2 Cheap lifts profit guidance

2 Cheap Cars Group Ltd has increased its profit guidance for the current financial year despite revenue in the first quarter dropping by six per cent when compared with the same period a year ago.

The NZX-listed company, which until recently was known as NZ Automotive Investments, says after a solid start to the year it expects to beat its previous net profit after tax (NPAT) range of $3.8 million to $4.2m.

Guidance for the full-year NPAT figure has now been revised to between $4.2m and $5m, 2 Cheap adds in an announcement to the market on July 6.

It also notes unaudited revenue for the three months to the end of June is expected to be $19.6m, a drop of six per cent from the first quarter of the previous year.

However, unaudited NPAT for the quarter is projected to be $1.3m compared with $400,000 a year ago.

Other key figures from the first quarter update include:

• Gross margin expansion is expected to reach 24 per cent, up seven per cent from the total for the 2023 financial year. 

• Gross margin is set to hit $4.7m, up 33 per cent year-on-year despite volumes being down 26 per cent.

• Electric and hybrid vehicles accounted for 52 per cent of sales, compared with 41 per cent in FY23.

Paul Millward, chief executive officer, adds 2 Cheap’s strategy of establishing broader shipping solutions has “progressed favourably to date, with stronger levels of inventory in New Zealand”.

Progress has also been made regarding insourcing a portion of the company’s vehicle compliance requirements.

"The team is super focused, we're clear on what we need to do to realise the full potential of this company,” continues Millward, pictured.

“Gross margin in particular is ahead of the curve and we're managing costs well despite the pressures. 

“There are headwinds and uncertainties especially around foreign exchange trading and supply chain but the team is focused on what matters.”