12:27 pm, August 1, 2023
Bosses at troubled used car retailer Cazoo say the outfit’s extensive restructuring programme is starting to reap rewards after the company slashed its losses in the first half of the year.
The self-styled online disruptor today (Aug 1) published its financial results for the six months to the end of June, with the numbers suggesting there may soon be some light at the end of the tunnel.
The documents show that gross profit and gross margin both rose in the first half of the year, while overall losses fell drastically.
After pulling out completely from the continental European market and ending several expensive sports sponsorship deals, Cazoo’s losses fell by 37 per cent year on year to £151m, compared with £241m in the same period last year.
Meanwhile, the company’s gross profit in the first six months of 2023 rose by a whopping 283 per cent from £6m to £23m.
There was also a 4.4 percentage point hike in gross margin, which now stands at 5.4 per cent.
The results were aided by a strong Q2 in which Cazoo made a gross profit of £8m with a gross margin of 4.7 per cent – up 167 per cent from £3m year on year. The company accounts also show a cash reserve of £195m.
Adjusted EBITDA loss for the first six months improved by 51 per cent from -£142m to -£70m, while the adjusted negative EBITDA margin rose by 7.7 percentage points from -24.4 per cent to -16.7 per cent.
Paul Whitehead, CEO of Cazoo, said: ‘I am pleased with the decisive and meaningful progress we have made to improve unit economics, optimise our fixed-cost base and maximise our cash runway in the first six months of 2023.
‘The results show tangible progress across all areas of the business.
‘Our Q2 and H1 2023 results are in line with our expectations and our cash position remains strong, as we continue to reduce costs and target every area of our business for greater operating efficiencies.
‘Through the recent UK restructuring and the wind-down of our EU business, we have rightsized the operational footprint and headcount, optimising the business for today, with a view to future growth.’
Despite the improvements, though, there were still some worrying signs within the accounts.
Cazoo sold 29 per cent fewer vehicles than it did in the first half of 2022, with the outfit shifting just 28,985 units compared with 40,570 during 2022’s first half.
Retail and wholesale transactions both took major hits to slide to 22,438 and 6,547 from 28,628 and 11,942 respectively.
More cost-cutting to come
The past year has been a time of huge upheaval for Cazoo as it has scraped to survive after racking up eye-watering losses since launching in 2019.
The concerns emerged last year when an explosive dossier from founder Alex Chesterman admitted to investors that the firm may ‘may never achieve profitability’ despite the vast amounts of money pumped into it.
The problems continued to mount and the following month a savage wave of cuts was announced, following losses of £243m.
Reacting to the news, Cazoo lost its chief financial officer, Stephen Morana, and replaced him with Paul Woolf.
The rest of the year saw Cazoo go into free fall.
More eye-watering losses were announced, the decision was made to withdraw from mainland Europe and December saw the company’s share price plummet to an all-time low.
Having once been valued at £8bn on the New York stock market, Cazoo found itself valued at less than £80m by the end of 2022.
Bosses say they have identified a further £20m in cash savings for the second half of the year, as they look to recover the firm’s perilous finances.
As a result, the board has adjusted the EBITDA guidance and is expecting a loss of between £100m and £120m for the year as a whole.
‘The results reported today demonstrate sustained improvement in retail GPU, fixed and variable cost reduction in line with our plans, and better adjusted EBITDA,’ said Woolf.
‘Encouraging progress on reducing fixed and variable costs post the restructuring changes executed earlier in the year supports our adjusted EBITDA guidance for the year in the range of £(100) million to £(120) million.
‘We have identified a further £20+million of annualised cash savings expected to be delivered in H2 2023 that will benefit our performance in 2024.
‘Lower restructuring charges and lower EU exit costs helped us to preserve cash in the first half of the year and allow us to reiterate our expectations for the year-end cash of £110 million to £130 million.’
