Good morning, everyone. My name is Michael Stiassny. I'm Chairman of 2 Cheap Cars Group Limited. It's now 10:00 A.M., and I'm pleased to open the 2 Cheap Cars Annual Shareholders Meeting. On behalf of my directors, welcome to all of you. With me this morning are Executive Director and CEO, David Sena, Director Gordon Shaw, and our Chief Financial Officer, Angus Guerin. Our lawyers from MinterEllisonRuddWatts and our auditors, UHY Haines Norton, are also present online. As we outlined in the notice of meeting, the board acknowledges there are advantages to holding in-person meetings. However, the associated costs are increasingly prohibitive and do not, in our opinion, deliver value to all shareholders. Hence our decision to hold this meeting online. We appreciate your understanding and are pleased to see shareholders from around New Zealand joining us. A couple of housekeeping matters.
We ask that you follow the information provided in the notice of meeting regarding voting and asking questions. Should you require assistance, you can type your query and one of the Computershare team will assist, or alternatively, you can call Computershare on 09 488 7804. Please note that only shareholders and proxies can ask questions and submit votes. You can submit questions via Computershare at any time during the meeting. If you have a question, click the Q&A tab on the right half of your screen, type your question into the field, and press Send. Your question will be submitted immediately. Specific questions on any of the resolutions to be considered will be answered as the relevant resolution is put forward, while general questions will be addressed later in the meeting. The Q&A tab can also be used for immediate help if you need assistance.
Submit your query in the same way, and a few Computershare representatives will respond directly to you. Please, however, note questions may be moderated, or if we receive multiple questions on a topic, they may be amalgamated. If we run out of time to answer all questions during this meeting, we will answer them directly via email and post all responses on our website. To any media present online, please get in touch with us after the meeting if you have any questions. Voting today will be by way of poll on all items of business, and to provide you with plenty of time, I will shortly open voting for all resolutions. If you're eligible to vote at this meeting, you'll be able to cast your vote under the vote tab. To vote, simply select your voting direction from the options shown on the screen.
You can vote for all resolutions together at once or for individual resolutions. When the tick appears, your vote has been cast. To change your vote after that time, simply select Change Your Vote. You can do this until clear votes are closed, and it'd be great if we could do that in general elections. I'm now declaring voting open on all items of business. The resolutions will be opened in the vote tab. You may submit your votes at any time, and I will let you know in advance that voting will be closing. Here is today's meeting agenda. Gus will provide a quick overview of last year's performance, the progress we've made in recent months, and how the business is responding to tough trading conditions.
While David has overseen the operational and strategic content, he has asked Gus to speak on his behalf to ensure the information is fully and easily understood by everyone. Following these questions, we will then move on to these presentations. Sorry, we will then move to the formal resolutions set out in the notice of meeting, followed by general business and questions. Okay, let's now move to the formal part of the meeting. Are there any apologies? Thank you. The company's constitution prescribes a quorum requirement of five shareholders present in person or by representative participating by audio, audio and visual, or electronic means. As confirmed by Computershare, this requirement has been met. Twenty shareholders holding a total of 38,458,075 shares have appointed proxies. The appointed proxies represent 84.42% of all shares.
In my capacity as Chairman of the meeting and in my own name, I hold proxies for 15 shareholders representing 38,334,575 shares or 84.15% of all shares. I'm talking to myself. I intend to vote all undirected proxies I have received in favor of all three resolutions. The annual report was made available on 2 Cheap Cars Group Limited website on June 27, 2025. The notice of meeting was uploaded to the NZX and sent to shareholders and persons entitled to receive it on August 28, 2025. I propose that we take the annual report and notice of meeting as written. It's fair to say that FY25 was a year of challenges and lessons. It was marked by a combination of continuing recessionary economic conditions, a sharp decline in immigration, a key consumer group for our business, and the impact of an uncertain regulatory environment.
Collectively, these factors created a difficult operating environment that required us to reassess our approach and become much more agile. Revenue declined by 6% to $82 million, reflecting the broader pressures facing almost every facet of New Zealand's economy. While the company was able to maintain stable finance and insurance penetration rates and to largely preserve contribution margin through increasing internal efficiencies, gross margin did decrease from 24% to 22%. This decline was driven by pricing pressures and shifts in consumer behavior, which could not be fully offset. Whilst clearly not a stellar performance, we are pleased to see that 2 Cheap Cars Group Limited remains cash flow positive and able to declare a total dividend for FY25 of $0.0603, which was no small feat. As outlined in our annual report, we cannot ignore the significant external cost increases that also impacted our bottom line.
The escalation of fees from third-party listing platforms has become a material drag on our profits. In response, we are now prioritizing the improvement of our direct-to-consumer digital channels to reduce our reliance on expensive intermediaries. In FY25, the removal of the Clean Car discount initially led to weaker sales of hybrid and electric vehicles. When the Clean Car Standard fees increased, they were once again floating on the market. The impact of the Clean Car Standard on both new and used imports in terms of the total cost of car and credits is and will continue to be significant. This has necessitated the need to reassess our buying strategy. We have responded by ensuring our Japanese procurement team is even more strongly focused on buying fuel-efficient and late-model cars that attract fewer carbon credit costs.
We are expanding our local vehicle acquisitions through trade-ins and wholesale channels to diversify our inventory and further reduce our exposure to the regulatory risks associated with carbon credits. Gus will talk more about the progress we have made in these areas shortly, but suffice to say they're not just tactical moves, but they are strategic necessities to support this company's long-term sustainability. As we navigate the continuing economic headwinds in FY26, our priorities are clear. We must continue to improve execution. This means identifying further operational efficiencies and ensuring our business remains aligned with our strategic goals. Secondly, we need to reduce our reliance on high-cost third-party listing platforms and invest in our own digital capabilities to build a scalable and sustainable sales engine. Finally, we need to have a razor-sharp focus on safeguarding margins in what is an increasingly competitive and expensive environment.
We remain confident that the core ethos of 2 Cheap Cars, providing affordable, quality vehicles, remains as relevant as ever. However, 2025 served as a reminder that profitability is not guaranteed, even when the product meets market needs. To protect and grow earnings, we need to innovate, control costs, and strengthen our digital engagement to continue developing a direct, scalable, and sustainable sales model that positions us well for the years ahead. Before Gus takes you through our FY2025 results and updates, I would like, on behalf of the Board, to thank everyone at 2 Cheap Cars for their hard work. It has been exceptionally tough, but our balance sheet is strong. Our business remains resilient to navigate it and to succeed in the challenges ahead.
Thanks, Michael. It's a pleasure to be here today as CFO and to share David's presentation on the operational aspects of 2 Cheap Cars Group Limited. FY2025 was a challenging year for the company. The cost of living crisis and persistently high interest rates significantly impacted our customer base, while external costs to the business also continued to rise. Revenue for the year was $82 million, a 6% decrease from FY2024's $86.8 million, reflecting industry-wide affordability pressures, lower sales volumes, and retail pricing. Net profit after tax was $3.3 million, down 47% from the prior year's $6.2 million. While this result is below FY2024's record performance, it does demonstrate resilience in a difficult economic environment. The board declared a total gross dividend of $0.0603 per share, consistent with our dividend policy, but down from $0.1156 in FY2024. Underlying earnings per share were $0.07 compared to $0.14 in FY2024.
Operating cash flow, excluding lending, remained stable at $6.7 million, slightly below last year's $6.9 million, supported by efficient working capital management. Contribution margin of 14% declined 14% to $17.8 million, and gross margin reduced by 2% points to 22%, primarily due to competitive pricing pressures. These challenges were partially offset by further efficiency gains in our vertically integrated supply chain. These results reflect tough trading conditions, and as Michael highlighted, we are adjusting our strategy to ensure we are managing costs and protecting margins as tightly as possible in order to position the business to fully capitalize as market conditions improve. Looking at our market dynamics, while market conditions remain difficult, there are several positive trends that are supporting us. Firstly, interest rates. As you'll know, the Reserve Bank has cut the official cash rate to 3%.
That's the lowest in three years, and they've signaled a possible further reduction to 2.5% by year-end. This is making car finance more accessible, with the average finance sale rates down over 3% in the past year, which is materially reducing customer borrowing costs and improving affordability. Secondly, foreign exchange. The New Zealand dollar remains relatively strong against the Japanese yen, currently trading in the $86 to $88 range. This strength helps our vehicle acquisition costs, benefiting our largely import-based business. Third, public to dealer sales. Across New Zealand, we continue to see strong volumes of private sellers supplying stock directly to dealers. While this source has historically not been a major part of 2 Cheap Cars Group Limited's procurement strategy, it will play an increasingly important role to improve our resilience. However, we are facing some challenges. Firstly, and probably most importantly, carbon tax.
As Michael Stiassny alluded to, the Clean Car Standard continues to impact both new and used imports. In FY2025, our carbon credit costs reached $1.1 million. For FY2026, despite a growing hybrid mix, we expect these costs to exceed $2 million. Secondly, immigration. Net migration has slowed sharply. The net gain for the year ended March 31, 2025 was just 26,400. It was down from 100,400 in the previous year, and it fell further to just 13,700 by June. Excluding COVID, this is the lowest in over a decade. Fewer migrants mean fewer new customers. Finally, cost of living. While inflation is now within the Reserve Bank's 1% to 3% target, household budgets remain under pressure. Rising costs for essentials like food, energy, housing, and insurance are limiting discretionary spending across all sectors. Turning to our strategy, the 2 Cheap Cars Group Limited strategy is simple.
It's comprised of five distinct areas, all interconnected, and each playing a role in driving sustainable profit growth. It continues to serve us well. However, to meet the challenges of the current market and drive growth, we understand the need to be more flexible, and we are required to adapt to thrive. While the headlines have not changed, we have been responsive, and we've tweaked the strategy to ensure that where gains can be made, they will be. In our supply chain, the new funding arrangements we announced in FY2025 are enabling us to increase volume through our Japanese subsidiary, Car Plus K.K. We are also continuing to systemize the buying process, and as touched on earlier, we are expanding local vehicle sourcing.
Trade-ins and purchasing New Zealand vehicles will provide a competitive source of stock, complement our imports, increase flexibility around our network, and assist in reducing carbon credit costs. For our retail footprint, we're concentrating on high traffic yards with maximum visibility and consolidating smaller underperforming sites to strengthen the network. Our flagship dealerships at Green Lane and Sylvia Park are the blueprint for the future. On gross margin, we're managing mix and pricing carefully to ensure we can pass on carbon credits, improving productivity and lifting finance and insurance penetration rates. We'll also help to enhance our profitability. Our rebuilt website is now our core digital asset, reducing our reliance on expensive third-party listing platforms. It's helping us to drive sales, deepen engagement, and fundamentally improve the customer experience. We're also working towards unlocking more value from our strong 140,000-plus social following.
As a business, 2 Cheap Cars Group Limited remain disruptors at heart and will continue to challenge conventions, test new ideas, and remain agile to meet the market. Finally, we're building capability from within, strengthening our people, systems, and leadership to support sustainable growth and performance. Turning to our new yards, our newly opened sites are already proving their worth. Our Green Lane site opened in March 2025 and has sold 242 cars, generating year-to-date revenue of $3.4 million. Importantly, Green Lane is also leading the group with the highest per-car margin, showing both the strength of the location and the efficiency of the team. Our Sylvia Park site opened on the 1st of August 2025, and in its first month of trading, sold 136 cars and achieved $1.5 million in revenue.
Looking ahead, we're projecting sales volumes to continue to grow as the site is fully ramped up, particularly with the added foot traffic expected when IKEA opens nearby in December. In summary, both Green Lane and Sylvia Park demonstrate the success of our new strategy to expand into high-traffic, high-profile locations. They're not only contributing strong revenue today, but also positioning us well for future growth. Turning to vehicle supply. In Japan, our subsidiary Car Plus K.K. now employs seven specialist buyers and a dedicated logistics manager. Over the past year, we've grown direct purchases from just 25% to more than 80%. That scale of progress simply wouldn't have been possible without our new banking arrangements with ANZ.
While competition from other global regions is putting pressure on prices, the skills and local knowledge of our team on the ground give us a clear competitive edge over other New Zealand importers. Over the past quarter, we've placed much greater focus on domestic purchasing. Our purchasing center at Sylvia Park will become a key part of the strategy, making it easier for New Zealanders to sell their vehicles directly to us. We've also strengthened our online platform, making it easier and more transparent for our customers to complete transactions. To drive awareness of this, we've increased our advertising, highlighting the convenience and value of selling cars to 2 Cheap Cars. Together, while still in their infancy, these initiatives are building a stronger local supply base to complement our offshore purchasing. Turning to our digital footprint. As we signaled last year, we've completely rebuilt our 2 Cheap Cars website.
This wasn't just about design, it's about speed, it's about usability, and putting us in control of our digital future. With the rebuild, we've moved to best practice standards, creating a site that's much faster, more reliable, and delivers a seamless experience for our customers. Our homepage is cleaner, faster, and mobile-first, and customers can now access vehicles, deals, finance, and dealership information in just a couple of clicks. We've introduced smart search with four ways to find cars, from quick keywords to full advanced filters like price, odometer, and location. Finance applications, test drives, and trade-ins are simpler and faster than ever. Each branch now has its own dedicated landing page with maps, consultant contacts, and stock on site. In short, the new website is far more customer-friendly, it's faster, and it's smarter.
It strengthens our brand, reduces reliance on third-party listing platforms, and drives more traffic directly to 2 Cheap Cars. Turning to FY26 year-to-date trading. In the five months to 31st of August 2025, we've sold 3,058 vehicles. That's down 12% on prior year. Revenue declined 5% to $33.4 million, reflecting lower sales volumes, partially offset by improved retail prices and stronger finance and insurance penetration. Finance penetration rose to 31%. That's up 4 percentage points, and average insurance penetration reached 40%. These gains reflect both the benefit of lower interest rates and the strong efforts of our sales staff. Gross margin eased by 2 percentage points to 19%, primarily due to the carbon credit impact. Net profit after tax of $800,000 was down $700,000 on prior year. It's important to note that carbon credit contributed $500,000 to this decline.
Operating cash flow of $1.5 million compared to $0.1 million last year, though this improvement primarily reflects lower provisional tax payments rather than underlying trading. Looking ahead to our outlook, our Green Lane and Sylvia Park sites are now fully operational and expected to ramp up sales as they establish themselves. Lower interest rates are improving affordability, while a strong New Zealand dollar is helping to mitigate cost pressures. Local purchasing is becoming a more significant part of our strategy. Despite challenges such as carbon credit costs, subdued immigration, and increasing competition for Japanese stock, we remain confident in our ability to deliver improved performance over the medium term. Higher finance and insurance penetration, fully operational new sites, and stronger in-house capabilities support this view. The company will provide further updates with the release of its half-year results, and I'll hand back to Michael.
Thanks, Gus. I'll briefly open the floor to questions specifically regarding the presentations, the annual report, and financial statements. We will take all general questions at the conclusion of general business. I remind you this is a shareholders meeting and only shareholders and proxy holders may speak. A question?
We do have a number of questions. Yeah. The first question is, how much did you invest in building this new website? I can tell you the answer to that question. The website's cost us roughly $80,000, which we actually got quotes from three or four different enterprises and went with the one we think more fully understood what we were looking for. Based on comparatives, we got really good value for money for that. We're pretty happy. The second question was, as the economy hopefully starts to recover in 2026, I'll open the rest of the question. What plans are in place to market to new customers and raise awareness of the 2 Cheap Cars Group Limited brand? Turners, for comparison, have a very aggressive marketing strategy and are actively building brand awareness at the moment before the recovery next year. What does 2 Cheap Cars Group Limited have planned?
Interesting question. I think if you really look at Turners, what they're really advertising is the purchase of New Zealand-owned cars. The strategy that we're following of trying to buy local is clearly the same policy that they're following, because the margin in those vehicles is significantly better than what we're getting from imported vehicles in Japan. You might want to answer the rest of the thing.
You know, in relation to marketing strategy, we are definitely trying to ramp up what we're doing. We've been relatively sort of stable for the last year or so. We're looking at new ways to build our brand. We've engaged our brand consultants, and it's coming to fruition. We should see some new stuff in market within the next few months. Watch this space. There was one other question just in relation to, do you have difficulties meeting your banking covenants? Before we transferred to ANZ, we didn't have difficulties meeting them, but it was restricting what we wanted to do. We had covenants that didn't allow us to have too much profit or assets offshore. While we still have those covenants, they're much more flexible now, and that's enabled us to put more stock directly through our Car Plus K.K. subsidiary in Japan.
By doing that, we actually save quite a lot of money. We're able to fund that entity to buy stock in Japan and sell it directly to us. The answer is, covenants are there for a reason, so they'll always be restrictive in some ways, but at the moment we're having no issues meeting them. That was the last question.
Okay, good. Thank you. We'll now move on to the voting on the resolutions laid out in the notice of meeting. Each resolution that's to be voted on is outlined in the notice of meeting. It's an ordinary resolution. It means it can be passed by a simple majority of eligible shareholder votes. As required by NZX listing rules, the Chairperson requires a poll on all resolutions. Therefore, votes on each resolution will be counted based on the number of shares each voting shareholder holds. Resolutions and voting options should now appear on your screen. Please make sure you have signed in with your CSN number to ensure your vote's valid. To vote, simply select your voting direction from the options shown on the screen, and you can vote for all resolutions at once or by individual resolution.
Please note that your vote has been cast when the green tick appears, and you can change your vote by selecting change your vote. If you require technical assistance, type in your query in the Q&A tab or chat function, and one of the Computershare team will assist or call 09 488 7800. All voting is anonymous. Votes will be collated by Computershare and the verified results announced later today. As the first resolution concerns myself as a re-election as a director, I'll hand over to Gordon.
Thank you, Michael. The first resolution concerns the re-election of Michael Stiassny as a director of 2 Cheap Cars Group Limited. Michael retires by rotation and is offering himself for re-election. I now move that Resolution 1 is put to the shareholders. Is there any discussion?
There is no discussion online.
No discussion. Thanks, Gus. Based on that, if the shareholders can now please cast their votes on Resolution Number 1.
Okay, thank you, Gordon. Resolution 2, re-election of Gordon Shaw as the director of 2 Cheap Cars Group Limited. Gordon retires by rotation and has offered himself for re-election. I now move that Resolution 2 is put to shareholders. Is there any discussion? No, if I could ask that people vote on Resolution 2. Now, Resolution 3. Section 207(s) of the Companies Act provides fees and expenses of the auditors are to be fixed in such manner as the company determines at the annual meeting. The board proposes that, consistent with past practice, the auditor's fees will be fixed by the directors. I therefore move that Resolution 3 is put to shareholders, that the board be authorized to fix the auditor's remuneration. Is there any discussion? None. If I could ask shareholders to vote on Resolution 3. As now all shareholders have voted, I declare the voting closed.
As at 10:00 A.M. Wednesday, 24 September, as I've already said, the following proxy votes have been received. As 84.42% of the votes cast and subject to verification by the scrutiny, it would seem that all resolutions had been passed. The final verified results will be posted on the NZX later today. Let's move on. Last item: general business, and I'll now ask Gus to read out questions we've received from the shareholders. Oh, I can read them here. Will there be an opportunity for an in-person or hybrid AGM in the future? This is from the Shareholders Association. I think it is exceedingly hard, unless there was a really significant issue to be addressed, that we would see an in-person and/or hybrid AGM occur in the near future.
We also have to be cognizant of cost, and the cost of these meetings is horrific if we hold it in person. It's actually horrific at any point, but it's even more horrific if we hold it in person. Therefore, I think we will continue to see it becoming very hard for us to do that. Second question, are we going to expand into straightforward car servicing or oil changes? I think it's fair to say that it's on our agenda. We have our total focus on ensuring that we're getting cars onto the yard. I think if we started going into that business to keep our staff busy, it would be counterproductive to making a profit. Are there any other questions? If so, if anyone wants to type them in?
No.
No, no, no.
As there are none, I just want to thank everyone for attending. We do appreciate that it is an online meeting. We do appreciate it isn't perfect, but we do have, as I said, we do have to balance costs. Please, if anyone does have supplementary questions, don't be shy. Please come back to the company, and we are more than happy to answer them. This brings us to the conclusion of our business today. We thank you all for joining us. We thank you most importantly for your continued support, and we are striving to improve the performance in these difficult times. Thank you all. I declare the meeting closed.