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  • BNPL Zip lashes European and South African subsidiaries, locks Middle East to break even

BNPL Zip lashes European and South African subsidiaries, locks Middle East to break even

ASX-listed buy now play later fintech Zip has struck deals to relieve Twisto, the European BNPL it acquired two years ago, and its South African company Payflex.

The company is also winding down its Middle East business, as previously reported, to limit losses and quarter cash burn.

Zip (ASX:Z1P) told the market on Thursday that it has signed agreements to divest Twisto and Payflex and expects total net cash inflows of approximately $20 million in H2 FY23 as a result. The deals are subject to regulatory approval.

The BNPL then bought into Twisto for the first time in 2020 acquired the rest of the company at the end of 2021, for about $140 million. It also spent $21 million to acquire Spotti in the Middle East.

Zip walks away with $20 million in his pocket.

In February, Zip revealed that losses had jumped 42% to $240 million in the second half of 2022, even as revenues rose. In FY22, the company’s loss increased 48.7% to a stunning $1.1 billion, including an $821.1 million impairment on goodwill and intangible assets.

The company’s share price is down more than 60% over the past 12 months, from a high of $1.57 in April 2022 to $0.56 cents at the end of Thursday. Zip’s share price is up about 14% this week.

Announcing the sales this week, Zip said that cash EBTDA (earnings before income taxes, depreciation and amortization) for its European Middle East and Africa (EMEA) operations was a loss of $10.2 million in H1 FY23. Once the EMEA businesses are gone, the company said it will achieve its goal of neutralizing cash burn by the end of this fiscal year.

Co-founder and Global CEO, Larry Diamond, said they shifted the company’s strategy 12 months ago from a focus on global growth to sustainable growth in its core markets in response to the changes in market conditions.

“While we continue to see increasing demand for our products from both customers and vendors globally, we have made the decision to allocate resources to areas of our business that are profitable or have a close and clear path to profitability,” he said.

“The completion of the sale of these Rest of World (RoW) assets marks another step in Zip’s transition as we become a stronger, leaner company focused on core products in core markets.

“With sales proceeds of approximately $20 million, RoW cash burn neutralized and the up to 50% improvement in Core Cash EBTDA we expect in H2 FY23, we remain confident that we have sufficient cash and liquidity to meet our goal of positive cash for the group to achieve. EBTDA during H1 FY24.”

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