Zip Co is moving to complete the consolidation of its operations by exiting the remaining businesses in its “rest of the world” division. In future it will focus on Australia, New Zealand and the Americas.
Zip global chief executive Larry Diamond told investors at the company’s December half results briefing that the move from operations in 14 countries to four will get the company to profitability.
But the company’s path to profitability has become more difficult as a result of heavy losses and cash outflows. The company’s auditor Deloitte pointed to the loss of A$241.2 million, cash outflow from operating activities of $226 million and cash outflow of $23 million from financing activities, saying: “These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.”
During the half Zip completed the wind-up of its UK and Singapore businesses and started the process to shutting its business in Mexico. Businesses still to be sold or shut down include the Czech Republic, Poland, Saudi Arabia, United Arab Emirates and South Africa.
The buy now pay later company has also trimmed its product set. It stopped offering two business finance products, Trade and Trade+, selling the outstanding receivables.
Zip reported a loss of $241.2 million for the six months to December, compared with a loss of $169.8 million for the previous corresponding period.
There were a significant number of one-off items in the result, including losses relating to investments and discontinued businesses, impairments and a payment made to Sezzle after termination of a merger agreement.
Stripping out the one-offs and only counting continuing operations, Zip reported a “core cash EBTDA” loss of $33.2 million.
Transaction value was up 8.9 per cent to $4.9 billion, active customer numbers rose 4 per cent to 7.3 million and merchant numbers rose 20 per cent to 97,500.
Revenue of $351 million was up 19 per cent. The credit loss fell from 2.4 per cent of transaction value in the December half 2021 to 1.9 per cent in the latest half.
Net cash used in operating activities was $226.2 million. The company said this included $140 million of “non-core, non-operating and one-off” outflows.
Diamond said the company would “neutralise its cash burn” once it has completed sale or closure of the remaining non-core operations.