Good morning, everyone. My name is Michael Stiassny. I am Chair of 2 Cheap Cars Group Limited. It has just gone past 10:00 A.M., and I am pleased to open our 2026 annual shareholders meeting. On behalf of my fellow directors, we welcome you and thank you for joining us. We have this morning with us our Executive Director and Chief Executive, David Sena, our Independent Director, Gordon Shaw, and our Chief Financial Officer, Gus Guerin. Our lawyers from MinterEllisonRuddWatts and our auditors, UHY Haines Norton, are also present online. A few housekeeping matters. We ask that you follow the information provided in the notice of meeting regarding voting and asking questions. Should you require any assistance, you can type your query and one of the Computershare team will assist, or alternatively, you can call Computershare on 09488-8700.
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If we do run out of time to answer all questions during this meeting, we will answer them directly via email and post the responses on our website. We have received a number of questions via email, which will be addressed during question time. To any media present online, please get in touch with Gus after the meeting if you have questions. Voting will be by way of poll on all items of business. To provide you with plenty time, I will shortly open voting for the resolution. If you are eligible to vote at this meeting, you will be able to cast your vote under the Vote tab. To vote, simply select your voting direction from the options shown on screen. 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 I declare voting closed. We should actually try this for the general election. It will be a hell of a lot easier. Anyway, I now declare voting open on all items of business. The resolution will be open in the Vote tab. You may submit your vote at any time, and I will let you know in advance that voting will be closed. Here is today's meeting agenda. I will begin with the chair's address. Gus will then take you through the FY 2026 results, our operational progress and trading for the first five months of FY 2027. As everyone knows, David has overseen the operational and strategic content and has asked us to speak on his behalf to ensure that information is easily understood by the shareholders.
Following these presentations, we will move to the formal resolution set out in the notice of meeting, followed by general business and questions. Let us now move on to the formal part of the meeting. Are there any apologies?
No.
No. Thank you. The company's constitution prescribes a quorum requirement of five shareholders present in person or by representative participating by audio, audiovisual, or electronic means. As confirmed by Computershare, this requirement has been met. 20 shareholders holding 36,774,547 shares have appointed proxies. These proxies represent 80.73% of the shares in the company. As chair, I hold proxies representing 2,000,642 shares. I intend to vote the undirected proxies I hold in favor of the resolution. We released the annual report on 26 June 2026, and the notice of meeting was released on 28 August 2026, and I propose that we take those documents as read.
As you are aware, on 27 July 2026, founder and director of 2 Cheap Cars, David Sena, through Sena & Co, made a full offer under the Takeovers Code for all of the ordinary shares in 2CC not already owned by Sena & Co at a cash price of NZD 0.80 per share. A committee comprised of the independent directors, myself and Gordon, was formed to consider the offer and make a recommendation to all offering shareholders after consideration of the independent advisor's report.
That recommendation outlined in our target company statement, which includes the independent advisor's report, were both released on 27 July 2026, was to accept the offer as it was in summary with the independent advisor's valuation range of NZD 0.71-NZD 0.90 per share, representing a premium to the pre-announcement trading price of the shares of 21% and a premium to various volume weighted average prices up to 12 months. 2CC is substantively under the control of Sena & Co. The trading in its shares is illiquid, and the offer presented a certain opportunity to sell, and no competing offer has emerged. On 16 September, Sena & Co increased its offer to NZD 0.90 per share. As at 5:00 P.M. on 22 September 2026, the level of acceptances received pursuant to the offer in respect of the shares was 12.525%.
The offer remains conditional on, amongst other things, Sena & Co receiving by 11:59 P.M. on Wednesday, September 30, 2026, acceptances that would give it, together with its existing shareholding, 90% or more of 2CC's voting rights. Your independent directors continue to recommend that shareholders accept the offer for the reasons laid out in our target company statement. Now, back to the business as it currently stands. FY 2026 and FY 2027, we have continued to ride the roller coaster that is the New Zealand economy. Whilst there have been periodic improvements to economic data, these have often been short-lived or inconsistent, and any green shoots shallow-rooted. Our strategic operational priorities, namely to improve execution, strengthen sourcing, and continue to develop our retail network in a challenging market, have largely been implemented and saw the business deliver a credible result.
The financial results for FY 2026 were an NPAT of NZD 3.2 million and steady revenue of NZD 80.17 million. This demonstrates the resilience of the business. The improvement from a first-half net profit after tax of NZD 1.01 million to a full-year result exceeding our January guidance of at least NZD 3 million was indicative of just how volatile the market was and remains. The Clean Car Standard remains a bone of contention, adversely impacting NPAT by approximately NZD 1.7 million relative to FY 2025. The company did what it could in an uncertain regulatory environment, adjusting our compliance model and sourcing strategies, which did provide some relief as revised settings took effect in the final quarter. We also made targeted investments in retail location and buying capabilities, decisions carefully evaluated by the board for their long-term growth potential.
Our gross dividend of NZD 0.0614 per share, up from NZD 0.0603 in the previous year, balanced shareholder returns with the need to fund strategic initiatives, always a key governance consideration. Early FY 2027 trading has been encouraging, though as you will have noted through our recent market updates, it does remain variable. We do not expect conditions to stabilize or improve markedly in the short term, particularly with the election only weeks away. Our fundamental mission remains unchanged, to provide quality, affordable vehicles to New Zealanders while generating sustainable returns for shareholders. On behalf of the board, I would like to thank all our staff in New Zealand and Japan, our customers, our suppliers, and our shareholders for their continued support. I will now hand over to Gus.
Sorry. Hopefully, you can hear me now. Thanks, Michael. I will cover the FY 2026 results, the changes we have made across the business, and our performance through to August. Our focus has been on improving operational efficiency, protecting margins, and making better use of our retail network. Looking at FY 2026 summary, revenue and income for FY 2026 was NZD 81.7 million, down just 0.3 percentage points or percent from NZD 82 million. Net PAT was NZD 3.2 million, compared with NZD 3.3 million in FY 2025, and underlying earnings per share remained rounded at NZD 0.07. Contribution margin of NZD 17.4 million, compared with NZD 17.8 million. As a percentage of revenue, gross margin was 21.3%, down 0.4 percentage points from 21.7%. Operating cash flow was NZD 4.2 million, compared with NZD 6.7 million in FY 2025. Cash generation and the amount tied up in inventory remain important measures alongside accounting profit. The gross dividends increased to NZD 0.0614 per share.
The result reflects two quite different halves, which I will talk about a little bit more in the future. The first half was affected by higher carbon costs and subdued demand, and the second half benefited from firmer margins, better trading conditions. That improvement allowed us to finish the year close to the previous year's profit despite the revised settings flowed through. The timing is important. Profitability had already improved before carbon costs reduced, supported by better vehicle margins, procurement, and finance and insurance performance. The reduction in carbon costs then provided additional support in the final quarter. The stronger second half result reflects both operational improvements we made and the benefit from easing cost pressures. While encouraging, it also highlights how sensitive our earnings remain to market conditions.
Looking at the dynamics that played out in FY 2026, while the market conditions remained mixed, several factors continued to support the business. First, interest rates. Falling interest rates through FY 2026 helped improve vehicle finance affordability, providing some relief for customers despite continued pressure on household budgets. These conditions, together with improved sales execution, supported our finance and insurance performance. Finance penetration increased to 31%, while stronger insurance penetration also contributed to a 17% increase in finance and insurance commission income to NZD 7.9 million. Secondly, foreign exchange. The New Zealand dollar traded above JPY 90 for much of FY 2026, supporting our purchasing power in Japan. It has weakened recently, however, highlighting how quickly that benefit can change. Japanese monetary policy and the possible currency intervention remain risks we need to monitor. Turning to challenges, carbon costs materially affected FY 2026 profitability.
The reduced charges introduced in January did provide some benefit or some relief, but the future government policy will remain important to our purchasing decisions and our earnings. In short, the regulatory uncertainty around implementation of Clean Car Standard remains one of the most significant external factors on our margins. Immigration did show some recovery but remained subdued. Net migration was 17,600 in the year to June 2026, compared to 10,300 a year earlier. While there is an improvement, looking ahead, migration remains a much weaker source of additional customer demand than it was several years ago. Finally, household budgets remained under pressure throughout FY 2026. Annual inflation was 3.1% in the March 2026 quarter, slightly above the Reserve Bank's 1%-3% target range. Higher living costs continued to affect what customers could afford and their willingness to commit to a vehicle purchase.
As FY 2027 plays out, we will need to remain flexible, respond quickly to changes in purchasing costs and consumer demand, while maintaining our focus on product mix, finance performance and operational efficiency. Looking at our footprint, we have continued to reshape the network around larger, more productive locations. This includes a new Wellington branch and securing a dedicated vehicle refurbishment hub in Christchurch. We have also closed underperforming branches in New Lynn, Westgate, and Palmerston North. Sylvia Park is developing into a flagship location, and Henderson opened in early August ahead of the upcoming closure of our Penrose site. The priority now is to make better use of the network and give customers a consistent experience, including the presentation and layout of our branches. The company will continue to review its retail footprint, having regard to market conditions, operational capacity, and expected returns.
We've also improved the way we move vehicles through the business, from purchasing to preparation and sale. We continue to fine-tune the balance between work completed in-house and services provided by external suppliers. The right balance depends on cost, capacity, and the volume moving through the operation at any given time. Our digital tools give us better visibility over stock, operational output, and potential bottlenecks. That allows managers to see where work is building up and where resources need to be directed. Direct purchasing through Car Plus in Japan gives us greater involvement in vehicle selection and procurement, along with the cost savings of avoiding intermediaries. The Auckland Hub has also been reconfigured to improve vehicle flow and refurbishment speed. The objective is to get sale-ready vehicles onto our yard sooner while maintaining quality and keeping preparation costs under control. Last year, our main marketing initiative was rebuilding the website.
This year, we are building on that capability and the brand presence around it. We've strengthened our in-house marketing capability and are working towards a more consistent look, tone, and message across our website, advertising, social channels, and branches. We are also working with a creative agency on a new brand campaign. The aim is to reach more potential customers and give them a clear reason to consider 2 Cheap Cars when they next need a vehicle. The company will build on our affordable positioning and support the sales activity already taking place across the network. We want our marketing to create familiarity with the brand as well as generate general inquiries now. Over time, the objective is to attract more customers directly and improve the value we get from our marketing spend.
The new campaign is being developed, so we are not attributing sales or profit gains to it at this stage. Looking at FY 2027 year-to-date August unaudited results. For the five months ended 31 August, we sold 3,010 vehicles, down 2% year on year, while revenue rose 5% to NZD 35.1 million. Gross margin improved to 25% from 19%, and financing penetration increased to 39% from 31%. Net PAT rose to approximately NZD 2.3 million from NZD 0.8 million a year earlier, with operating cash flow stable at NZD 1.5 million. The improvement reflects better margins and higher finance penetration, not increased volumes. Economic volatility remains a key theme in FY 2027. After a strong first quarter, NZD 1.7 million Net PAT, July and August contributed around NZD 0.3. This brings unaudited Net PAT for the first five months of FY 2027 to approximately NZD 2.3 million.
Looking ahead, we see opportunities to improve performance, while remaining realistic about the market conditions. We will better utilize our existing footprint through increased stock availability, faster preparation, and more consistent execution. External factors such as interest rates and exchange rates may support customer financing and procurement, though both remain uncertain. We continue to develop AI tools for vehicle selection, pricing, and operational decisions, and a new brand campaign aims to increase awareness and attract more customers directly. However, challenges persist, including price-sensitive consumers, strong competition for stock in Japan, lower-priced new vehicles from Chinese manufacturers, and ongoing margin pressure from the Clean Car Standard changes. We must also address finance and insurance conduct requirements. Our priorities are clear. Protect margin, manage cash and inventory carefully, and ensure operational improvements translate into consistent results. While encouraged by our progress, we recognize that trading conditions remain volatile. Thank you.
I'll now hand back to Michael.
Thanks, Gus. Before we move to the resolution, we'll take questions specifically about the presentations, annual report, and financial statements, and we will take other questions under general business. Gus?
Yeah. We have quite a few questions that have come in from shareholders. What we'll do is read them out. We've got a number of them we've consolidated just for ease. The first question was: what is the company's strategy for geographical footprint, including larger sites in Tauranga, Wellington, and possibly a second Christchurch site? Answer for that one is, our priority remains to maximize the use of our existing network first, while continuing to assess opportunities for accessible, visible and productive sites. The same approach applies to Tauranga, Wellington and Christchurch. Any proposed expansion or relocation will be assessed against market conditions, operational capacity and expected returns. We've got a question about the Christchurch site. Will the Christchurch site again have the strong presentation it previously had with Quest flags?
We're working towards. As we talked about in the marketing update, we're working towards a very consistent theme across all our branches. So we want the look and feel to be very similar, and that includes Christchurch. The aim is just to have the sites looking sharp, welcoming, and a consistent presentation across all our branches. We were asked: How does profit for the first five months of FY 2027 compare with the same period last year? I think we've been through that in the presentation, and you can see that it's up significantly. The only thing I'd note is, I took you through the quarterly breakdown, and you can see that you're comparing it to probably one of the worst periods we'd seen for a number of years, and that was heavily impacted by carbon credits. We'll come to that because there's a question specifically about carbon credits.
Fuel prices and performance. How much have higher fuel prices and demand for fuel-efficient vehicles contributed to the improvement? Fuel economy matters to our customers, and higher fuel prices can make hybrids and other economical vehicles more attractive to our customers. However, as you would have seen, our reported improvement reflects stronger margins and higher finance penetration rather than increased sales volumes. Vehicle sales through August were down 2% on the same period prior year. Lower Clean Car Standard costs also supported those margins. Looking at the Clean Car Standard, what impact has vehicle mix had on the company's Clean Car Standard position? Vehicle mix has contributed, but a much, much larger impact has been the reduction in the rate per credit. Year-on-year improvement. Our Clean Car Standard costs through to August this year are approximately NZD 413,000.
That is compared to NZD 755,000 during the same period last year. These costs remain an important influence on our purchasing decision and profitability. Is there scope to increase finance and insurance penetration further? We see scope for further improvement. Finance penetration is already at 39% for the first five months of FY 2027 compared to 31% in the same period last year. Our focus is consistent on sales execution, but recognizing that the outcomes depend on customer needs, their affordability and their lending criteria. Is the company's digital strategy helping achieve higher finance and insurance penetration? Yes. It makes applications process easier and helps our customers to be supported by our sales staff. However, the finance and insurance team, supported by more favorable interest rates, has been the main driver of that improvement. Do higher volumes allow the company to negotiate better commission rates? We do not disclose individual commercial arrangements.
We obtain competitive terms while maintaining a suitable range of providers and products for our customers. Why has the sales-ready stock increased to 720 vehicles? Does this signal an expectation of a very strong finish to the year? We have been working to move vehicles through our preparation faster and improve availability across yards. The increase also reflects lower sales volumes over recent months. It gives customers more choice and helps us use our network more effectively, but it should not be read as a forecast of stronger sales. Can the company increase vehicle sales volumes without compromising margins? We see opportunities to improve sales through better stock availability and more consistent execution. Protecting margin depends on purchasing well, controlling preparation costs, and carrying the right mix. We cannot assume that higher volumes will leave margins unaffected, so our focus remains on sustainable returns and careful cash management.
What competitive advantage does sourcing directly from Japan provide, including access to fuel-efficient vehicles? I think we have talked a lot about our business model and how we source. Japan obviously gives us access to a broad range of vehicles, including hybrids that are suited to our customers, but other dealers also source from Japan and benefit from that same mix. The benefit of our Car Plus operation is greater involvement in that vehicle selection process, together with the savings from avoiding some of the intermediaries. Is the roughly equal mix of hybrid or electric vehicles and non-hybrid deliberate? Are these plans to increase this hybrid and electric share? Our approach is driven by consumer demand, affordability, purchasing costs, and expected margins rather than a fixed fuel type target.
We want to have a useful range of customers' needs so that mix can change as demand and sourcing economics change. Has increased local sourcing improved average vehicle margins? Unfortunately, no. We haven't seen an improvement in margins from local sourcing. While the Clean Car Standard savings are there, we've often seen higher refurbishment costs from cars that we're buying locally. Has the website increased sales leads, reduced reliance on external listing sites, and lowered customer acquisition costs? Website visitors are up 41% on the prior year, and interactions are up 22%. Those are encouraging engagement measures, but they do not, by themselves, establish increased sales or lower acquisition costs. Spending on external listing sites is slightly lower, but that really reflects the fact we've had less cars on yard. Trade Me certainly haven't lowered any of their fees, and we haven't downgraded our packages at this stage.
Our focus remains on attracting more customers directly to our website. There's a question around imputation credits. Why was the shareholder continuity breach in 2023 not identified at the time and steps taken to minimize the loss of imputation credits? We disclosed that on 18th of August 2025 before last year's annual shareholder meeting. As explained then, a review of the shareholder changes identified an inadvertent breach of the shareholder continuity rules and an overstatement of imputation credit account. It was an oversight, but no further action was warranted. They also ask, has the company explored a claim against its advisors in relation to the loss? It was a management oversight, and no further action was warranted. So that's the questions there. There's a few general questions we'll take a bit later on.
Any that have come through?
Oh, yes, we have actually. 14 September trading update noted that sales-ready inventory was boosted from 640 to now over 720 vehicles. Whereas year-to-date sales update notes unit vehicles are down 2% year-to-date. Is the current increase in the sale-ready stock a result of lower than expected sales or a deliberate strategy? I think I answered that question earlier.
Yeah. Thank you.
Yeah.
Okay. Thank you, Gus.
Thanks.
We now move to the resolution. The resolution can be voted on as outlined in the notice of meeting. It is an ordinary resolution, so 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, the votes on this resolution will be counted based on the number of shares each voting shareholder holds. The resolution and voting options now appear on your screen. Please make sure you have signed in with your CSN number, and to ensure your vote is valid. To vote, simply select your voting direction from the options shown on the screen. Please note that your vote has been cast when the green tick appears, and you can change your vote by selecting change your vote.
Should you require any technical assistance, please type your query into the Q&A tab or chat function, and any of the Computershare team will assist or call the number I referred to before. All voting remains anonymous. Voting will be collated by Computershare in the verified results will be announced at the NZX later today. There is only one ordinary resolution. It concerns the board's authority to fix the auditor's fees and expenses. Section 207S of the Companies Act provides the 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. Therefore, move that the resolution one is put to shareholders and the board be authorized to fix the auditor's fees and expenses. Is there any discussion?
No.
Okay. Please could you vote?
If all shareholders have now voted, I declare that the voting is closed. As at 10:00 A.M. Wednesday, 23 September, Computershare advised the following proxy votes had been received. With 80.73% of votes cast and subject to verification by the scrutineers, the resolution has passed. Final verified results will be posted on the NZX later today. Let's move on. Final item on our agenda is general business. There have been a few questions, so I will hand back to Gus for that.
There were a couple of general questions. One was, "Has the company considered dedicated van-only sites for around 20 - 40 vans, potentially in Auckland and Christchurch?" No, we haven't considered the dedicated van sites, but thank you for your suggestion. Adjacent businesses. "Does the company see opportunities to expand into adjacent business areas?" Our focus remains on improving the performance of our existing business and making better use of our investments already made. Any opportunity in adjacent business would need to be assessed carefully against returns, resources, and risks involved. That was the end of the questions.
Okay. We do realize there are limitations of an online meeting, and there can be difficulty for shareholders asking supplementary questions. If anyone believes they have not received a satisfactory answer to a question they've asked here today, please write to us and we will respond. I am able to say that that brings us to the conclusion of our business today. We thank you for joining us and for your ongoing support of 2 Cheap Cars Group Limited. Enjoy the rest of your day and have a good weekend. I declare the meeting closed. Thank you.