2 Cheap Cars has opened FY27 with a sharp lift in unaudited profit and margins, even as vehicle volumes declined. The improvement arrives alongside Sena & Co’s increased NZ$0.90-per-share takeover offer, which remains conditional on reaching 90% voting control by 30 September.
- Unaudited FY27 NPAT rises to NZ$2.3 million in five months
- Gross margin improves to 25% despite 2% fewer vehicles sold
- Sena & Co increases takeover offer to NZ$0.90 per share
- Offer has received acceptances for 12.525% of shares
- FY26 revenue remains broadly flat at NZ$81.7 million
FY27 Profit Improves Before Takeover Deadline
2 Cheap Cars Group Limited (NZX:2CC) has started FY27 with a marked improvement in profitability, reporting unaudited net profit after tax of approximately NZ$2.3 million for the five months ended 31 August, up from NZ$0.8 million a year earlier. The gain came without volume growth: vehicle sales fell 2% to 3,010, while revenue increased 5% to NZ$35.1 million.
The more important movement was in margins and finance income. Gross margin rose to 25% from 19%, and finance penetration increased to 39% from 31%. Operating cash flow was unchanged at NZ$1.5 million. Management said the improvement reflected better margins and higher finance penetration rather than increased vehicle volumes, with a strong NZ$1.7 million first quarter followed by approximately NZ$0.3 million in both July and August.
NZ$0.90 Offer Still Needs 90% Control
The operating update sits beneath a more immediate shareholder decision. Founder and director David Sena, through Sena & Co, lifted its full takeover offer from NZ$0.80 to NZ$0.90 per share on 16 September. As at 5pm on 22 September, acceptances had been received for 12.525% of the shares covered by the offer.
The offer remains conditional on Sena & Co receiving acceptances that, together with its existing holding, would give it at least 90% of 2 Cheap Cars’ voting rights by 11:59pm on 30 September. The independent directors continue to recommend acceptance, citing the offer’s position within the independent adviser’s valuation range of NZ$0.71 to NZ$0.90, the premium to pre-announcement trading levels and the illiquidity of the shares. No competing offer has emerged.
Flat FY26 Result Masked Second-Half Recovery
Against that transaction backdrop, FY26 was a year of resilience rather than expansion. Revenue was broadly flat at NZ$81.7 million, NPAT eased to NZ$3.2 million from NZ$3.3 million, and operating cash flow fell to NZ$4.2 million from NZ$6.7 million. Gross margin slipped to 21.3%, while gross dividends increased to 6.14 cents per share and underlying earnings per share remained at 7 cents.
The annual numbers concealed a stronger second half. Quarterly NPAT rose from approximately NZ$0.2 million in the first quarter to about NZ$1.1 million in each of the final two quarters. The company said improved vehicle margins, procurement, finance and insurance performance supported the recovery, while Clean Car Standard costs eased in the final quarter. It estimated the standard reduced FY26 NPAT by approximately NZ$1.7 million relative to FY25.
Branch Consolidation Meets Persistent Cost Pressure
2 Cheap Cars is reshaping its retail footprint around larger and more productive locations. It has opened a larger Wellington branch, secured a Christchurch refurbishment hub, closed underperforming sites in New Lynn, Westgate and Palmerston North, and opened Henderson ahead of the planned closure of Penrose. Sylvia Park is being developed as a flagship location, with the company expecting to have 10 branches from 1 October.
The next phase also includes more direct purchasing through Japanese subsidiary Car Plus KK, a reconfigured Auckland hub, digital tools to track stock and bottlenecks, and AI applications for vehicle selection, pricing and operational decisions. The company is developing a new brand campaign, but has not attributed any sales or profit gains to it because the campaign is still in development.
Demand Remains Uneven Despite Better Margins
Management’s FY27 stance is deliberately guarded. Consumer demand remains subdued and price-sensitive, competition for quality Japanese stock is strong, and lower-priced Chinese new vehicles add pressure. Clean Car Standard charges continue to affect margins despite being significantly lower than in FY26, while finance and insurance conduct requirements are increasing.
The early profit improvement is therefore encouraging but not yet a full-year trend. The immediate catalyst is the 30 September acceptance deadline for the conditional takeover offer; beyond that, the harder test will be whether 25% gross margins and stronger finance penetration can persist while volumes remain soft.
Bottom Line?
The takeover deadline is the near-term binary event, while the business case rests on whether margin gains can survive uneven demand, regulatory costs and competitive pressure.
Questions in the middle?
- Will Sena & Co secure enough acceptances to reach the 90% voting-rights condition by 30 September?
- Can the 25% gross margin and 39% finance penetration be sustained beyond the strong first quarter?
- Will branch consolidation and refurbishment investment improve returns without tying up more cash in inventory?