A widely touted IPO by digital payday lender Beforepay is likely to attract scrutiny from investors after the company reported a sharp deterioration in its financial performance for the 12 months ending in late June.
According to the annual accounts published on the company’s website, Beforepay recorded a net loss of A $ 18.6 million last year, compared to a loss of $ 650,000 in 2020.
Beforepay’s accounts show the company is struggling and at an early stage of development, with revenue of just $ 4.58 million and total costs of over $ 20 million.
Additionally, the company reported trade and other receivables worth $ 9.7 million on its balance sheet only at the end of June.
While this was significantly higher than the $ 148,083 of receivables held at the end of June 2020, Beforepay wrote off more than $ 5 million in assets receivable that it deemed irrecoverable or likely to become so.
This means that a third of the company’s receivables portfolio was written off or ceased to function during the year.
Such performance figures would test the courage of the most adept investment bankers trying to market a new business to investors, and the challenge is made even more difficult by Beforepay’s balance sheet state in the end. of the month of June.
The balance sheet shows that the company had a net asset deficit of $ 13.2 million as of June 30, compared to a net asset surplus of $ 650,000 a year earlier.
Beforepay auditor Simon Hannigan of Ernst & Young highlighted the board’s decision to continue operating as a focus in his report.
âWithout calling our conclusion into question, we draw attention to note 2 of the financial report which indicates that the Group’s ability to continue operating depends on future conditions, including the Group’s ability to successfully raise debt or equity, âHannigan said in his audit report.
âThese factors cast doubt on the Group’s ability to realize its assets and liabilities in the normal course of business and at the amounts indicated in the financial report.
“The financial report does not include any adjustments relating to the recoverability and classification of the amounts of recorded assets or to the amounts and classification of liabilities that might be necessary if the Group does not continue to operate.”
Beforepay’s board of directors, which is chaired by former Westpac chief executive Brian Hartzer, revealed in notes to the accounts that the company is seeking to raise $ 10.7 million through the issuance of convertible notes in September.
According to ASIC records viewed by Banking Day this week, the show appears to have been executed.
However, the fully paid equity in Beforepay has only increased by about $ 330,000 since June 30.
Hartzer and his fellow directors appear to be counting on the successful execution of a $ 40 million IPO to help turn around the company’s balance sheet.
They cited future funds raised during the IPO as one of the factors influencing their decision to continue operating as a business.
âAs of the signing date of the June 30, 2021 financial report, the Group seeks to raise approximately $ 40 million through an initial public offering at the end of calendar year 2021,â the directors said in the annual report.
âThe directors believe that the funds available from the existing cash reserves and borrowing facilities, combined with those that would become available from the convertible bond issue and the initial public offering to be concluded, will provide the Group sufficient working capital to achieve its stated objectives. targets for at least the next 12 months from the date of signing of these financial statements.