Laybuy will look to exit or restructure its UK business if it can't raise capital through other means.
The buy now, pay later operator was founded by Kiwi retail magnate Gary Rohloff and has its head office on Auckland's North Shore. It was 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 yesterday closed on just 3.7c on Thursday amid a wider write-down in value of the sector.
In audited financial accounts released to the ASX late yesterday, the company revealed it made an after-tax loss of $51.58 million for the year to March 31 and as of that date had nets assets worth $26m.
The group had net cash outflows of $52m from its operating activities during the year.
The notes to the accounts show the business needs to secure additional capital before July 31 with funding to flow before September 30 to continue with its growth aspirations.
"The group's current business model will also require further capital subsequent to this date to support the business until it reaches scale and is in a cash-generating and profitable position."
Last month the company said it would cut costs and focus on profitability.
The accounts reveal plans for a review of its operational spend including a "substantial reduction" in the employee headcount.
In April the company appointed NOR Capital to undertake a strategic review to explore various strategic alternatives and capital raising options.
In a statement released to the ASX yesterday, founder and managing director Rohloff said this work was progressing, and active discussions were under way with several parties which might result in a sale or partial sale of the business.
"If these processes are ultimately unsuccessful, the company will exit or restructure (through either a joint venture or sale) its UK operations and in the event of an exit decision, this is expected to be completed by 30 September 2022."
Rohloff said he would update the market on or before July 31 on the progress of this.
The company has a $30m facility with Kiwibank of which $11m was drawn as of March 31 and a further £30m facility with PFG of which £7m was drawn.
"Because we will either raise capital or exit or restructure our business in the UK, the directors expect that the group will be able to meet its undertakings and, with the continued support of the two debt funds, will have sufficient cash to discharge its liabilities as they fall due, for a period of at least one year from the date of the financial statements."
But the company also warned that if it can't deliver on a range of factors it will need additional capital, funding or amended terms with its funders to support the business.
"As a result of these matters, there is a material uncertainty that may cast significant doubt about the group's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business."
Rohloff said despite the current challenges and negative sentiment that exists towards the sector he remained confident in the sustainability of the business model.
"We know that the long-term growth forecasts are positive."
He pointed to figures from GlobalData which last month forecast that the global transaction value of buy now, pay later payments would grow from US$120 billion to US$576b between 2021 and 2026.
Rohloff said in the context of the current environment the Laybuy board had taken the decision to focus on its pathway to profitability by containing costs, improving efficiencies and continuing to improve its fraud and credit risk management.
"We remain confident in our strategic direction but will need to take a much more deliberate and considered approach while we navigate our way through the short-term headwinds the sector is facing."
Speaking after the announcement Rohloff said Laybuy was making good progress on its talks with potential investors.
"But it would be fair to say in all transparency that the market for fintech from an investor perspective is not as appealing as it was 12 or even six months ago. So I'm not going to sit here and say it has got easier. It hasn't.
"At the same time we are in active discussions with several potential partners and they have varying appetite for different things and we have just got to work through that."
Rohloff said the July 31 deadline was self-imposed.
"That is just a line in the sand we have put for ourselves."
He said selling or restructuring the UK unit was just one option.
"The reality is we have a very profitable business down here in Australasia but what I have to do is take a step back and say what is the best decision for our people and our shareholders and ensure that I am acting always in their best interests - that is my focus."
Rohloff said during Covid online shopping and buy now, pay later had exploded.
"In an ironic way as the world has come out of Covid and people are spending their money elsewhere in restaurants and the like - then get doubled down with rising inflation and interest rates, that is impacting discretionary income and retail.
"The irony of this is we are having our Covid moment now because the investor community no longer sees the volume of transactions that were going through e-commerce platforms as they were before."
Asked if he regretted taking the company public Rohloff was pragmatic.
"We are all wise people with the benefit of 2020 hindsight. Whilst it is difficult not to ask yourself what if - I've learned over my career it is a waste of time - you can't change it."
Rohloff said his mission now was about making sure its people and investors were kept as whole as possible.
"All my attention is on how can I navigate through these choppy waters to provide the best outcome for our people and our shareholders.
"Our family is the largest shareholder - it's not like we haven't got any significant skin in the game. We are very very much aligned."