New York-listed, UK-based online car marketplace Cazoo has had to radically scale back projected sales volumes for the next 12 months, and will make redundancies in an effort to trim its cost base.
Reduced sales of 40,000 - 50,000 UK retail units form part of Cazoo's revised 24-month path to profitability, with cash generation to accrue from faster moving inventories, ongoing fixed cost reductions and, consequently, better unit economics. Sales are predicted to resume growth from 2024 onwards, following a cost cutting drive that'll see closures of Cazoo's vehicle preparation and customer contact facilities.
Despite sales revenue of £315 million in the latest quarter, with full-year turnover amounting to £1.3 billion, Cazoo reported a softening outlook thanks to the wider macroeconomic picture and a tighter strategic roadmap that's seen Cazoo largely offload or wind down EU operations in Italy, Spain, Germany and France. The revenue picture was mixed with reduced wholesale cash flow from car dealerships but better results from its direct-to-consumer channel.
Since launching three years ago Cazoo has managed to shift over 100,000 cars through its direct-to-consumer auto marketplace. UK sales volumes in the fourth quarter rose 100% on the year ago period.
Founding CEO Alex Chesterfield appears to have recognised things aren't going to plan.
Chesterfield will be standing down as CEO to be replaced by his current COO Paul Whitehead. He remains executive chairman, allowing Cazoo to present the change as merely a shuffling of cards.
With a cash position amounting to £250+ million at 2022-end, Cazoo's management still believes the fundamentals are robust even with the adjusted forward sales volumes, and doesn't foresee raising equity funds while making changes to underlying cost structures. By the end of this year, available cash should rise to £100 million.
But Cazoo faces a battle keeping stock prices above the New York Stock Exchange's $1.00 threshold. The management recently secured board approval for share consolidation to reduce stock availability to hopefully drive the trading price north.
Cazoo is a publicly traded company having IPOed in New York last year in a $1 billion float enabled by its merger with the SPAC company Ajax 1.
Departing CEO Alex Chesterman commented: “I am pleased with our progress in Q4 despite ,the challenging economic backdrop. We had another strong quarter of UK retail unit sales, up over 100% YoY, and, we have now sold well over 100,000 cars entirely online in the UK in just 3 years since our launch.
"We remain, however, extremely mindful of the current economic environment and believe the right course of action
for 2023 is to focus on further improving our unit economics, reducing our fixed cost base and maximising our cash
runway."
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