2 Cheap Cars FY26 revenue steady at $81.7m with NPAT of $3.2m

Profit Holds Firm Despite Regulatory Headwinds

2 Cheap Cars Group (NZX:2CC) reported a net profit after tax of $3.2 million for the year ended 31 March 2026, almost unchanged from the prior year’s $3.3 million. This steady result came despite a challenging environment marked by increased costs associated with New Zealand’s Clean Car Standard, which alone shaved an estimated $1.7 million from earnings.

The company’s revenue held steady at $81.7 million, down a marginal 0.3%, while vehicle sales declined to 7,239 units from 7,675 the previous year. The muted volume reflected subdued consumer confidence and ongoing pricing pressures in the used vehicle market.

Second-Half Surge and Operational Discipline

The story of FY26 was a marked turnaround in the second half. Improved procurement conditions, stronger vehicle margins, and record-breaking finance and insurance (F&I) penetration rates underpinned this momentum. Insurance penetration hit a record 44%, up from 36% the year before, significantly boosting profitability.

2 Cheap Cars’ vertically integrated model, anchored by its Japanese sourcing subsidiary Car Plus K.K., continued to deliver inventory quality and margin optimisation advantages. The company also implemented operational efficiencies, including a hybrid compliance strategy combining internal and outsourced resources, which helped contain expenses amid inflationary pressures on rent, employment, and utilities.

Carbon Credits and Regulatory Impact

Carbon credit costs under the Clean Car Standard remained a drag for much of FY26, compressing margins especially in the first half. However, changes to carbon credit settings late in the year eased this burden, supporting profitability on vehicles imported and sold under the revised regime. The group fully utilised its remaining carbon credit intangible assets during the year, reflecting a shift from credit generation to net purchasing.

Balance Sheet and Cash Flow Stability

At year-end, 2 Cheap Cars held $3.8 million in cash and increased inventory investment to $18 million, reflecting confidence in procurement opportunities. Total equity rose to $22.15 million, while borrowings decreased to $751,000. Operating cash flow remained positive at $4.2 million, albeit down from $6.7 million the prior year, partly due to higher working capital tied up in inventory.

The company maintained compliance with all banking covenants and continued to manage lease liabilities prudently, with right-of-use assets and lease liabilities increasing in line with property and equipment leases.

Dividend and Outlook

In line with its dividend policy, the board declared a final gross dividend of 3.99 cents per share, bringing total FY26 dividends to 6.14 cents per share. This payout represents roughly 60% of second-half NPAT and offers a yield near 10% based on the current share price of $0.62.

Looking ahead, early FY27 trading is described as encouraging, with the company cautiously optimistic despite ongoing macroeconomic uncertainties including inflation, interest rates, and fuel costs. Chairman Michael Stiassny highlighted the group’s disciplined inventory management and flexible sourcing as key strengths to navigate the volatile market.