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Afterpay share price storms higher after doubling its underlying sales

The Afterpay Ltd (ASX: APT) share price is storming higher this morning following the release of its highly anticipated half year results.

At the time of writing the payments company’s shares are up 5% to $37.78.

How did Afterpay perform in the first half?

Afterpay continued its positive form in the first half of FY 2020, reporting a 109% increase in underlying sales to $4.8 billion. The catalyst for this was increasing usage from existing customers, a 134% jump in active customers to 7.3 million, and an 86% lift in active merchants to 43,200.

This led to the company reporting total group income of $220.3 million and a net transaction margin for the Afterpay business of $102 million. This represents growth of 96% and 118%, respectively, over the prior corresponding period.

Another metric heading in the right direction was its gross loss as a percentage of underlying sales. This improved 17% on the prior corresponding period to 1%.

EBITDA (excluding significant items) was $6.8 million, which was 51% below the first half of FY 2019. This was due to a material investment in marketing, people, and technology targeted towards accelerating its growth in existing markets and expanding the platform for further geographic expansion and product development.

Combined with one off and non-cash items, this ultimately led to the company reporting a statutory loss after tax of $31.6 million for the period.

What were the drivers of its growth?

The main driver of growth during the half was its US segment. It posted a 445% increase in underlying sales to $1.4 billion and a 445% lift in active customers to 3.6 million. Active merchants grew 421% to 7,400.

This was supported by the ANZ segment which reported $3.1 billion of underlying sales, up 55% on the same period last year. Active customers increased 26% to 3.1 million during the period and active merchants were up 63% to 35,500.

The UK business has started strongly and reported $0.2 billion of underlying sales and 0.6 million active customers. Active merchants in the UK stood at 400 at the end of the half.

Management commentary.

Afterpay’s CEO and managing director, Anthony Eisen, was happy with the half.

He said: “The strong metrics announced today reflect our team’s efforts to considerably accelerate sales growth across our global business, while at the same time balancing business performance and developing our team, infrastructure and capabilities for the future.”

Mr Eisen was appears to be particularly pleased with the growth of the US business.

He added: “Our global expansion is accelerating with the US and UK growing at considerably faster rate than what we experienced in ANZ. The US now represents over 30% of the Group’s total underlying sales and has the largest number of customers actively using the platform.”

Outlook.

Mr Eisen appears confident the company is well-positioned to exceed its medium term growth targets.

He said: “We are now focused on exceeding our mid-term underlying sales target of over $20b by FY22 and we are aiming to reach 9.5 million active customers by the end of this financial year.”

Though, this will come at a cost. He explained: “While this will impact Group profitability in the short term, we expect to achieve higher profitability in each market as they mature over time, in-line with our ANZ experience.”

“We believe we have the right strategy, the right people and the right business model to continue our momentum and deliver long term value for our shareholders,” he concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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