BNPL – ZIP’s Terrible Half Year Result

Surprise, surprise .. Zip funding rates have blown out!!! (Who has been banging on about this?)

LOSSES CONTINUE

Zip half year result is really bad - hard to see how they can ever make real profits.. this is a basket case!!

Zip losses blow out $242 million or 42% increase on last year – this from the Zipsters who spin they will make profits (really, they are saying cash flow positive which is not profits) in 2023!!

?Key figure of active customers only grew 300,000 or 4.3% - 7.3 million customer is below the mid-year 7.6 million.

?Massive cut back in Marketing, $42.7 million which is really bad news going forward for customer growth and spending.

Funding has double to $73 million and will continue to grow?as rates go up ?- this is the threat to the business as it’s clear interest rates will continue to go up, staying high for much longer.

?This offsets a drop in bad debts, reducing by $55.6 million?to $79.6 million – so one step forward, but two steps backward.

Other expenses - salaries up $12.7 million?or 16%

Marketing down by massive 61% or $42.7 million?

Write off of BNPL investments/goodwill in Tendo and Payflex - $23.1 million

Other expenses up $16.7 million or 64% highlighting the lack of cost control across the business.

?

ZIPS TWO BIG PROBLEMS

Zips auditors have heavily qualified its accounts around lack of cashflow – in other words spending more than they are receiving a very dangerous game.

"We draw attention to Note 1 in the condensed consolidated financial statements, which indicates that the Group has incurred a consolidated loss after tax of $241.2 million and had net cash outflows from operating activities of $226.2 million, net cash outflows from investing activities of $22.9 million and net cash inflows from financing activities of $227.9 million during the six months ended 31 December 2022."

"As stated in the going concern section of Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our conclusion is not modified in respect of this matter." Zip Auditors Deloitte 23rd Feb 2023

Note - the auditors are saying they concerns about Zips only ability to fun it's self

Zip’s big problem is the debt owed on corporate?convertible notes, $400 million by 2025 which earn interest as well as possible conversion to shares.

In April 2021 Zip issue $400 million in debt (convertible bonds) that could be converted to shares later assuming the share value increased.

The terms of the issue allowed bond holders to convert their holdings at $12 a share, but the sharp decline in Zip’s share price to 60 cents has rendered the conversion of securities worthless.

If Zip cannot reissue this $400 million in debt, at higher rates, it goes down as they won't be able to raise equity to pay it. The market is pretty much baking in this disaster, with the stock at 60c - saying the equity is nearly worthless.?

Zip paid $12.5 million in incentive to bond holders and $47.7 million in costs in 6 months.