Embattled Openpay eyes cost cuts in restructure

George Lekakis

Loyal retail investors in the embattled buy now pay later sector are bracing for more bleak news this morning as Openpay prepares to unveil its latest financial results.

Openpay’s ASX-listed scrip has taken a sustained hammering in the last six months and that trend is unlikely to change for Openpay, which is expected to announce a restructure of its underperforming UK business.

Openpay is believed to be considering options to rein in costs across its operations as it becomes more challenged to steer its business to profitability.

Industry sources told Banking Day yesterday that the company might even consider pulling stumps on the UK operation - less than nine months after announcing plans to acquire British BNPL provider, Payment Assist.

That acquisition was quietly abandoned towards the end of 2021 after the company signalled it was refocusing its growth strategy on the US market.

Openpay has been ramping up its UK business since June 2019 when it employed only five people.

According to documents lodged with British regulators the business had 22 UK staff at the end of June 2020.

Openpay’s board dropped a bombshell in the second week of January with an announcement that longstanding chief executive Michael Eidel was leaving the company.

Eidel’s departure was explained as a corollary of Openpay’s shift to a “simplified regional strategy”.

Earlier this month UK regulators ordered Openpay and three other BNPL providers to issue refunds to customers and delete alleged “unfair terms” in financial contracts.

Market sentiment towards the Melbourne-based company has turned ominous in recent weeks, with the share price sinking to record lows on concerns that the global strategy will struggle to generate bottom line growth.

Investors will also be tracking the Zip Co profit result, to be delivered next week. The BNPL giant is expected to pitch for shareholders to subscribe to a capital raising to help fund the Sezzle acquisition.

Zip announced on Monday that it had incurred higher bad debts in the December half and that its cash loss before tax and depreciation would be higher than the previous corresponding period.