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Dow Jones Newswires: Australian BNPL company Zip to exit the U.K. after blowout annual loss

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SYDNEY — Zip Co. Ltd.
ZIP,
+2.06%

will close its U.K. operations as the Australian buy-now-pay-later provider seeks profitability in the wake of a blowout 1.015 billion Australian-dollar (US$701.3 million) annual loss.

The ASX-listed company on Thursday said net loss for the 12 months through June widened from a restated A$697.4 million loss in fiscal 2021. Zip recorded a non-cash impairment of goodwill and intangibles of A$821.1 million.

Zip had bet big on expansion in the U.S. and elsewhere but the strategy came to an abrupt stop this year against a backdrop of rising rates, soaring inflation, worsening consumer sentiment and global macro uncertainty.

The company, which had already announced it would simplify its product range and exit Singapore, said on Thursday it would quit the U.K.

“It’s clear the world is vastly different than when we started the year,” Chief Executive and Co-Founder Larry Diamond said.

Zip will focus on the U.S., Australian and New Zealand as it seeks to reduce its cash burn. It said its domestic business proved that strong unit economics at scale would convert to profitability and is still reviewing its other global businesses.

The board didn’t declare a dividend. Stripping out one-off items, Zip reported an adjusted loss of A$256.5 million, compared with a restated A$389.1 million adjusted loss in FY 2021.

Revenue rose by 57% on-year to A$620.0 million, equivalent to 7.1% of the value of transactions on its platform, up from 6.8% a year earlier. Its cash transaction margin declined by 80 basis points to 2.3% on higher sales costs.

Zip said 48% of its total A$8.59 billion in transactions came from the U.S., where it had 56% of its 11.4 million customers at the end of FY 2022. Total customer numbers grew 56% on-year, while merchant numbers grew 77% to 90,700.

Losses represented 3.2% of the value of transactions, up from 2.3% a year earlier.

The decision to exit from the U.K. comes a month after Zip terminated its acquisition of buy-now-pay-later rival Sezzle Inc.

It had announced the A$491 million all-scrip acquisition in January in the hope of building scale to attract the largest retail merchants. But buy-now-pay-later valuations were subsequently decimated as investors switched focus from growth stocks to defensive plays.

Zip incurred A$17.5 million in costs related to acquisitions made or announced in FY 2022.

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