Afterpay doubles full-year earnings guidance

The company has been among the best performers on the stock exchange in the past year.

The company has been among the best performers on the stock exchange in the past year. Picture: AAP

Buy now, pay later major Afterpay has nearly doubled its underlying profit guidance for fiscal 2020 after recording higher-than-­expected collections of payments in recent weeks.

The ASX-listed Afterpay, which touched fresh highs of $77.00 in intraday trading on Wednesday, expects earnings before interest, tax, depreciation and amortisation of $44m for the 12 months through June, well up on the $20m to $25m guidance it ­released only last month.

The new guidance was due to an improvement in its net transaction loss as a percentage of underlying sales, the company said in an update released after Wednesday’s market close.

The company recorded higher-than-anticipated payment collections relating to its June 30 receivables balance after the end of the financial year.

“This has in turn translated into a materially lower provision and lower losses than expected in financial year 2020,” it said.

The net transaction loss, which Afterpay calculates by subtracting late fees from gross losses, improved by 17 basis points from its July 7 update to 0.38 per cent.

“As a result of the positive change in net transaction loss, ­unaudited fiscal 2020 net transaction margins as a percentage of underlying sales and earnings before interest, tax, depreciation and amortisation (excluding significant items) are expected to be higher than the July trading update,” the company said.

On the back of the improved net transaction loss, it guided to a net transaction margin of 2.25 per cent, up from the 2 per cent it said it was expecting in July.

Last month, it said its net ­transaction margin underpinned a pathway to longer-term profitability for the overall business.

“The unaudited provision for expected losses is expected to be approximately $34m on an un­audited gross consumer receiv­ables balance at June 30 of approximately $817m,” it said.

The July trading update was based on a relatively short period of collections data relating to a June 30 receivables balance, the company added.

“Since that time, and with the benefit of more collections data reviewed as part of the process of preparing the full-year financial statements, a reduced net transaction loss percentage is now ­expected.”

Afterpay last month raised $800m from investors — $650m through a placement and $150m through a share purchase plan as it accelerated its plans to grow underlying sales.

The company has been among the best performers on the stock exchange in the past year. The company has been among the best performers on the stock exchange in the past year. Since the March low, when it was trading just above $8, its shares have rocketed more than 700 per cent. After briefly touching an all-time high of $77 in intraday trade on Wednesday, it closed at $74.90.

Afterpay is set to release its full-year results on August 27.