Cazoo Group Ltd (NYSE:CZOO) Q4 2021 Earnings Conference Call April 7, 2022 8:00 AM ET
Company Participants
Alex Chesterman – CEO
Stephen Morana – CFO
Robert Berg – Director of IR & Corporate Finance
Conference Call Participants
Rajesh Gupta – JPMorgan
Saim Saeed – Berenberg
Doyinsola Sanyaolu – Citi
David Reynolds – Davy
Operator
Greetings. Welcome to Cazoo’s Fourth Quarter and Full Year 2021 Earnings Call. At this time, all participants will be in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions]. Please note, this conference is being recorded.
At this time, I’ll now turn the conference over to Robert Berg, Director of Investor Relations and Corporate Finance. Mr. Berg, you may now begin.
Robert Berg
Good morning, everyone. Thank you for joining today’s call and webcast to discuss our Q4 and fiscal year 2021 results. You’ll be able to find today’s press release and accompanying presentation on our Investor Relations website at investors.Cazoo.co.uk. We appreciate everyone joining us today. With me on the call is Alex Chesterman, Founder and Chief Executive Officer; and Stephen Morana, Chief Financial Officer.
Before we get started, I would like to remind you of the company’s Safe Harbor language, which I’m sure you’re all familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to different materially. For a further discussion of risks related to our business, please see the filings of Cazoo Group Ltd with the SEC. Now, I will hand over the call to Alex.
Alex Chesterman
Thanks, Rob. Good morning, everyone, and thank you for joining us today. I continue to be extremely proud of what our team has achieved, both since launch and particularly over the last 12 months. 2021 was a landmark year for Cazoo, our second full year of operations, and a year in which we made huge strategic strides towards achieving our mission of transforming the car buying and selling experience across the UK and Europe. Along with listing on the NYSE last summer, we achieved a number of our key strategic goals last year, including bringing our UK vehicle reconditioning in-house, and launching our own in-house car buying channel, where we now purchase a significant volume of cars directly from consumers. We also launched our subscription service, and already have over 10,000 subscribers across Europe. And in December, we launched Cazoo into France and Germany. We continue to put all the strategic building blocks in place to enable us to execute on our ambitious growth plans, whilst also creating significant moats around the business. Whilst we’ve accomplished an enormous amount in just two years, we’re still just at the start of this very exciting journey. We’re more excited now than ever about the future opportunity for Cazoo, and our ability to capture a 5% or larger market share of the huge £300 billion addressable market that we currently operate in. Our customers love the Cazoo proposition, and consistently tell us that they will only consider using us for their next car transaction, which is reflected in our market-leading Trustpilot rating of 4.8 Stars, and this continues to give us increased confidence in both our strategy and the growth opportunity.
Before we discuss recent trends, I’d like to quickly recap the significant progress we’ve made in the two years since launch. We spoke about this in detail on the recent fundraising call. So, I’ll just summarize the key points today. When we launched in December 2019, our mission was and remains to transform the car buying and selling experience across the UK and Europe. As you can see on Slide 4, in just over two years since then, we’ve established a market leading platform, brand, team, and infrastructure, and have already sold over 60,000 retail units in the UK, putting to rest the question of whether consumers are ready to buy a car entirely online. We’ve built a highly trusted brand across the UK, with over 80% national brand awareness. And we now have a world-class team of over 4,500 employees working tirelessly across the group to deliver a materially better car buying and selling experience for our customers. We’ve started to replicate our success in Europe, having launched France and Germany at the end of last year, and the recent acquisitions of Swipcar in Spain and Brumbrum in Italy, have provided us with strong local teams, infrastructure capabilities, and relationships, which will expedite our launch into those markets in the coming months. Combined with the UK, those five key markets we’re focused on, have an addressable market of over £300 billion a year, which we expect to become the largest player in.
On Slide 5, you can see that a significant amount of this progress took place during 2021. In July, we launched our in-house car buying channel in the UK, where we now buy cars online directly from consumers. It’s been performing well ahead of expectations so far, and has materially increased our sourcing capabilities and diversified our buying mix, which will have significant long-term benefits to our GPU. We’ve also recently added service plans to the suite of additional products that we sell at checkout. And that now includes consumer finance, warranties, pain protection, and insurance. And we’re very encouraged by the growth in attachment rates that we’re seeing on these products. In addition to our used car retail proposition, our new car subscription service is resonating extremely well with consumers. And with over 10,000 active subscribers, we are the leading consumer car subscription business in Europe. Importantly, however, whilst we’re driving forward very fast, we continue to maintain extremely high levels of quality and customer service, and are incredibly proud of the exceptional feedback that we receive from our customers every day. Our Trustpilot rating of 4.8 Stars, with 95% of our customers rating us as either excellent or great, is the highest of any player in our sector globally.
Perhaps the biggest strategic step that we’ve made over the past 12 months is bringing UK reconditioning in-house, a challenging process for sure, but one that has significant operational and financial advantages. We now have 11 in-house reconditioning sites across the UK and EU, up from just one at this time last year. Our UK vehicle preparation sites can currently recondition over 120,000 cars a year, and we have the potential to double that volume from those existing sites over time once they are optimized. We now operate 21 customer centers across the UK for collection, distribution, storage, and servicing, and have a fleet of over 250 car transporters for deliveries. The investment we’ve made in our in-house infrastructure will be pivotal to our ability to grow materially over the coming years, whilst maintaining the high-quality experience that our customers love. As a reminder, earlier this year, we also announced the news of our significant additional $630 million of convertible notes funding, a transaction which was a further endorsement of our business and strategy from both new and existing investors who are extremely excited about our progress to date and the huge market opportunity ahead of us. We are now very well-funded for the coming years to continue to capitalize on the huge future opportunity I’m about to remind you of.
As I said at the start of this call, whilst we’ve achieved so much in just two years, we are still just at the start of the journey. As you can see on Slide 6, we’re addressing a massive market opportunity. The UK alone has a used car market of around 8 million transactions a year, with a value of over £100 billion annually. We’re now live in France and Germany, and plan to launch into Spain and Italy later this year. this increases our addressable to around 26 million transactions a year, with a value of over £300 billion annually. Not only is this a huge addressable market with one of the lowest digital retail penetrations, but it’s also an extremely fragmented market, with no dealer having more than a 3% market share, which means that we have a significant opportunity to build a leading brand across Europe in this space. Customers are embracing our offering, and we fully expect to continue to rapidly grow our market share over time. That said, as you can see on the right-hand side of the slide, the market opportunity is so large that with just low single digit market shares and prudent medium-term GPU targets of £1,500 to £2,000, we would have an enormous business generating meaningful free cash flows. Our long-term target, however, is to capture a 5% or greater market share with a £3,000 GPU, which is why we are extremely excited about the future growth opportunities.
I will now pass over to Stephen, who will run through the details of our 2021 performance and future guidance in a little more detail.
Stephen Morana
Thank you, Alex, and good morning, everyone. As you can see on Slide 7, in 2021, we achieved group revenues of £668 million, which were up over 300% year-on-year. Growth was driven primarily by UK retail revenues, which increased 234%, but also by strong performances from our wholesale and other revenue streams. During 2021, we sold 49,853 cars, 233% year-on-year growth, including 34,731 retail units, 187% year-on-year growth. This growth in retail units came despite the move to transition our UK reconditioning in-house, which had short-term impacts on our available inventory, and hence sales. Bringing reconditioning in-house is a huge strategic benefit, and we believe well worth the short-term pain experienced during the transition. We are now already starting to see the benefits of this investment, as we are no longer reliant on third parties for any of our key processes, and have seen our available inventory numbers grow to over 6,000 cars, up from 2,000 in October. To be clear, our inventory challenges at the end of last year had nothing to do with the supply of cars, where we have not seen any issues, but it was all about our ability to recondition cars to the right specification and quality, at the speed required. The increase in website inventory has helped lead to a record start to 2022, as expected, with unit sales of both sequentially and year-on-year.
UK retail GPU was £427 in 2021, a significant improvement compared to the loss of £229 we made in the prior year. Now, I do think it’s worth taking a bit of time to go through GPU in a bit more detail than usual, and try and give a little more insight into the short-term quarter-on-quarter fluctuations you will see in an early-stage business like ours, which is making some big strategic decisions for the long-term. We have stated we see a clear path to £2,000 retail GPU in the medium-term, and we remain confident of reaching this level and beyond, given the steps we’ve taken in 2021. To get there requires a number of small ongoing operational efficiencies, together with some big strategic steps forward.
In the second half of last year, we cleared two of the major strategic hurdles to get our long-term GPU target, the ability to recondition all our cars in-house, and the ability to source a large proportion of cars we sell directly from consumers. Both of these have a significant positive impact on costs and hence medium-term GPU. Reconditioning all our cars internally, allows us to control costs, manhours per car, logistics, and stock turn, much more efficiently going forward. And as Alex said, we launched our car buying channel in July 2021. As a reminder, before then, we only sourced cars from consumers as a part exchange, which accounted for around 2% of the cars sold in any month. We initially set ourselves a long-term target of getting to 30% of the cars sold coming from this route, and we now believe we’ll get to that level much sooner and significantly exceed it over time. We’re very happy with the progress we’re making, but to deliver these two key strategic goals, there has to be a short-term cost, some of which of will flow through OpEx via GPU.
You can see on Slide 8, the investments we’ve made in both these areas weigh on our Q4 ‘21 and Q1 ‘22 UK retail GPU, from which we believe we will start to enjoy the benefits from Q2 ‘22 onwards. On the left-hand side, you can see the short-term impact on our metal margin, which is the amount we make on the car itself due to the launch of our car buying channel. This purchasing channel has two long-term benefits, minimizes the risk, and reduces the cost of supply. To launch this channel in a competitive market, we’ve deliberately over-invested to build the brand and proposition and wow customers, largely through competitive pricing. So, the launch costs for the first six months largely come through the GPU line, rather than through a large marketing or CapEx spend. This resulted in a cohort of cars with a suboptimal gross profit profile, which have worked its way through our inventory, negatively impacting our GPU in Q4 last year, but having more of an impact in Q1 of this year. As a reminder, there’s typically a one quarter lag from purchasing and reconditioning, through to the sale of any vehicle. So, car purchases in Q3 impact Q4 and so on. This is a short-term impact of launching a new product line, which in context, could have had a marketing budget of £5 million, but instead had a GPU impact of a few hundred pounds per car. As a reminder, each £1 million of cost on 10,000 units, for example, while low fairly small in absolute terms, equates to £100 of retail GPU. The long-term benefits are significant. The consumer feedback has been fantastic, and we’ve been blown away by the consumer interest in the proposition. We’re already at almost 30% of cars sold being sourced directly from consumers, and now believe we can double that figure over the long-term.
On the right-hand side of the slide, you can see the effects on our reconditioning cost per vehicle as we brought it in-house. Let’s recap what we did here. Originally, we outsourced our vehicle reconditioning to a third party on a single site. Within the past 12 months, we have fully internalized this and now operate 10 of our own vehicle prep sites across the UK. This has resulted in some short-term additional operational costs as we work to optimize these sites, as well as the obvious CapEx requirements. Combining these two strategic initiatives in H2 last year, has had a double whammy effect on costs, which continued into Q1 this year, given the typical one quarter lag from purchasing and reconditioning through to sale. We believe the impact from investment in the car buying channel and high reconditioning costs, will be highest in Q1. Looking at Q2 and beyond, we have clear visibility on the more recently purchased and reconditioned inventory at lower cost. So, we expect to see a notable increase in GPU for Q2 and beyond.
We have lots of further improvements in place, which will also continue to drive GPU growth during the year. So, let’s just highlight a few of these, many of which can be seen on Slide 9. First, banking a large part of the data we’ve acquired organically since launch, and notably through the acquisition of Cazana in September ‘21, we’re continuing to enhance our buying and pricing strategy. Taking learnings from 60,000 cars we’ve sold since launch, we’re now able to make far more accurate assumptions on vehicle depreciation, desirability, fuel type and the like, at a car-by-car level in order to better predict margin and speed of sale. In addition, from the data we’ve sourced since the launch of our car buying channel, we’re in the process of making specific enhancements to our purchasing model, allowing us to take a more nuanced approach to vehicle condition, while continuing to operate this as our largest single acquisition channel. We’re also using our increased scale to evaluate our relationships with a number of existing buying channels. We believe these changes will have the biggest near-term benefit to our retail GPU.
Second, given we’ve now brought vehicle reconditioning in-house, we’re in a position to implement a number of efficiency-driving measures across all our production sites, in parts and paint supply, staffing, systems integration, and processes. Each of these is expected to reduce vehicle preparation costs and increase capacity. Finance and ancillary revenues have both performed strongly in recent months. There are, however, a number of enhancements to both our finance and car care propositions planned for Q2 and beyond, and we believe these have the advantage that like purchasing or vehicle production, once launched, the benefit is expected to be felt immediately, both by the consumer and in our GPU performance.
It’s worth touching on the current dynamics of the UK used car market, and the impact on retail GPU progression through the year. As you all know, used car pricing has been robust for some time now, thanks to strong demand and the continued shortage of new vehicle supply. 2022 year-to-date has seen low depreciation overall, but our UK retail GPU forecasts, factor in that depreciation will normalize as the year progresses. While moves in car prices have limited impact on GPU over a period of quarters, as the wholesale market moves in tandem with the retail market, there can be an impact within a particular quarter. We are, however, taking proactive steps to try and minimize the near-term impacts from moves in used car prices, by continuing to invest in faster vehicle reconditioning, and in acquiring the most desirable cars. Taking all this into account, while our UK retail GPU is expected to be sequentially lower in Q1 2022, we expect to see material improvements through the rest of the year. With headwinds falling away, and the benefits from actions I’ve just described, we believe the GPU will be up significantly in Q2 ‘22 versus Q1 ‘22, and will approach £900 for the full year. Looking further ahead, as we previously detailed, we have a medium-term GPU target of £2,000 per car. And over the longer term, if we can bring consumer financing in-house, we believe this could expand to £3,000.
Turning to Slide 10, we have no change in overall guidance to what we’ve already said. We’re targeting total retail sales of around 100,000 units for 2022, which, when combined with the ancillary sales and wholesale business, we believe should drive revenues – total revenues towards £2 billion, with year-on-year growth approaching 200%. As discussed, we believe we’ll see continued GPU improvement during the year, with Q1 being our low point, and expect annual UK retail GPU approaching £900. The quarterly GPU will always be impacted by strategic decisions. As a reminder, we’ll not be giving any guidance on EU GPU at this stage. We expect it to be negative for the first year in any market, in much the same way as our first year in the UK, as we grow that business. We are aware of the inflationary pressures facing the UK and EU marketplace at the moment. And whilst we do not believe they should impact topline growth given our current market share, there are obvious risks to the short-term GPU if we see that cost inflation coming through.
Finally, I just wanted to take a moment to highlight our sound balance sheet. In February, we raised $630 million from the issuance of convertible notes through an investor group led by Viking Global. This transaction is a further endorsement of our business and strategy from both new and existing investors who are excited of our progress to-date and the market opportunity ahead of us. Combined with our existing liquidity, we believe that we’re now very well-funded to continue to capitalize on this huge opportunity, and to execute on our ambitious growth strategy over the next 24 months, by which stage we expect our UK business to be reaching profitability. Alex.
Alex Chesterman
Thanks, Stephen. So, in summary, the team has accomplished an incredible amount in the two years since launch, establishing a market-leading platform, brand, team, and infrastructure in the UK, and a strong presence now in the four biggest markets in mainland Europe. we believe that we are very well positioned and well-funded to capture the huge opportunity across both the UK and the EU. And we believe that we’ve put all the strategic building blocks in place, and have seen great momentum so far in 2022, which we expect to continue throughout the year and beyond.
I will now pass the call back to the operator who will open up the line for Q&A. Thanks.
Question-and-Answer Session
Operator
Thank you. Our first question is coming from the line of Rajesh Gupta with JPMorgan. Please proceed with your questions.
Rajesh Gupta
Hi. Good morning, good afternoon. Thanks for taking the question. Just for the initial question on contingency planning for this year, there’s increasing concerns around inflation, affordability, maybe a recession. If the macro environment does deteriorate, and the slide at the back of the deck on the prior cycle was helpful, but maybe if you think that things could be different this time around, if there is a downturn, can you talk about like the levers you might have to protect GPUs, expenses, and maybe cashflow, and have a follow-up. Thanks.
Alex Chesterman
Yes. Thanks, Rajesh. I’ll make a couple of comments on that, and then I’ll let Stephen add to it. So, from – in terms of inflation, we don’t think that there’s going to be a material impact on GPU. There are certain other cost areas of the business that could see inflationary pressures, but unlikely to have a huge impact, we think, on GPU, but it’s unpredictable, obviously, depending on which areas are hit. I think if you look at the – sort of the macro recessionary potential, used cars have historically performed relatively well in a recessionary environment. New cars tend to be much more affected as a discretionary or luxury purchase, whereas used cars are functional. And you see that in the slide you referred to in the appendix. So, we think as Stephen referred to, from a topline perspective, given our very small market share and strong growth trajectory, we think topline is unlikely to have – be material affected by a downturn. And we have a number of ways – we raised a significant amount of money earlier this year, as you know, which gives us a very long runway. And we have a lot of levers that we can pull in terms of cost savings if things – if that’s required. So, I think we’re in relatively good shape to weather any potential storm that may come. Stephen?
Rajesh Gupta
Thanks, Alex. Maybe on the cost side …
Stephen Morana
Yes, I think nothing really to add from my side.
Rajesh Gupta
And just maybe on the cost side, any color you can give us around today, what’s the fixed, what’s the variable component like, just to understand like how much flexibility there could be?
Alex Chesterman
Well, a significant portion of our spend obviously is in marketing. And Stephen, you might want to talk to some of the other areas.
Stephen Morana
Yes. If we just look at the cost of sales line, obviously the biggest spend itself is the cars that we buy, the metal cost of them. And any inflationary pressures on them, you’d argue, would flow through into the sales price that we generate. So, we don’t see – inflationary pressures on car prices shouldn’t really impact us. Obviously, the cost of sales line includes the work that we do on cars, the refurbishment costs from a people perspective, from a parts, from a paint, and they could be obviously under some inflationary pressures over time. As Alex said, marketing is a big spend. A lot of our costs are pre-booked. I wouldn’t expect many inflationary repressions there. But it’s hard to predict at the moment. I think as an industry, we’re in relatively good shape. And as a business that’s pretty nascent as we are, even if the industry contracts, we don’t have that much concern because we think we’re still taking significant market share from a low base. So, I think it’s more around individual cost lines, where there could be some movement in the short-term, but we’ll just have to see how that plays out.
Rajesh Gupta
Got it. And in terms of like some of the SG&A components, like the administrative expenses, that’s a pretty healthy expense item. I mean, any sense of how much of that is like fixed versus variable?
Stephen Morana
Sorry, I struggled to get that. Can you just repeat that one again, please?
Rajesh Gupta
Yes. So, within the cost structure within the SG&A expenses, the administrative expenses is a pretty big bucket of those expenses. So, I was curious if there is any color you could give us on the fixed versus variable expense component of that. I’m just trying to get a sense of like how much flexibility that is a flex to that cost bucket, if there is some pressure or like what …
Stephen Morana
So, a lot is heads. Apologies. Yes. A lot is heads – so, on the SG&A line, a lot is heads, a lot is marketing, and marketing really splits into two amounts, the above the line, which is relatively fixed deals that have already been in place, sponsorships that are in place where there won’t be inflationary pressures in the short-term, and then your PPC, your specific targeted marketing for which that could be inflationary pressures. And then other kind of SG&A costs, some of the logistics could come under pressure as well in the short-term, if you’re looking at kind of energy costs as well, cost of oil, et cetera. But they’re a smaller proportion of that overall SG&A line. A bigger proportion is marketing and those heads.
Rajesh Gupta
Understood. Great. Thanks for the color. I’ll jump back in queue and let others ask their questions.
Operator
Our next question is from Saim Saeed, a Private Investor. Please proceed with your questions.
Saim Saeed
Hi. Thank you for taking my questions. I suppose my first is about that 60,000 retail unit sold up until now figure. I just want to correctly interpret that. If that’s as of April, I guess that implies a floor of say 13,000 retail units that was sold in Q1 2022, if you subtract 60,000 with the cumulative units sold up until Q4 ‘21. So, that’s around about a 50% quarter-on-quarter growth rate. I’m just curious to understand, how do you expect say the quarter-on-quarter growth rate to progress during the year if you want to say achieve that 100,000 retail unit target in 2022? Secondly, it’d be quite useful to understand that in terms of the 250,000-capacity figure you’ve given for the UK, and 120,000 that’s actually usable, any idea of when do you expect to sort of phase your investments to get to that 250,000 figure? And finally, in terms of the UK wholesale unit mix, in Q4 it’s sort of nearly 50% versus retail. And I guess in Q3, it had also risen to 30% versus 20% earlier. Longer-term, can we expect to sort of stay at 30%, or would we expect it to go back to 20% that we saw in earlier quarters? Thank you.
Alex Chesterman
Great. Yes, let me pick up on some of that, and then I’ll let Stephen jump in. So, I wouldn’t read too much into the 60,000 retail units number. It’s a round number that we’ve just generally typically – we’re not announcing an actual number there. So, I wouldn’t use that number and make any subtractions from it. We’re saying that we’ve sold well over 60,000 units since launch, as opposed to giving a specific number that you can deduce Q1 from. In terms of the reconditioning capacity growth from the doubling from the 120,000 plus a year in the UK to 250,000, that is a month-on-month increase that we’ve been seeing throughout this year, and we’ll continue to see as a number of things happen, as we reorganize the sites and remove the third-party partners that were on those sites when we bought them.
So, they were at 100% capacity for non-Cazoo work six months ago when we bought one of those businesses in September, and they’ll – in six months-time, they’ll be 100% dedicated to Cazoo as we line up end-to-end processes, add all those sites, as we add additional shifts. So, there’s a lot of optimization being implemented on those sites. And so, there’s no one thing and there’s no one site. So, that’s happening across all 10 UK sites and just taking steps in that direction. Continually, wholesale mix in Q4 was higher than we expected to be long-term. We deliberately, for reasons that Stephen alluded to earlier, in terms of the reconditioning constraints that we had in the latter half of last year, we decided not to continue to sit on inventory for too long. And therefore, we sold more through wholesale than we ordinarily would. I would expect the long-term number to be in the 20% to 30% range, not in the 40% to 50% range.
Saim Saeed
Got it. Thank you. And if I may just have another quick follow-up question. If we were to say look at retail average selling price and wholesale selling price, it increased quite significantly in this quarter. Would you be able to give us an idea of how much of that is due to general used car inflation pricing increasing, and how much of it was due to sourcing more from consumers? Thank you.
Alex Chesterman
It was more mix than general price appreciation. I mean, we saw some appreciation in the second half of last year. As everybody knows, that’s been a global phenomenon. We’re starting to see the air come out of the tires a little bit now. And so, was a little bit of price deflation. As Stephen said, we’ve built that sort of depreciation on retail price into our model. So, expect to see that happening a little bit throughout this year. But no, it’s more related to mix of what we were buying and selling then. There’s an element of market in it, but that’s not the lion’s share.
Saim Saeed
Okay. Thank you very much.
Operator
Thank you. [Operator instructions]. The next question is from the line of Doyinsola Sanyaolu with Citi. Please proceed with your questions.
Doyinsola Sanyaolu
Hi. I had a couple of questions, and then I will jump back into the queue. My first one was on your view on the outlook for market supply and pricing, just because I feel like we started to see it stabilize at an elevated level. And the second was around web traffic, because we’ve kind of seen it soften. Have you seen any change in your demand from consumers? Thank you.
Alex Chesterman
So, I’m not sure I entirely heard the first question, but if it’s related to sort of retail used car pricing, which I think it is, then I would say we’ve seen a continuous increase in pricing for the last 18 months, again, as Stephen mentioned, mostly related to excess demand because of shortages in the supply chain and new cars. That continued a little bit in Q1. We’re starting to see that trend reverse, and I think there’s potential for further supply chain issues in the new car market. So, we don’t expect the market to give back all of its gains this year, the last 18 months gains, but we certainly expect it to normalize over the next 12 to 24 months. And we think prices will get back to a normalized level. In terms of web traffic, that’s really a factor of the mix of the marketing and seasonality that we do. And no impact on our – on retail units and sales, and we’ve had, as we said, very strong momentum and hitting record levels so far in 2022 in terms of sales.
Doyinsola Sanyaolu
That’s great. Thank you.
Operator
Thank you. I would just like to take a moment to mention that Saim Saeed is from Berenberg. My apologies. And we do have another question coming from the line of Doyinsola Sanyaolu with Citi. Please proceed with your follow-up.
Doyinsola Sanyaolu
So, my next question was, in terms of the bottleneck on the refurbishment, do you feel like you are fully coming through that, and what do you see as the main challenges over the next 6 to 12 months?
Alex Chesterman
Yes, we do feel like we’ve certainly overcome it. If you look at our website inventory, which is the best reflection of how quickly we’re able to recondition cars to keep up with the demand of selling them, if you think about how our business works, on any given day, we have to recondition as many cars as we sell, just for our inventory to stand still. So, what happened between August last year and October last year is, we were selling more cars every day than we were able to recondition. And we saw our inventory slide from about 3,500 cars in the summer, to about 2,000 cars in October. Now, that didn’t mean we weren’t reconditioning a lot of cars. We were. We were reconditioning 3,000 plus cars a month. We were just selling more cars than we were reconditioning on any given day. If you look at what’s happened since then, we finished December with about 4,500 cars on the website, up from 2,000 in early October, which shows that we were able to keep pace with sales and add to inventory. And if you look at what’s happening in Q1, we’ve grown from 4,500 to 6,500, whilst also setting record sales levels. So, not only have we been able to keep up with our highest level of sales in Q1, but we’ve also been able to add to inventory. So, I think that sort of is the best indication of the bottleneck is largely through. Now, we’re not where we want to be, because as we’ve said, we want to be at 250,000 cars a year, rather than 120,000, but we don’t need to be there yet. So, I think that bottleneck has been solved. So, I’m not sure if there was a second part to the question.
Doyinsola Sanyaolu
Yes, that was my first question. I actually had two more questions, if that’s okay. The first was, in terms of how – expect unit growth to go across this year to get to 100 units, how is that going to be saved through the quarters? And do you see any like major risks to that?
Alex Chesterman
So, it obviously grows quarter-on-quarter in line with our growth in reconditioning output. And what we see, and the reason we have – are seeing record sales, is because if we have the right inventory and we price it sensibly, we’re able to sell it. And we’ve said this many times before. We have not seen any demand constraints within our business. If we have great cars, we price them sensibly, consumers love the proposition and offering, we sell those cars. So, as you can see, the reconditioning capacity grow month-on-month. So, the inventory on sites will grow month-on-month, and the unit sales will grow. So, you would expect to see obviously a significant quarter-on-quarter uptick, and the second half of the year, much stronger than the first half of the year. And we don’t see a lot of sort of risk to being able to produce those cars, and neither do we see a lot of risk to being able to sell them, despite the macro issues that we’ve discussed because of the resilience of the used car market sensible pricing. So, we are – that’s why we’re sort of increasingly confident of not only our guidance, but also our medium-term market share and retail GPU opportunity.
Doyinsola Sanyaolu
Thank you. I have one last question and then I will be quiet. It was just around, I know now you’re in all of the major European markets, but did have any further M&A requirements? And is there anything else you need to – you feel like you might need to do to establish your footprint in Europe? Thank you.
Alex Chesterman
Yes. So, that’s a great question. And I think that the sort of the key word there is, do we have any M&A requirements, anything we need to do? And the answer is no. Whereas historically, all of the M&A that we did, we did need to do. In order to establish the infrastructure across the UK organically to get to 10 reconditioning sites in the UK, would have taken us a very long time. So, we needed to do M&A to take reconditioning in-house in order to launch this year into Italy and Spain, to have teams on the ground, and to be able to get that, we needed to do M&A to do that. So, no. We have- those key markets in – the four biggest markets France, Germany, Italy, Spain, in mainland Europe, plus the UK, are the five markets that we’re focused on. We have the infrastructure that we require. We have the teams that we require. So, we don’t need to do any M&A, and I don’t expect us to do M&A at anything like the pace that we did over the last 18 months. It’s not to say we won’t do anything. We’re always exploring opportunities to accelerate growth and enhance infrastructure and things like that, but certainly we wouldn’t expect that the volume of M&A transactions to look anything like it has over the last 18 months, as we were putting those building blocks in place. Now we have them largely in place, so there’s nothing more we need to do in Europe.
Doyinsola Sanyaolu
Thank you very much for answering all of my questions.
Operator
Thank you. We do have a question from the webcast coming from David Reynolds at Davy. He asks, how has the competitive dynamic changed through 2021 in both the UK and continental Europe?
Alex Chesterman
Thanks for that question, David. So, actually, the competitive dynamic has remained largely the same in that there is one other key competitor in the UK and one in mainland Europe, Cinch in the UK, Autohero in mainland Europe. But as we’ve said many times before, it’s really not that – that’s not the competition, because all of these businesses are sub 1% market shares, and all of these businesses are going after the 99% opportunity. And so, they’re not really competing with each other. They’re reinforcing each other’s message of the sort of the new way to buy and sell your car. But as we’ve seen, this is a complicated business that requires multiple different skillsets and incredibly deep pockets in order to execute very well and build a brand and build the infrastructure, et cetera. So, we haven’t seen sort of new competitors emerge, and we continue to think that it’s helpful to have a couple other players in each market. But we’re going after the 150,000 plus offline dealers, is the opportunity for us, the 26 million transactions across those five markets. The fact that another player has 30 or 40 or 50,000 of those 26 million transactions, is not relevant from a competitive standpoint.
Operator
Thank you. The next question is, how do you see interest rates affecting the debt-heavy model? Will this affect the stocking loans?
Alex Chesterman
So, interest rates have a number of impacts. Stocking loans, yes, as interest rates go up, the cost of carrying a car goes up marginally, but it is very small. We hold the cars for days rather than months or years, 30 to 60 days. And I always say, sort of slightly flippantly, but it has been true that we spend more on the predelivery valet of the vehicle before we deliver it to the customer, than we do on the stocking – on the financing of the vehicle during the period that we stock it. So, it’s not a material number. The other impact of higher interest rates could be on consumer finance and attachment rates. But actually, what we’ve seen is very strong finance rates during the – so far in 2022. And we think, again, looking at sort of historic numbers, as you have a cost-of-living increase and a squeeze on consumers, they tend to buy more on finance than otherwise. So, we think that there’s a potential upside in terms of consumer finance attachment rates through – with inflation and cost of living issues, et cetera.
Operator
Thank you. Our next question is from Rajesh Gupta with JPMorgan.
Rajesh Gupta
Great. Thanks for getting me back into queue. I just had one follow-up on the 2022 guidance on the GPU. Is there any way for us to bridge how much of that is just the metal margin versus the financing and service contract, et cetera? Or maybe like if you could bridge the 2021 to 2022 in terms of how much of those individual components contribute. Thanks.
Alex Chesterman
I’ll leave that one for Stephen.
Stephen Morana
Yes. We don’t break out specifically the difference between the metal and the non-metal. Over time, when we say getting towards 2,000, you’d expect to roughly 50-50. So, I think for now, the non-metal will be higher than the metal element. I think metal will grow more during the course of the year, for all of the reasons we touched on. So, the strategic initiatives of last year, bringing refurbishment in-house and launching the Cazoo kind of buying channel direct from the consumer, will mean that quite a bit of the growth towards the second half of this year will be coming through the metal line.
Rajesh Gupta
Got it. Okay, great. Thank you, and good luck.
Operator
Thank you. At this time, this will conclude today’s teleconference. We thank you for your participation, and for joining today’s webcast. You may disconnect at this time. Have a great day, everyone.
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