we have carved out high brand recognition and strong market share.
“We are already one of the top three providers in that market and our focus will now be on attracting and retaining quality customers that can drive sustainable and profitable growth and support our Australian and New Zealand operations.”