BNPL Zip flogs off European and South African subsidiaries, shuts down Middle East, in bid to break even

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

The business is also winding down its Middle Eastern operations, as previously flagged, as it looks to stem losses and quarterise its cash burn.

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

The BNPL first bought into Twisto in 2020, then acquired the rest of the business in late 2021, for around $140 million. It also spent $21 million to acquire Spotti, in the Middle East.

Zip walks away with $20 million in its pocket.

In February, Zip revealed that its losses in the second half of 2022 jumped 42% to $240 million, even as revenues grown. In FY22 the company’s loss rose by 48.7% to an eye-watering $1.1 billion, including an $821.1 million impairment of goodwill and intangibles.

The company’s share price has fallen more than 60% in the last 12 months, from a high of $1.57 in April 2022, to $0.56 cents at Thursday’s close. Zip’s share price has rallied around 14% this week.

Announcing the sales this week, Zip said the cash EBTDA (earnings before income taxes, depreciation and amortisation) for its European Middle Eastern & African (EMEA) businesses was a $10.2m loss in H1 FY23. Once the EMEA ventures are gone, the company said it will have delivered on its objective of neutralising cash burn by the end of this financial year.

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

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

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

“With sale proceeds of approximately $20m, RoW cash burn neutralised and the up to 50% improvement in Core Cash EBTDA we are expecting in H2 FY23, we remain confident that we have sufficient cash and liquidity to deliver on our target of group positive cash EBTDA during H1 FY24.”