Margins under pressure
2 Cheap Cars no longer expects to match the net profit after tax (NPAT) levels it achieved in the 2023/24 financial year due to “rapidly changing” market conditions.
The company remains confident that initiatives planned for the second half-year will improve NPAT compared to the first half.
However, the “challenging economic environment means it will not be possible to repeat financial year 2024’s record-breaking performance”, it states in a market update to the NZX issued on September 19.
The company notes that while the lower value used-car market has proven resilient and overall sales volumes are largely stable, consumers are spending less and that has an impact on margins.
David Sena, chief executive officer, says the business remains well-positioned and is trading well.
“The demand for cheaper cars rises as the economy declines and consumers feel the pinch,” he explains. “People still need vehicles but have less to spend. 2 Cheap Cars is well-positioned in this respect.
“But there’s no escaping the cost-of-living crisis is cutting deep and, until recently, interest rates have also impacted customers’ ability to get finance.”
The company is optimistic declining interest rates will help ease consumers’ financial strain and support an eventual recovery in demand in the second half-year. A further trading update will be provided at its annual shareholders’ meeting on September 27.
