Exhibit 99.1
CAZOO GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2022
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the six months ended June 30, 2022
| Continuing operations | Notes | Six
months | Six
months | |||||||
| Revenue1, 2 | 3 | |||||||||
| Cost of sales | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||
| Marketing expenses | ( | ) | ( | ) | ||||||
| Selling and distribution expenses | ( | ) | ( | ) | ||||||
| Administrative expenses | ( | ) | ( | ) | ||||||
| Loss from operations | ( | ) | ( | ) | ||||||
| Finance income | ||||||||||
| Finance expense | ( | ) | ( | ) | ||||||
| Other income and expenses3 | 4 | |||||||||
| Loss before tax | ( | ) | ( | ) | ||||||
| Tax credit | 7 | |||||||||
| Loss for the period | ( | ) | ( | ) | ||||||
| Other comprehensive income | ||||||||||
| Exchange differences on translation of foreign operations | ||||||||||
| Total comprehensive loss for the period | ( | ) | ( | ) | ||||||
| Earnings per share: | ||||||||||
| Basic loss per ordinary share4 | £ | ( | ) | £ | ( | ) | ||||
| Diluted loss per ordinary share4 | £ | ( | ) | £ | ( | ) | ||||
| 1 | |
| 2 | |
| 3 | |
| 4 |
The notes on pages 7 to 22 form part of these financial statements.
2
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at June 30, 2022
At | At December 31 2021 | |||||||||
| Notes | £’000 | £’000 | ||||||||
| Assets | ||||||||||
| Non-current assets | ||||||||||
| Property, plant and equipment1 | 8 | |||||||||
| Right-of-use assets2 | ||||||||||
| Intangible assets and goodwill | 9 | |||||||||
| Trade and other receivables | ||||||||||
| Current assets | ||||||||||
| Inventory | ||||||||||
| Trade and other receivables | ||||||||||
| Cash and cash equivalents | 13 | |||||||||
| Total assets | ||||||||||
| Liabilities | ||||||||||
| Current liabilities | ||||||||||
| Trade and other payables | ||||||||||
| Loans and borrowings | 10 | |||||||||
| Convertible notes and embedded derivative | 11 | |||||||||
| Lease liabilities | ||||||||||
| Provisions | 12 | |||||||||
| Non-current liabilities | ||||||||||
| Loans and borrowings | 10 | |||||||||
| Convertible notes and embedded derivative | 11 | |||||||||
| Warrants | 11 | |||||||||
| Lease liabilities | ||||||||||
| Provisions | 12 | |||||||||
| Deferred tax | ||||||||||
| Total liabilities | ||||||||||
| Net assets | ||||||||||
| Share capital | ||||||||||
| Share premium | ||||||||||
| Merger reserve | ||||||||||
| Retained earnings | ( | ) | ( | ) | ||||||
| Foreign currency translation reserve | ( | ) | ||||||||
| Total equity | ||||||||||
| 1 | |
| 2 |
The notes on pages 7 to 22 form part of these financial statements.
3
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended June 30, 2022
| Share capital | Share premium | Merger reserve | Retained earnings | Foreign currency translation reserve | Total equity | |||||||||||||||||||||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||||||
| At January 1, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||
| Comprehensive loss for the period | ||||||||||||||||||||||||||
| Loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||
| Contributions by and distributions to owners | ||||||||||||||||||||||||||
| Acquisition of subsidiaries | 6 | |||||||||||||||||||||||||
| Share-based payments | ||||||||||||||||||||||||||
| Taxation recognized directly in equity | ( | ) | ( | ) | ||||||||||||||||||||||
| At June 30, 2022 | ( | ) | ||||||||||||||||||||||||
The notes on pages 7 to 22 form part of these financial statements.
4
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended June 30, 2021
| Share capital | Share premium | Merger reserve | Retained earnings | Foreign currency translation reserve | Total equity | |||||||||||||||||||||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||||||
| At January 1, 20211 | ( | ) | ||||||||||||||||||||||||
| Comprehensive loss for the period | ||||||||||||||||||||||||||
| Loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||
| Contributions by and distributions to owners | ||||||||||||||||||||||||||
| Acquisition of subsidiaries2 | ||||||||||||||||||||||||||
| Share-based payments | ||||||||||||||||||||||||||
| At June 30, 20211 | ( | ) | ||||||||||||||||||||||||
| 1 | |
| 2 |
The notes on pages 7 to 22 form part of these financial statements.
5
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended June 30, 2022
| Notes | Six
months | Six
months | ||||||||||
| Cash flows from operating activities1 | ||||||||||||
| Loss for the period | ( | ) | ( | ) | ||||||||
| Adjustments for: | ||||||||||||
| Depreciation of property, plant and equipment and right-of-use assets | 8 | |||||||||||
| Amortization and impairment of intangible assets | 9 | |||||||||||
| Finance income | ( | ) | ( | ) | ||||||||
| Finance expense | ||||||||||||
| Share-based payment expense | 14 | |||||||||||
| Fair value movement in warrants and embedded derivative and foreign exchange movements | 4, 11 | ( | ) | |||||||||
| Tax credit | 7 | ( | ) | ( | ) | |||||||
| ( | ) | ( | ) | |||||||||
| Movements in working capital: | ||||||||||||
| (Increase)/decrease in trade and other receivables | ( | ) | ||||||||||
| Increase in inventory | ( | ) | ( | ) | ||||||||
| Increase in subscription vehicles | ( | ) | ||||||||||
| Increase in trade and other payables | ||||||||||||
| Increase in provisions | 12 | |||||||||||
| Total working capital movements | ( | ) | ||||||||||
| Other cash flows from operating activities: | ||||||||||||
| Interest received | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| Cash flows from investing activities | ||||||||||||
| Purchases of property, plant and equipment | 8 | ( | ) | ( | ) | |||||||
| Purchases and development of intangible fixed assets | 9 | ( | ) | ( | ) | |||||||
| Acquisition of subsidiaries, net of cash acquired | 6 | ( | ) | ( | ) | |||||||
| Proceeds from sale and leasebacks | ||||||||||||
| Proceeds from lease modifications | ||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||||
| Cash flows from financing activities | ||||||||||||
| Net proceeds from convertible notes | 11 | |||||||||||
| Proceeds from stocking loans | 10 | |||||||||||
| Repayment of stocking loans | 10 | ( | ) | ( | ) | |||||||
| Proceeds from subscription facilities | 10 | |||||||||||
| Repayment of subscription facilities | 10 | ( | ) | |||||||||
| Repayment of bank loans and mortgages | 10 | ( | ) | ( | ) | |||||||
| Interest paid on loans and borrowings | ( | ) | ( | ) | ||||||||
| Lease payments | ( | ) | ( | ) | ||||||||
| Excess proceeds above fair value from sale and leasebacks | ||||||||||||
| Net cash generated from/(used in) financing activities | ( | ) | ||||||||||
| Net increase/(decrease) in cash and cash equivalents | ( | ) | ||||||||||
| Cash and cash equivalents at the beginning of the period | ||||||||||||
| Net foreign exchange difference | ||||||||||||
| Cash and cash equivalents at the end of the period | 13 | |||||||||||
| 1 |
The notes on pages 7 to 22 form part of these financial statements.
6
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended June 30, 2022
1. Reporting entity
Cazoo Group Ltd (the “Company”) is an exempted company incorporated under the laws of the Cayman Islands on March 24, 2021. The Company’s registered office is at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Company’s principal executive office is at 41 Chalton Street, London, NW1 1JD, United Kingdom. The Group’s principal activity is the operation of an e-commerce platform for buying and selling used cars.
The unaudited condensed consolidated interim financial statements incorporate the accounts of the Company and entities controlled by the Company (“its subsidiaries”). The term “Group” means, prior to closing of the Transaction, Cazoo Holdings Limited, a private limited company organized under the law of England and Wales (“Cazoo Holdings”) and its consolidated subsidiaries and, for periods subsequent to closing of the Transaction, Cazoo Group Ltd and its subsidiaries.
The Transaction
On March 29, 2021, Ajax I, a Cayman Islands exempted company (“Ajax”), Cazoo Holdings and Capri Listco, a Cayman Islands exempted company (“Listco”), entered into the Business Combination Agreement (the “Business Combination Agreement”), as amended by the First Amendment thereto, dated as of May 14, 2021 which, among other things, provided that (i) Ajax would merge with and into the Company, with the Company continuing as the surviving company, (ii) the Company would acquire all of the issued and outstanding shares of Cazoo Holdings via exchange for a combination of shares of the Company and cash consideration and (iii) the Company would become tax resident in the UK following the consummation of the Transaction.
Upon consummation of the Transaction, shareholders
of Ajax and Cazoo Holdings became shareholders of Listco, and Listco changed its name to “Cazoo Group Ltd.” Upon consummation
of the Transaction Class A ordinary shares, par value $
The unaudited condensed consolidated interim financial statements are prepared as a continuation of the financial statements of Cazoo Holdings, the accounting acquirer, with a recapitalization to reflect the capital structure of Cazoo Group Ltd. The 2021 comparatives are based on the operations of Cazoo Holdings prior to the Transaction.
2. Basis of preparation
The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2022 have been prepared in accordance with Accounting Standard IAS 34 Interim Financial Reporting. The unaudited condensed consolidated interim financial statements do not include all the information and disclosures required in the annual consolidated financial statements. Accordingly, this report should be read in conjunction with the Group’s annual report on Form 20-F for the year ended December 31, 2021.
Except as described in 2.2. below, the accounting policies adopted in the preparation of the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended December 31, 2021.
7
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
2.1 Going concern
The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.
The Board of Directors have approved an operating
plan through to December 31, 2023 which combines continued top line growth with ongoing operational improvements which move the business
towards breakeven, targeted in December 2023. This plan achieves those goals without the need for further fund raising and has a forecast
cash balance of over £
The operating plan includes the on-going exit
of existing operations in Europe, which Management of the Group (“Management”) believes will result in cash savings of over
£
Given the stage of evolution of the Group, there
are certain inherent uncertainties in forecasting operating performance. Therefore, in assessing the appropriateness of the going concern
assumption, Management have assumed a combined downside scenario to the above base case, whereby the most sensitive assumptions have been
flexed. These are limiting gross profit margin to
The majority of the Group’s future spend
is not committed. In the event that further actions to manage liquidity were to be necessary, Management may seek to reduce discretionary
marketing spend, capex and/or headcount, as well as pursuing various other options to reduce cash outflow which Management believes, in
combination, could give rise to additional savings of approximately £
Management have reverse stress tested gross margin
and operating expenses as a percentage of sales as compared to the base case. In isolation, reductions of gross margin to
The Group utilizes stocking finance to support inventory
purchasing. In the UK, the business works with five lenders and had total stocking facilities at June 30, 2022 with a maximum of £
The Group also has debt in the form of convertible
notes which bear regular interest at a rate of
The Board believes that the Group’s existing available cash, financing facilities and the approved operating plan are adequate to meet the Group’s forecasted cash requirements for the period to September 30, 2023. Therefore, the accompanying unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.
8
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
2.2 New accounting policies
2.2.1 Convertible notes
On February 16, 2022, the Company issued $
The host contract is classified as a financial liability because there is an obligation to make fixed interest payments on a quarterly basis and there is an obligation to deliver cash to the holder on redemption of the convertible notes at the maturity date.
The holder’s conversion option is not classified as equity as it does not meet the “fixed-for-fixed” criterion. This is because the Company’s contractual obligation, being denominated in a foreign currency (USD), represents a variable amount of cash on settlement.
The convertible notes will be convertible at the
option of the holders at any time after November 6, 2022 and prior to the close of business on the second scheduled trading day immediately
preceding February 16, 2027. In addition, the Company may force the conversion of the convertible notes on or after February 16, 2025,
if the trading price of the Class A Shares exceeds
If the convertible notes have not been converted,
repurchased or redeemed at or prior to February 16, 2027, holders of the convertible notes will be entitled to payment of a premium at
maturity of the convertible notes, equal to
The convertible notes were not guaranteed or secured upon issuance but will receive the benefit of any guarantees or security provided at any time for the benefit of certain other indebtedness of the Company for borrowed money issued or incurred in the future, other than indebtedness incurred to purchase, finance or refinance the purchase of vehicles, vehicle parts, supplies and inventory and certain other indebtedness. The Indenture also contains covenants, events of default and other provisions which are customary for offerings of convertible notes.
Financial liability
The financial liability was initially measured at fair value less transaction costs. The fair value of the liability was calculated as the residual transaction price after deducting the fair value of the embedded derivative.
The financial liability is subsequently measured at amortized cost using the effective interest method. Interest expense is recognized within finance expense in the statement of profit or loss.
The financial liability is translated from USD to GBP at the exchange rate at the reporting date in accordance with IAS 21, with the exchange rate difference recognized within other income and expenses in the statement of profit or loss.
The capital element of the financial liability is presented as non-current as it is not due to be repaid until February 2027. However, the accrued interest as at June 30, 2022 is presented as current, as it will be settled within the next 12 months.
9
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
2.2.1 Convertible notes (continued)
Embedded derivative
The compound embedded derivative for the conversion options and premium feature was initially measured at fair value. The embedded derivative is subsequently remeasured at fair value at each reporting date with changes in fair value recognized in other income and expenses within the statement of profit or loss. The fair value of the embedded derivative is determined using a Monte-Carlo simulation to model the conversion, redemption and repayment premium features.
The embedded derivative is translated from USD to GBP at the exchange rate at the reporting date in accordance with IAS 21, with the exchange rate difference recognized within other income and expenses in the statement of profit or loss.
The embedded derivative is presented as non-current as the maturity exceeds twelve months from the reporting date and the Company intends to hold the derivative for more than twelve months from the reporting date.
2.2.2 Business segments
During the six months ended June 30, 2022, there was a change in the segmentation of the Group following the launch of the Cazoo retail proposition in Europe. The Board of Directors is the chief operating decision maker, The monthly reporting pack provided to the chief operating decision maker disaggregated the performance of the business on a UK and EU basis. The key financial performance metrics are monitored by the chief operating decision maker on a UK and EU basis. Management has therefore determined that there exist two operating segments, UK and EU, for the unaudited condensed consolidated interim financial statements.
Costs relating to certain Group services have been allocated to another heading called “Central costs”. “Central costs” is not a reportable operating segment but is included in order to reconcile segment loss.
2.2.3 Sale and leaseback
In February 2022, the Group sold two of its customer
collection centers and leased them back for
2.2.4 Share-based payments
In January 2022, the Group established “Cazoo Save”, a Save As You Earn (“SAYE”) scheme. The scheme provides employees an option to purchase shares in the Company in three years’ time at a discounted price per share which is fixed at the grant date.
The SAYE scheme is accounted for as an equity-settled share-based payment scheme. The fair value determined at the grant date of the SAYE scheme is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. The fair value is determined using a Black-Scholes option pricing model.
2.3 New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended December 31, 2021, except for the adoption of new standards effective as of January 1, 2022. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2022, but do not have an impact on the unaudited condensed consolidated interim financial statements of the Group:
| ● | Reference to the Conceptual Framework – Amendments to IFRS 3 |
| ● | Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 |
| ● | Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37 |
| ● | IFRS 9 Financial Instruments – Fees in the “10 per cent” test for derecognition of financial liabilities |
10
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
3. Revenue
3.1 Disaggregated revenue information
The following is an analysis of the Group’s revenue for the period from continuing operations.
Six
months | Six
months | |||||||
| Type of goods | ||||||||
| Retail | ||||||||
| Wholesale | ||||||||
| Other sales | ||||||||
| Recognition of revenue | ||||||||
| Revenue from contracts with customers | ||||||||
| Other revenue | ||||||||
3.2 Contract balances
At | At | |||||||
| Trade receivables | ||||||||
| Contract assets | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
All contract assets and liabilities are short-term in nature and are derecognized within one month of the reporting period end across both June 30, 2022 and December 31, 2021.
Revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the period end is summarized as below.
| Within one month as at June 30, 2022 £’000 | Within one month as at December 31, 2021 £’000 | |||||||
| Undelivered vehicles | ||||||||
11
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
4. Other income and expenses
Six
months | Six
months | |||||||
| Fair value movement in embedded derivative | ||||||||
| Fair value movement in warrants | ||||||||
| Foreign exchange movements | ( | ) | ||||||
5. Segment information
The following table presents the Group’s revenue and loss information for the Group’s operating segments for the six months ended June 30, 2022 and 2021, respectively:
| UK | EU | Total segments | Central costs | Consolidated | ||||||||||||||||
| £’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||
| Six months ended June 30, 2022 | ||||||||||||||||||||
| Revenue | ||||||||||||||||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Six months ended June 30, 2021 | ||||||||||||||||||||
| Revenue | ||||||||||||||||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
“Segment loss” is the loss measure reported to the Group’s chief operating decision maker. It is defined as loss for the period from continuing operations adjusted for tax, finance income, finance expense, depreciation, amortization and impairment of intangible assets, share-based payment expense, fair value movement in warrants and embedded derivative and foreign exchange movements and exceptional items which do not relate to our core operations.
The following table presents assets and liabilities information for the Group’s operating segments as at June 30, 2022 and December 31, 2021, respectively:
| UK | EU | Total segments | Central costs | Consolidated | ||||||||||||||||
| £’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||
| At June 30, 2022 | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| At December 31, 2021 | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
12
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
5. Segment information (continued)
Reconciliation of segment loss
| Six months ended June 30, 2022 | UK | EU | Total segments | Central costs | Consolidated | |||||||||||||||
| £’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Tax credit | ||||||||||||||||||||
| Finance income | ||||||||||||||||||||
| Finance expense | ( | ) | ( | ) | ||||||||||||||||
| Depreciation of property, plant and equipment and right-of-use assets | ( | ) | ( | ) | ||||||||||||||||
| Amortization and impairment of intangible assets | ( | ) | ( | ) | ||||||||||||||||
| Share-based payment expenses | ( | ) | ( | ) | ||||||||||||||||
| Fair value movement in warrants and embedded derivative and foreign exchange movements | ||||||||||||||||||||
| Exceptional items(1) | ( | ) | ( | ) | ||||||||||||||||
| Loss for the period | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| 1 |
| Six months ended June 30, 2021 | UK | EU | Total segments | Central costs | Consolidated | |||||||||||||||
| £’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Tax credit | ||||||||||||||||||||
| Finance income | ||||||||||||||||||||
| Finance expense | ( | ) | ( | ) | ||||||||||||||||
| Depreciation, amortization and impairment of intangible assets | ( | ) | ( | ) | ||||||||||||||||
| Amortization and impairment of intangible assets | ( | ) | ( | ) | ||||||||||||||||
| Share-based payment expenses | ( | ) | ( | ) | ||||||||||||||||
| Fair value movement in warrants and embedded derivative and foreign exchange movements | ||||||||||||||||||||
| Exceptional items | ( | ) | ( | ) | ||||||||||||||||
| Loss for the period | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
13
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
6. Business combinations
6.1 brumbrum S.p.A
On January 31, 2022, the Group acquired
Founded in 2016, brumbrum was based in Milan and
operated a
The purchase has been accounted for as a business combination under the acquisition method in accordance with IFRS 3. The unaudited condensed consolidated interim financial statements include the results of brumbrum for the period from the acquisition date.
In calculating goodwill arising from the acquisition, the fair value of net assets acquired was assessed and no material adjustments from book value were made to existing assets and liabilities. The Group has recognized a number of separately identifiable intangible assets as part of the acquisition. Details of the provisional amounts are set out in the table below.
| £’000 | ||||
| Property, plant and equipment | ||||
| Right-of-use assets | ||||
| Inventory | ||||
| Trade and other receivables | ||||
| Cash and cash equivalents | ||||
| Trade and other payables | ( | ) | ||
| Loans and borrowings | ( | ) | ||
| Lease liabilities | ( | ) | ||
| Provisions | ( | ) | ||
| Total net assets acquired | ||||
| Intangible assets recognized on acquisition: | ||||
| Brand | ||||
| Customer relationships | ||||
| Software | ||||
| Deferred tax arising on intangible assets | ( | ) | ||
| Total intangible assets recognized on acquisition | ||||
| Total identifiable net assets at fair value | ||||
| Goodwill | ||||
| Purchase consideration transferred | ||||
| Satisfied by: | ||||
| Cash | ||||
| Deferred consideration | ||||
| Debt assumed and discharged | ||||
| Shares issued | ||||
| Purchase consideration transferred | ||||
At the date of the acquisition, the carrying amount
of trade and other receivables was £
The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities.
Software acquired represents brumbrum’s platform system and website, which had been developed in-house and are considered to be brumbrum owned intellectual property. The brand was considered to be highly recognizable in Italy.
14
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
6.1 brumbrum S.p.A (continued)
An intangible asset has been recognized for significant customer relationships.
Goodwill is attributable mainly to the skills and technical talent of brumbrum’s workforce.
The fair value of the Class A Shares issued at
the date of acquisition was determined as £
From the date of acquisition to June 30, 2020,
brumbrum has contributed £
Transaction costs of £
7. Taxation
The major components of income tax credit in the interim condensed consolidated statement of profit or loss are:
Six
months | Six
months | |||||||
| Current income tax expense | ( | ) | ||||||
| Deferred tax credit relating to origination and reversal of temporary differences | ||||||||
| Income tax credit recognized in statement of profit or loss | ||||||||
The deferred tax credit relates to the net movements in specific deferred tax items in the period. A deferred tax asset on losses is only recognized to the extent that it matches deferred tax liabilities.
8. Property, plant and equipment
During the six months ended June 30, 2022, the
Group acquired property, plant and equipment with a cost of £
The Group completed sale and leaseback transactions
during the period resulting in freehold property with a carrying value of £
15
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
9. Intangible assets and goodwill
| Goodwill | Development costs and software | Customer relationships | Brand | Domain | Total | |||||||||||||||||||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| At January 1, 2022 | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Acquisition of subsidiaries | ||||||||||||||||||||||||
| At June 30, 2022 | ||||||||||||||||||||||||
| Accumulated amortization | ||||||||||||||||||||||||
| At January 1, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Charge for the period | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Impairment loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| At June 30, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net book value | ||||||||||||||||||||||||
| At June 30, 2022 | ||||||||||||||||||||||||
Details of goodwill and other intangible assets recognized on acquisition of subsidiaries are set out in Note 6. The impairment charge is recorded within administrative expenses in the statement of profit or loss.
Impairment testing
The Group performed its annual impairment test in December 2021. The Group considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indicators of impairment. As at June 30, 2022, the market capitalization of the Group was below the book value of its equity, indicating a potential impairment of goodwill. In addition, the Group announced a Business Realignment Plan in June 2022 (the “Business Realignment Plan”) given the current macroeconomic conditions. As a result, Management performed an impairment test as at June 30, 2022 for all of the Cash Generating Units (“CGUs”).
The Group’s impairment test for intangible assets and goodwill is based on value-in-use calculations. The key assumptions used to determine the value-in-use for the different CGUs were disclosed in the annual consolidated financial statements for the year ended December 31, 2021. The projected cash flows were updated to reflect the actions announced in the Business Realignment Plan and updated pre-tax discount rates were applied. All other assumptions remained consistent with those disclosed in the annual financial statements for the year ended December 31, 2021. The Group used each CGU’s value-in-use, as this is higher than fair value less costs of disposal, to determine the recoverable amount.
UK
Management did not identify any impairment for
the UK CGU to which intangible assets and goodwill of £
16
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
9. Intangible assets and goodwill (continued)
Germany and France
Management has recognized an impairment charge
of £
Spain
Management did not identify any impairment for
the Spain CGU (formerly the Swipcar CGU) to which intangible assets and goodwill of £
Italy
The Italy CGU is a new CGU following the acquisition
of brumbrum in January 2022. Management has recognized an impairment charge of £
Cazana
Management has recognized an impairment charge
of £
10. Loans and borrowings
The book value of loans and borrowings are as follows:
At | At | |||||||
| Current | ||||||||
| Bank loans | ||||||||
| Stocking loans | ||||||||
| Subscription facilities | ||||||||
| Mortgages | ||||||||
| Non-current | ||||||||
| Bank loans | ||||||||
| Stocking loans | ||||||||
| Subscription facilities | ||||||||
| Mortgages | ||||||||
| Total loans and borrowings | ||||||||
17
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
11. Financial instruments
11.1 Financial assets
Set out below is an overview of financial assets, other than cash and short-term deposits, held by the Group as at June 30, 2022 and December 31, 2021:
| At June 30 2022 £’000 | At December 31 2021 £’000 | |||||||
| Financial assets at amortized cost | ||||||||
| Trade receivables | ||||||||
| Contract assets | ||||||||
| Lease deposits | ||||||||
| Current | ||||||||
| Non-current | ||||||||
11.2 Financial liabilities
Set out below is an overview of financial liabilities held by the Group as at June 30, 2022 and December 31, 2021:
Financial liabilities: Interest-bearing loans and borrowings
| Interest rate | At | At December 31 2021 | ||||||||||
| % | Maturity | £’000 | £’000 | |||||||||
| Current | ||||||||||||
| Lease liabilities | ||||||||||||
| Convertible notes | ||||||||||||
| Bank loans | ||||||||||||
| Stocking loans | ||||||||||||
| Subscription facilities | 3.15% – 6.0% | |||||||||||
| Mortgages | ||||||||||||
| Non-current | ||||||||||||
| Lease liabilities | ||||||||||||
| Convertible notes | ||||||||||||
| Bank loans | ||||||||||||
| Stocking loans | ||||||||||||
| Subscription facilities | 3.15% – 12.0% | |||||||||||
| Mortgages | ||||||||||||
18
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
11.2 Financial liabilities (continued)
Other financial liabilities
At | At 2021 | |||||||
| £’000 | £’000 | |||||||
| Financial liabilities at fair value through profit or loss | ||||||||
| Warrants | ||||||||
| Embedded derivative | ||||||||
| Current | ||||||||
| Non-current | ||||||||
11.3 Fair value
Management assessed that the fair value of trade receivables, other receivables, stocking loans, subscription facilities and trade and other payables approximate their carrying value due to the short-term maturities of these instruments.
The fair value of trade receivables, other receivables, stocking loans, subscription facilities and trade and other payables has been measured using Level 3 valuation inputs.
Public warrants are classified as Level 1 due to the use of an observable market quote in an active market. Private warrants are classified as Level 3 due to the use of unobservable inputs. The fair value is determined using a Black-Scholes model for the private warrants.
The embedded derivative of the convertible notes is classified as Level 3 due to the use of unobservable inputs. The fair value is determined using a Monte-Carlo simulation to model the conversion, redemption and repayment premium features.
The following table provides the fair value measurement hierarchy of the Group’s financial assets and financial liabilities as at June 30, 2022:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| At June 30, 2022 | £’000 | £’000 | £’000 | £’000 | ||||||||||||
| Warrants | ||||||||||||||||
| Embedded derivative | ||||||||||||||||
19
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
11.3 Fair value (continued)
The following information is relevant in the determination of fair value of the private warrants and the embedded derivative at June 30, 2022:
Private | Embedded | |||||||
| Expected term (years) | ||||||||
| Expected volatility | % | % | ||||||
| Dividend yield | ||||||||
| Risk free interest rate | % | % | ||||||
Reconciliation of fair values
The fair value movements are set out as follows:
| Public warrants | Private warrants | Embedded | Total | |||||||||||||
| £’000 | £’000 | £’000 | £’000 | |||||||||||||
| At January 1, 2022 | ||||||||||||||||
| Issuances | ||||||||||||||||
| Fair value movement | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange movements | ||||||||||||||||
| At June 30, 2022 | ||||||||||||||||
The fair value decrease and foreign exchange movements is recognized in the statement of profit or loss within other income and expenses.
Sensitivity analysis
For the private warrants, a 100 basis point increase
in the expected volatility rate would increase the fair value by £
For the embedded derivative, a 100 basis point
increase in the expected volatility rate would increase the fair value by £
20
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
12. Provisions
| Dilapidation | Restructuring | Other | Total | |||||||||||||
| £’000 | £’000 | £’000 | £’000 | |||||||||||||
| At January 1, 2022 | ||||||||||||||||
| Acquisition of subsidiaries | ||||||||||||||||
| Recognized during the period | ||||||||||||||||
| At June 30, 2022 | ||||||||||||||||
| Current | ||||||||||||||||
| Non-current | ||||||||||||||||
The dilapidation provisions relate to the
expected reinstatement costs of leased office buildings, vehicle preparation centers, collection centers and vehicles back to the
conditions required by the lease. Cash outflows associated with the dilapidation provisions are to be incurred at the end of the
relevant lease term, between
The restructuring provision relates to actions being undertaken as part of the Group’s Business Realignment Plan which was announced in June 2022 including redundancy costs. The restructuring is expected to be completed by the end of 2022.
13. Cash and cash equivalents
For the purpose of the condensed consolidated statement of cash flows, cash and cash equivalents are comprised of the following:
| At June 30 2022 | At December 31 2021 | |||||||
| £’000 | £’000 | |||||||
| Cash at bank available on demand | ||||||||
| Cash held in short-term deposit accounts | ||||||||
| Total cash and cash equivalents | ||||||||
14. Share-based payments
Share-based payments charge
For the six months ended June 30, 2022, the Group
recognized a share-based payment charge of £
The following options were granted during the six months ended June 30, 2022:
| Scheme | Number | Grant date | Expiry date | |||||||||
| Incentive Equity Plan | ||||||||||||
| Incentive Equity Plan | | |||||||||||
| SAYE scheme | ||||||||||||
21
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)
For the six months ended June 30, 2022
14. Share-based payments (continued)
Employee share option fair value assessment
The following information is relevant in the determination of fair value of the employee share options granted during the six months ended June 30, 2022:
| Incentive Equity Plan | SAYE scheme | |||||||
| Exercise price | £ | £ | ||||||
| Expected volatility | % | |||||||
| Dividend yield | ||||||||
| Risk free interest rate | % | |||||||
| Fair value per share1 | £ | £ | ||||||
| 1 | Considering that the Incentive Equity Plan awards vest over time without any further restrictions, the fair value is equal to the Company’s closing stock price as of the grant date. |
The number of options outstanding as at June 30,
2022 was
15. Events after the reporting date
Strategic review of mainland Europe
On August 2, 2022, the Group announced that it was conducting a strategic review of its business in mainland Europe, with the aim of further preserving cash and positioning the Group to achieve profitability without the need for further external capital.
On September 8, 2022, the Group announced the conclusion of its strategic review. Following a review of a range of strategic options, Management concluded that Cazoo would focus exclusively on its core opportunity in the UK.
As a result, the Group has commenced an orderly wind down of its operations in Germany and Spain and is in consultation with its employee representatives in France and Italy. Cazoo will facilitate a structured closure for its customers, employees and suppliers and has notified the relevant employee representatives and unions in each market.
The Group expects to incur charges as a result of the implementation in the second half of 2022, including amounts for restructuring. The amount of these charges is yet to be determined.
16. Related party transactions
No reportable related party transactions occurred during the six months ended June 30, 2022 (six months ended June 30, 2021: ) other than the remuneration of key management personnel.
22