2 Cheap Cars in Auckland. Photo: Google Maps
Used car dealer 2 Cheap Cars says its brand is well positioned to take advantage of current economic conditions and has revised up its full year profit expectations as a result.
The downturn in the economy had seen strong used car sales in the first five months of 2 Cheap Car's trading year ending in March, which compared with last month's 33 percent drop in new vehicle registrations.
2 Cheap Cars expected to make a full year net profit in a range of $5.2 million to $5.7m, compared with a July guidance of between $4.2m and $5.0m.
The company said strong demand was supported by a healthy inventory, driven up by additional shipping arrangements, in addition to insourcing of some of its border compliance activity, which had had saved on costs and made it possible to replenish stock more quickly.
"We are very focussed on gross margin delivery, and together with strengthening our people capability and successfully navigating supply chain pressures, 2 Cheap Cars Group is in great shape," chief executive Paul Millward said.
Gross margins were up 32 percent in the first five months over the year earlier.
"The leadership team is working well together to deliver, and the brand is particularly well positioned for the current economic conditions that exist in New Zealand."
Millward said efforts to restore the profitability of 2 Cheap Cars Group and shareholder value had progressed more quickly than expected.
The company reported a full year net profit of $1.3m in the year ended March 2023, with no dividend.
However, Millward said the company was on track to pay a dividend in the current year, with a target payout ratio of between 50 percent and 60 percent of underlying net profit.
It will update the market later this month at the company's annual shareholder's meeting on 28 September.