Cazoo Group Ltd (NYSE: CZOO) shares rose 11.34% Friday night to $0.532 after-hours, bouncing back from a -19.76% loss to close the regular session at $0.48 on the day.
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How did CZOO fare recently?
In recent weeks, Cazoo (CZOO) completed a strategic review of its European operations. With the aim of preserving cash and positioning itself to achieve profitability without any external capital, Cazoo announced on August 2, 2022, that it would conduct a strategic review of its mainland European business.
The management of CZOO has concluded that it is the right course of action to focus exclusively on its core opportunity in the UK, a market that is worth over £100 billion annually and has approximately 8 million used car transactions.
Despite the challenging macroeconomic backdrop, retail unit sales in the UK have increased over 100% year-on-year in July and August. Management is very excited about Cazoo’s future prospects and its potential to capture a share of the UK market of 5% or more with the demand for its proposition.
Considering the material additional investment necessary to scale CZOO operations in the EU and the conflict this has with CZOO’s priorities of achieving profitability without additional capital, the withdrawal from the EU is a rationale based on the withdrawal plan.
What is CZOO up to?
Currently, Casao is consulting with its employee representatives in France and Italy regarding a structured wind-down of its operations in Germany and Spain. For its customers, its employees, and its suppliers, CZOO will facilitate a structured closure, and the relevant employee representatives and unions have been notified.
After withdrawal from the EU, Cazoo is expected to save over £100m in cash, net of any wind-down costs, by the end of the year 2023. By making this decision, CZOO believes it will substantially accelerate its path to profitability and eliminate the need for additional external funding.
In what ways will CZOO benefit from the decision?
Cazoo (CZOO) hopes to break even on its cash flow by the end of 2023 when the company still expects to have approximately £100 million in cash. CZOO’s decision should have a limited impact on its revenue and unit targets for 2022 since EU businesses made up 10% of company revenues and retail units in H1 2022.
