12:05 pm, March 30, 2023
Used car dealer Cazoo lost a whopping £704m in 2022 – a huge increase on the £544m loss posted the year before.
Results for the full year have been posted by the troubled used car dealer group today and show revenues were up to £1.25bn from the sale of 65,366 cars.
However, losses for the troubled group have increased dramatically as the business battled to shut down its operations across Europe and focus on the UK.
Administrative expenses – including costs for shutting down a large proportion of the businesses it bought up during its ill-fated growth spurt – increased in 2022 to £530m, from £219m the year before.
Some £299m of that was booked as an impairment charge which ‘largely related to actions taken in the company’s revised business plans’.
Gross profit per unit for the year also FELL from just £427 per car in 2021 to a woeful £403 in 2022.
By comparison, established car dealers usually make upwards of £1,500 per used car sold. Last week, dealer group Pendragon said it made £1,607 per used car it sold last year.
Cazoo argues its profitability is improving and says in the final quarter of this year it was making £596 per car. However, this is still well below the industry average.
Founder and CEO Alex Chesterman – who banked a reported £100m from the sale of shares before Cazoo listed – is due to step back from his frontline role with the used car dealer and assume the role of executive chairman.
Paul Whitehead takes on the CEO role on April 1 alongside former Carshop CEO Jonathan Dunkley, who was recently appointed its new chief operating officer.
In the update to investors, Chesterman said: ‘During the year we made a number of important strategic decisions to change gear from fast-paced growth to focus on improving our unit economics in the near term.
‘I am very encouraged by the pace of the team’s delivery in rightsizing our headcount and operational footprint which we have now completed in order to drive higher margins going forward.’
Hundreds of Cazoo staff have lost their jobs as part of those attempts to ‘rightsize’ the used car dealer.
Earlier this month, Cazoo ended a consultation period with staff which saw hundreds lose their jobs as the firm shut 15 customer centres across the country.
These handover centres were opened at a cost of millions as the company grew its profile in the UK, but have been unceremoniously axed as the used car dealer attempted to save money.
The company only retained sites in Birmingham, Bristol, Chertsey, Lakeside, Manchester, Northampton and Wembley.
Cazoo has also sold its operations in Germany, Italy and Spain, shut down its car subscription business and is in the process of selling off a large proportion of its prep centres. In February, it also sold its data business Cazana.
It has also taken the axe to its prep centres – chopping these down from double figures to just four, resulting in hundreds of job losses.
The results for the year show how costly those closures have been.
Chesterman added: ‘I am incredibly proud of everything the team at Cazoo has achieved since launch.
‘The past three years have shown that there is a significant appetite for buying and selling cars online and that our proposition is resonating strongly with consumers, having now sold over 120,000 cars entirely online in the UK.’
Last year, Cazoo said it sold 65,366 units and continued to buy cars directly from consumers.
However, it is forecasting a significant drop in sales of between 40,000 and 50,000 retail units in 2023.
This will still result in heavy losses for 2023 – the company predicts an adjusted EBITDA loss for 2023 of £100m-£120m.
This will see the company further eat into its cash reserves which stood at £258m at the end of 2022 and are set to deplete to between £110m-£130m by the end of this year.
This could mean the company needs to raise more money in the second half of next year.
Cazoo admitted: ‘We remain on track to achieve our goal of reaching profitability, without the need to raise further external funding until H2 2024.’
Cazoo is also aiming for a 5 per cent market share of the UK used car market, which it says is worth 7 million transactions a year.
It added: ‘The UK used car market with its approximately 7 million used car transactions a year worth around £100bn annually is the largest in Europe.
‘Digital penetration remains materially below almost all other retail sectors and we believe that our market leading platform, brand, team and infrastructure position us well to realise our ambition of achieving a 5% or greater share of the UK used car market over time.’
UHY Hacker Young’s David Kendrick told Car Dealer the results didn’t look good.
He said: ‘They have certainly shifted some vehicles, however the margins are far from the norm. While it shows good improvement, it is way off what we typically see in a used dealer or franchised dealer.
‘The forecast for 2023 is to yet again lose a huge sum of money, so I really don’t know where this ends. Cash balance is good, but how long can that last with sites being closed and businesses sold off? Who knows, but I still don’t see a long term sustainable business, unfortunately.’
Cazoo’s full year results were posted with the NYSE this morning.
