In the blizzard of bespoke metrics that makes up an Afterpay financial report, a couple of the more straightforward measures tell the story of the buy now pay later company’s poor performance in the year to June.
The cash flow statement for the year to June shows receipts from customers of $18.6 billion (roughly equivalent to its $21.1 billion of underlying sales), payments to merchants and suppliers of $19.1 billion and payments to employees of $146.4 million. Net cash outflow from the business was $571.2 million.
In 2019/20 receipts from customers were $9.9 billion and the net cash outflow was $233 million. The more business the company does the more money it loses.
On the impairment side, the company made a provision for expected credit losses of $195 million, which is 12.5 per cent of receivables at 30 June.
In 2019/20 the provision for expected credit losses was $94.5 million – 11.6 per cent of receivables at 30 June 2020.
In a financial year when most credit providers were able to release some of their 2019/20 provisions, Afterpay doubled its provision, representing a higher proportion of its receivables.
The company prefers to present its credit loss provision as a percentage of underlying sales, at 0.9 per cent in 2020/21, even though it is a receivables impairment expense.
Afterpay reported a loss of $159.4 million, compared with a loss of $22.8 million in 2019/20.
Total income was up 78 per cent to $924.7 million. The company claims to have an “income margin”, which it defines as income as a percentage of underlying sales, of 3.9 per cent, which is hard to reconcile when it pays more out to merchants and suppliers than it receives in receipts from customers.
Almost 10 per cent of income (9.6 per cent) came from late fees, despite the company’s commitment to encouraging what it calls “responsible spending”.
Active customer numbers grew 63 per cent to 16.2 million and the active merchant network grew 77 per cent to 98,200.
Active customer numbers grew 8 per cent to 3.6 million in Australia and New Zealand, 88 per cent to 10.5 million in North America and 104 per cent in the UK and Europe (Clearpay).
Underlying sales growth in the UK and Europe, where it rose 227 per cent.
Underlying sales grew 146 per cent in North America and 44 per cent in Australia. Underlying sales volume was highest in North America.
Capturing attention in the results announcement was a mocked-up screenshot from an app Afterpay plans to launch in October.
Although the app will initially offer transaction and savings accounts to customers with Westpac accounts, the screenshot was of a slide reading: “$800,000: Your first apartment in Bondi is pre-approved.”
This is the first concrete signal from Afterpay that its long-term ambitions include a potential move into the mortgage market. Co-CEO Anthony Eisen said Afterpay had no plans to manufacture its own traditional banking products, but saw opportunities in offering its customers financial products from other providers.