On 28 November 2018, Australian Securities and Investments Commission (ASIC) released its first review of the rapidly growing buy now pay later industry in which it highlighted the risks associated with this industry and provided its recommendations. According to the ASIC review, the spending habits of consumers, especially younger consumers are getting affected by the buy now pay later arrangements.
As per ASIC Commissioner Danielle Press, many consumers enjoy using buy now pay later arrangements and they are planning to continue using these arrangements, however, these arrangements could cause some consumers to become financially overcommitted and liable to pay late fees. Due to the potential risks to consumers in using these products, the Australian regulator is supporting the extension of its proposed product intervention powers to all credit facilities regulated under the Australian Securities and Investments Commission Act. Due to the exponential growth in the buy now pay later industry and risks associated with it, this industry will remain an area of ongoing focus for ASIC.
To develop a broad understanding of buy now pay later industry, ASIC reviewed six companies which include Afterpay Touch Group Limited (ASX: APT).
Afterpay Touch Group Limited held its annual general meeting on 28 November 2018. At AGM, the chairman of the company Mr. Anthony Eisen welcomed the ASIC recommendation of Product Intervention Powers as the most suitable way to regulate Afterpay and other buy-now-pay later products for Australian consumers.
The management of the company believes that the proposed intervention powers represent a proportional regulatory response that recognizes Afterpay’s unique business model. The company is aware that these intervention powers would give ASIC the ability to intervene in the market when and if they believe there was significant consumer detriment. Mr. Anthony Eisen further said that having clear oversight from ASIC will further increase public confidence in Afterpay’s product.
In FY 2018, the revenue and other income of the company increased by an exceptional 390% to $142.3 million, reflecting both strong growth in Afterpay and a full year contribution of the PayNow business. The main reasons behind the Afterpay’s revenue growth were the significant increase in underlying merchant sales to over $2.18 billion in FY18 which is 289% higher than the last year. The EBITDA for the group, excluding significant items, increased by 468 percent to $33.8 million in FY 2018 driven by a full year contribution from PayNow as well as a significant uplift in Afterpay. Net loss after tax of the company decreased by 7 percent to $9.0 million in FY 2018. As at 31 October 2018, the company was having cash of $30.2m and net debt of $28.7 million.
Recently on Black Friday, the company added a record number of new customers in Australia and New Zealand. The company added approximately 8.5k customers from Australia and New Zealand in a single day, and it also added over 19k new US customers.
In the past six months, the share price of the company increased by 68.44 percent as on 27 November 2018. APT’s shares traded at $12.760 (-1.619% intraday) with a market capitalization of circa $2.98 billion as on 28 November 2018 (AEST 4:00 PM).
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