Annual report 2023
ANNUAL REPORT
FOR THE YEAR ENDED
31 MARCH 2023
DRIVING
BETTER
DEALS
EVERY DAY
2
Annual Report For The Year Ended 31 March 2023.
CONTENTS
WHO WE ARE
FY23 IN REVIEW
KEY METRICS
BOARD AND MANAGEMENT
FOCUSED ON DELIVERY
FINANCIAL SUMMARY
FINANCIAL STATEMENTS
STATEMENT OF CORPORATE GOVERNANCE
STATUTORY DISCLOSURES
CORPORATE DIRECTORY
4
6
10
12
14
16
24
60
70
78
32
On behalf of the Board and management of 2 Cheap Cars
Group Limited, we are pleased to present the Annual Report
for the financial year ended 31 March 2023.
2 Cheap Cars Group Limited was formerly named
NZ Automotive Investments Limited.
Approved for and on behalf of the Board of Directors
Director Director
28th of June 2023
54
Annual Report For The Year Ended 31 March 2023.
WHO WE ARE
2 Cheap Cars Group is transitioning to focus on this business
alone. As a result, the NZ Motor Finance (the finance
company) loan book is now in ‘run down’ mode.
2 Cheap Cars has 12 dealerships nationwide. We are one of
NZ’s largest used vehicle retailers, selling 8,367 vehicles and
accounting for 4.5% market share1 in FY23.
With a vertically integrated supply chain, 2 Cheap Cars
benefits f rom a Japanese-based team who source, inspect
and choose vehicles most suitable to the NZ market.
Once landed in NZ, vehicles arrive at our NZ processing Hub
and are groomed and serviced, undergo further mechanical
checks for quality control, photographed and dispatched to
our dealerships. Gaining greater control over our supply chain
by insourcing additional activities means we reduce costs
and get vehicles online and onto yards faster.
Our mission is to deliver on our promise... 2 Cheap Cars,
driving better deals, every day.
2 Cheap Cars is a nationwide leading retailer, selling
quality, affordable vehicles and offering competitive
third-party finance and insurance options.
1 Source: Autofile – based on 2 Cheap Cars’ vehicle sales as a proportion of
dealer-to-public used cars sold between 1 April 2022 and 31 March 2023.
86
28
8,367
12
17%
26%
FTE Employees
Cars sold
Days to sell a carFinance penetration
DealershipsDigital sales
AUCKLAND
X7
HAMILTON
TAURANGA
PALMERSTON
NORTH
WELLINGTON
CHRISTCHURCH
DRIVING
BETTER
DEALS
EVERY DAY
7
6
Annual Report For The Year Ended 31 March 2023.
REAR VIEW
MIRROR
2 Source: Autofile, dealer-to-public data.
Annual Report For The Year Ended 31 March 2023.
The new Board, appointed in late August 2022, committed
to stabilising the Company and appointed a new CEO in
January 2023.
It has been a year of reset and rebuild and much has
been achieved, particularly in the fourth quarter which
saw significantly improved underlying earnings and
profitability. While there is considerable work still to be
done, this is a gratifying result in a relatively short period.
Importantly, the Board made the decision to reset the
Company’s foundations to focus on the core vehicle retail
business and to act only as a finance agent. Consequently,
the NZ Motor Finance loan book will remain in run down
mode with the business collecting the loan receivables and
recouping investment.
As the business resets, the focus will be on what drives
value for shareholders and what we do well; that is, selling
affordable vehicles. We already have great finance and
insurance solutions that generate considerable returns.
In the wake of well-publicised Board and management
issues in the first half of the year, the priority has been
to transition the Company to profitable growth, restore
market confidence and importantly, shareholder
value. With strong leadership and a focused plan now
in place, our foundations are reset and the Company
rebuild is gaining pace.
The Company’s full year revenue and income
increase of 25% to $82.7m was driven by a boost in
sales volumes (against the same period last year),
and an inflationary uplift in the prices of vehicles
sold.
While the NZ dealer-to-public used vehicle market
increased by 3% in the twelve months to 31 March
20232, 2 Cheap Cars’ vehicle sales were up 6% for
the year when compared with FY22.
Gross margins have notably improved in the
last quarter. This reflects optimised pricing and
effective promotional activity, as well as improved
finance penetration. The full year contribution
margin is up 18% to $14.8m.
Operating costs (excluding non-recurring costs)
have risen 2.3% to $8.8m, due to an additional
investment in marketing. Management is strongly
focused on controlling cost increases.
Underlying EBITDA, including finance income,
increased 26% to $6.0m in FY23. Higher vehicle
sales volumes and improved vehicle margins in
the fourth quarter contributed to the increase.
Non-recurring costs of $1.0m associated with
significant changes at Board and management
level are included in FY23, while a one-off lease
gain of $0.9m in FY22 has seen net profit after tax
(NPAT) fall to $1.3m f rom $2.6m in the previous
corresponding period.
Underlying NPAT, excluding the non-recurring
costs, increased by 18% to $2.0m in FY23.
It is worth noting that last quarter profits represent
40% of the total year’s profit.
Net operating cash flow, excluding lending, has
improved to $10.9m, up f rom $0.6m for the same
period last year.
These results indicate that the business is
moving in the right direction.
There is an almost entirely new leadership team
and the full year results, particularly relating to
the last quarter, are testament to a renewed
energy and focus.
In addition, new auditors, UHY Haines Norton
Sydney, have been appointed. We also have
a new trade facility in place with long-term
strategic partner, Finance Now.
Finance Now has provided finance solutions
to 2 Cheap Cars’ customers for over nine years.
They understand and actively support our
business, and we can confidently plan knowing
the business has access to very well-priced
working capital.
The Board is confident that the turnaround
promised is well underway.
FY23 in review
RESET
AND
READY
TO GROW
98
Annual Report For The Year Ended 31 March 2023.
3
Source: Autofile, dealer-to-public data.
Annual Report For The Year Ended 31 March 2023.
2 Cheap Cars sold 8,367 vehicles in FY23, up
6% on the same period last year with market
share reaching 4.5%3. Margin was deliberately
prioritised over volume in the back half of
the year as management refocused the sales
strategy on margin expansion.
While finance and insurance penetration rates
were down for the full year, we saw significant
improvement in March and that positive trend
continued into April. In quarter four, we invested
considerable resource to ensure our people are
well equipped to sell finance and insurance, and
the upside is already being seen.
Electric and hybrid electric vehicles
(EV/HEVs) continue to be a sweet spot for
2 Cheap Cars, accounting for 41% of total sales,
an increase of 65% over the previous year.
This will continue to be a strong focus for the
team, particularly hybrids.
Online vehicle sales lifted to 17% of total sales.
Website development is planned to further
improve the digital customer journey and
take advantage of online vehicle and finance
opportunities
Economic headwinds and shipping constraints
are a fact of life for most NZ import businesses.
2 Cheap Cars is working to mitigate shipping
issues by utilising the services of additional
shipping suppliers.
Finance penetration rates decreased to 26% in
FY23, down f rom 30% in FY22. This is due to the
impacts f rom Credit Contracts and Consumer
Finance Act lending regulations and lifts in
the official cash rate (OCR). Disciplined focus
f rom management saw finance penetration
improve to 29% in March 2023. This positive
trend has continued into the new financial year,
accelerating to over 30%.
The Government’s Clean Car regime has
constrained supply, and increased the cost,
of used vehicles into NZ across the industry.
2 Cheap Cars has a reliable source of used
vehicles f rom Japan and has increased prices
to offset cost pressures, further supporting the
Company’s strategic focus on margin expansion.
Given our very clear value proposition, we
continue to see good demand for vehicles,
finance and insurance.
Pricing and promotional activity has been
optimised, and the business has seen an
uplift in margins in Q4, resulting in enhanced
profitability.
It’s very pleasing to note that 2 Cheap
Cars continues to be well regarded in the
marketplace, receiving the highly commended
used car dealer award f rom Reader’s Digest for
2023, adding to previous accolades.
Driving commercial performance
A strong, capable and engaged team is
essential to enable 2 Cheap Cars Group to reach
its potential. A new strategic sales position has
been created – GM Retail – to build capability
and energise the sales team. We now work as
one team, focused on the broader customer
experience.
We’re making progress to ensure we have
strong leaders, a great bench and a culture that
attracts talent. Our recruitment and training
practices are also being refined and built on to
ensure that our team has the skills and support
they need to succeed.
A big part of that work is focused on developing
a high-performance culture. Our people are
now being incentivised through reshaped KPIs
that reward value and profit delivery.
Focusing on profitability
With the Company’s foundations now
stable, our sights are firmly set on improving
profitability through gross margin expansion.
Pricing and promotional activity has been
optimised and while it is early days, gross
margins increased f rom 17% to 21% in the three
months to April 2023. This has had a marked
impact on profitability.
We are in a rebuilding phase, and these green
shoots give us confidence that we are on the
right track to restore shareholder value.
A new badge
To reflect the change to a singular focus, the
NZAI brand has been retired and replaced
with 2 Cheap Cars Group. That’s who we are.
We’re proud of what we do, we’re privileged
to have a strong brand and it makes sense to
connect with and leverage that brand at all
levels, including corporate. It’s a small but really
important change because it signals genuine
focus on what drives shareholder value.
Dividend
As the Company transitions to deliver profitable growth, the Board has taken
the prudent approach to retain capital and no final dividend will be paid.
The Company anticipates recommencing dividend payments in FY24 when
it is prudent to do so.
Outlook – Focus on the road ahead
With the foundations now reset, 2 Cheap Cars Group is concentrating on
growing a more profitable vehicle retail business, and accelerating our
finance and insurance business.
2 Cheap Cars Group has a very clear value proposition and is seeing good
demand for vehicles, finance and insurance driven by immigration, the
Government’s Clean Car regime and the tightening economic environment.
Despite the economic headwinds, our market segment is expected to
remain buoyant, and our business model and brand are well-positioned to
maximise customers’ reduced spending power.
However, there is still a lot to achieve and we have a clear, five-point action
plan moving into the 2024 financial year:
• Gross margin expansion – Margin delivery will take priority over
market share.
• Electric and hybrid vehicles – Continuing to leverage our leadership
position by supplying an unrivalled range of quality, affordable vehicles.
• Supply chain – Focusing on a quality-first approach, navigating shipping
risks and gaining even greater end-to-end control.
• Finance and insurance – Continuing to accelerate our finance and
insurance plan, an incremental and highly profitable income stream.
• Three-year strategic property plan – Focusing on retail locations
where the 2 Cheap Cars Group scale model works well, and provides
opportunities for profitable growth.
This plan will drive increased NPAT. We are seeking to double NPAT to
between $3.8m and $4.2m in FY24 by concentrating on gross margin
expansion, prudent cost management and increasing direct control of the
value chain.
While there is still work to do, the foundations for a stronger, focused
2 Cheap Cars Group are in place. We have a detailed action plan, and an
energised and capable leadership team to deliver it.
We would like to thank the team for their hard work in what has been a
difficult year, and our shareholders for their patience and continuing
support as we reset the Company’s foundations.
Michael Stiassny Chair
Paul Millward CEO
The engine room – 2 Cheap Cars
11
10
Annual Report For The Year Ended 31 March 2023.
FY23
*Underlying NPAT is a non-IFRS measure that excludes non-recurring costs including restructuring.
SUMMARY OF
KEY RESULTS
$
82.7M
0.0 CPS
$
2.0M
$
10.9M
$
0.8M
$
3.8M
$
1.3M
4.4 CPS
up 25% from $66m
down from 3.1 cps
up 18% from $1.7m
up $10.3m from $0.6m
up (representing 40%
of full year profit)
up 18% quarter-on-quarter
down ($1.3m) from $2.6m
up from 3.7 cps
Revenue and income
Dividend
Q4 Underlying NPAT
FY23 Underlying NPAT
Operating cash flow –
ex. lending
NPAT
Underlying EPS
(includes $1.0m restructuring & non-recurring costs)
Annual Report For The Year Ended 31 March 2023.
*
Retail Contribution Margin
1213
THE BOARD
AND MANAGEMENT
Annual Report For The Year Ended 31 March 2023.
Michael Stiassny LLB
Independent Director | Chair
Michael is a Chartered Fellow and past President of the Institute
of Directors. He is a Director of a number of other companies
including Tegel Group Holdings Ltd and New Talisman Gold
Mines Ltd, and is Chair of Tower Ltd.
Michael holds Commerce and Law degrees f rom the
University of Auckland.
Paul Millward
CEO
Paul Millward was appointed CEO in January 2023.
Most recently, Paul was Sales Director NZ for DB Breweries
Limited (Heineken NZ) where he was responsible for a
team of 130 staff and revenue of circa $750m. Under his
leadership, the Company’s market share, return on sales
and EBIT margins have increased significantly.
Paul has 20 plus years’ experience in commercial
leadership. He has a sales and finance background in
FMCG and in retail and medical businesses in New Zealand,
England, America and Denmark. Paul graduated f rom
the University of Waikato with a business degree -
Bachelor of Management Studies (Hons).
Paul has a proven ability to lead and transform
successful teams, build brands and drive
profitable growth.
Haydn Marks
CFO
Haydn has over 20 years’ experience in financial
management and leadership across the financial
services and technology sectors. Prior to joining
2 Cheap Cars Group in 2020, Haydn was CFO of the
technology company, Straker Translations (ASX:STG),
where he took the company to IPO on the ASX
in 2018.
Haydn spent 10 years in senior finance roles in
London, including with banking software company
Temenos (TEMN:SWX), Credit Suisse and Visa Card.
Haydn is a member of Chartered Accountants
Australia and New Zealand, and holds a Bachelor
of Business f rom Massey University.
David (Yusuke) Sena
Executive Director | Co-Founder
David co-founded 2 Cheap Cars in 2011. He is responsible for
all procurement and supply chain aspects for the Company
including compliance, re-conditioning and logistics.
David was born in Japan, and has been influential in
developing and maintaining relationships with vehicle
suppliers. He has been a Director of 2 Cheap Cars Group
Limited since its inception.
Gordon Shaw
Independent Director
Gordon Shaw is a New Zealand based professional director
and business advisor with over 20 years’ management and
governance experience in the commercial, transport, vehicle
retail, vehicle regulatory and Government sectors both in
New Zealand and overseas.
An Independent Director of 2 Cheap Cars Group, Gordon
Chairs the Audit and Risk and Remuneration Committees.
Gordon is a board member of Nelson Netball Centre Inc, and
the Chair and independent director of ProMed HR NZ Ltd.
He Chairs the Mapua and Districts Business Association, is
a Chartered member of the NZ Institute of Directors and a
committee member of the Nelson Marlborough Branch of IoD.
15
14
Annual Report For The Year Ended 31 March 2023.
SUPPLY
CHAIN
LEADERSHIP
Expand our vehicle processing
Hub to unlock growth
Actively increase supply of
affordable EV & HEVs.
Leverage our scale to
drive efficiencies
Explore broader
sourcing strategy
FOCUSED
ON DELIVERY
Next Steps
Progress made
Key:
RETAIL
FOOTPRINT
TO WIN
National dealership footprint
for wider reach
Clear property strategy to
broaden reach and profitably
Refurbish and modernise
dealerships
Relevant brand programme
to connect
1. 2.
GROSS
MARGIN
EXPANSION
Increase financial penetration
Implement and grow digital
application and fulfilment
Right value proposition - availability,
price and promotion to win locally
Continuing cost and value
programme
CUSTOMER
EXPERIENCE
Deepen connection with 135k+ followers on social media
Invest in customer care team
Capability investment for f rontline staff
Further uplift in customer satisfaction
Deliver customer value through partnerships
DIGITAL
TO
DELIVER
Refine full end-to-end
online buying process
Execute on customer
insights
Digital platform to
“make it easy”
5.
3.4.
Our plan is concentrating on core areas, profit delivery for ‘the now’ is the
priority whilst starting to future proof the company for the years’ to come.
We are focused on five key areas, all connected, and each playing a role to
drive the outcomes required for our transformation.
1716
Annual Report For The Year Ended 31 March 2023.
Operating revenue
The 2 Cheap Cars’ Group draws revenue f rom the two divisions:
• 2 Cheap Cars, the automotive retail division, revenue is primarily f rom the sale of vehicles and
f rom agent commissions relating to the sale of third-party finance and insurance products.
• NZ Motor Finance (NZMF) generates finance income f rom lending to customers who are
financing vehicles, and f rom selling guaranteed asset protection insurance (GAP) and payment
protection insurance (PPI) products. Finance income is recognised as either contractual income
earned on loans at fair value or as finance income received at amortised cost.
Following a decision by the Board to focus on the core vehicle retailing business and to act as a
finance agent, NZ Motor Finance is no longer lending to customers, and its loan book is now in
‘run down’ mode, with the business collecting loan receivables and recouping investments.
Sales of hybrid/electric vehicles up by 65%
2 Cheap Cars hybrid/electric vehicle growth
The Company’s total revenue and income increased by 25% to $82.7m in FY23.
Revenue f rom the sale of cars increased by 32% to $74.9m. This increase was driven by a boost
in sales volumes against the same period last year and an inflationary uplift in the prices of
vehicles sold.
Agent commissions received f rom finance and insurance products increased by 8% to $6.8m in
FY23. Finance penetration rates decreased to 26% in FY23, down f rom 30% in FY22, due to the
impacts of the Credit Contracts and Consumer Finance Act, lending regulations and lifts in the
official cash rate (OCR). Disciplined focus f rom management saw the finance penetration improve
to 29% in March 2023.
Finance and interest income, largely derived f rom the NZMF loan book, declined f rom $1.2m in
FY22, to $0.9m in FY23. This was due to the decision to focus on the core business of retailing cars
rather than lending.
Other income of $0.03m was made up of amounts received f rom the Government’s COVID-19 Leave
Support Scheme. In FY22, other income of $1.7m was made up of a one-off cash gain f rom the
rearrangement of leases, the Government’s wage subsidy and rent relief received f rom landlords in
response to the pandemic.
2 Cheap Cars grew its market share for FY23 to 4.5%4, up f rom 4.4% in the same period last year.
The business sold 8,367 vehicles in FY23, which is up 6% on the same period last year. Margin
was deliberately prioritised over volume as management refocused the sales strategy on margin
expansion.
2 Cheap Cars continues to be well positioned to meet the increasing demand for EV/HEVs. In FY23,
the number of EV/HEVs sold as a proportion of total vehicle sales increased to 41%, up 4% on last
year and growing to 43% in the last quarter of FY23.
The introduction of NZ’s clean car discount scheme is the main reason for the uptake in demand
for EV/HEVs.
20232022Change
$’000$'000%
Sale of cars 74,902 56,653 32%
Finance & Insurance agent commissions 6,823 6,345 8%
Finance & interest income 979 1,233 (21%)
Revenue and income 82,704 64,231 29%
Other Income 33 1,725 (98%)
Total revenue and income 82,737 65,956 25%
20232022Change 2023 Mix
$’000$'000%%
Petrol Vehicles 4,908 5,785 (15%)59%
EV / HEV Vehicles 3,459 2,097 65%41%
Total Vehicles Sold 8,367 7,882 6%100%
Changes in total revenue and income
Q1Q2Q3
41%
29%
43%
37%
FY23
FY22
41%
21%
40%
20%
Q4
FINANCIAL
SUMMARY
4
Based on the NZ dealer to public market share sourced f rom Autofile.
1918
Annual Report For The Year Ended 31 March 2023.
FINANCIAL SUMMARY
CONTINUED
NZ Motor Finance Loan book
Financial results
As a result of the NZMF loan book being in ‘run down’ mode, the loan book reduced f rom $6.8m at
the end of FY22 to $3.9m as at 31 March 2023.
NZMF made a loss of $0.16m for the year. This is due to no new lending taking place since June
2022 and f rom the result of reversing a fair value gain that was built up f rom previous years’
lending.
The number of loans reduced f rom 889 loans in FY22 to 631 loans in FY23.
Loan book arrears are being carefully managed by the business. There is an impairment provision
of 4.6% to cover expected losses on the loan book as at 31 March 2023.
Revenue and income for FY23 was $82.7m, up 25% on FY22 for the reasons outlined above.
Operating costs (excluding non-recurring costs) have risen 2.3% to $8.8m, due to an additional
investment in marketing. Despite inflationary pressures, management is strongly focused on
controlling cost increases.
Non-recurring costs of $1.0m, associated with significant changes at Board and management level
included in FY23 and a one-off lease gain of $0.9m in FY22, has seen NPAT fall to $1.3m f rom $2.6m
in the previous corresponding period.
Underlying NPAT5, excluding the non-recurring costs, increased by 18% to $2.0m in FY23. The profit
in the last quarter represented 40% of the total year’s profit.
The underlying earnings per share were 4.4 cents per share for FY23, up f rom 3.7 cents per share
in FY22.
20232022Change
$’000$'000%
$ Value of Loan Book 3,909 6,824 (43%)
Number of Active Loans 631 889 (29%)
20232022Change
$’000$'000%
Revenue and income 82,704 64,231 29%
Sundry income 33 1,725 (98%)
Total revenue and income 82,737 65,956 25%
Contribution margin 14,799 12,551 18%
Other operating expenses 8,811 8,612 2%
Interest expenses 1,090 689 58%
Depreciation & amortisation 2,134 1,779 20%
Non-recurring costs 977 - N/A
Total operating expenses 13,012 11,080 17%
Earnings before taxation 1,820 3,196 (43%)
Earnings before tax margin2.2%4.8%-54.6%
Taxation 528 602 (12%)
Net profit after tax 1,292 2,594 (50%)
Earnings before taxation 1,820 3,196 (43%)
Net consideration f rom re-assignment of leases - (885) N/A
Non-recurring costs 977 - N/A
Underlying earnings before taxation 2,797 2,311 21%
Net profit after tax 1,292 2,594 (50%)
One off items net of tax 704 (899) (178%)
Underlying net profit after tax 1,996 1,695 18%
Underlying net profit after tax margin2.4%2.6% (6.1%)
5
Excludes non-recuring costs associated with the Board and management changes and one-off net gain f rom the rearrangement
of leases in FY22 (Underlying NPAT and underlying EBITDA are non-IFRS measures).
Contribution margin
The full year contribution margin is up 18% for FY23 to $14.8m. Gross margins have notably
improved in the last quarter on the back of optimised pricing, effective promotional activity and
improved finance penetration.
20232022Change
$’000$'000%
Revenue and income
82,704 64,231 29%
Contribution margin
14,799 12,551 18%
Gross margin %
18%20% (2%)
2120
Annual Report For The Year Ended 31 March 2023.
FINANCIAL SUMMARY
CONTINUED
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Dividend
Cash flow
The group’s underlying EBITDA5, including finance income, increased by 26% to $6.0 million in
FY23. A higher volume of vehicle sales and improved vehicle margins in Q4 have contributed to the
increase in underlying EBITDA including finance income.
As a result, the underlying EBITDA margin increased f rom 7.2% in FY22 to 7.3% in FY23.
As the Company transitions to deliver profitable growth, the Board has taken the prudent approach
to retain capital and no final dividend will be paid. The Company anticipates recommencing
dividend payments in FY24 when it is prudent to do so.
A dividend of $0.3m was paid in FY23. This related to the FY22 financial year.
2 Cheap Cars Group received $82.8m f rom the proceeds of the sale of vehicles and related income
f rom its 2 Cheap Cars retail business. Receipts were up 27% on FY22.
Underlying cashflow f rom retail operating activities and before loan book lending has improved
to $10.9m, up f rom $0.6m for the same period last year. This is largely due to EBITDA profit and
reduced inventory levels. Reduced inventory levels have resulted f rom a combination of shipping
constraints and more efficient stock management.
NZMF finance business lent $1.8m to customers and received $4.5m in proceeds f rom loan receipts.
The group repaid $10.9m in short-term debt for the year. This related to a reduction in the retail
trade finance facility and debt related to the NZMF finance loan book.
As at 31 March 2023, the Company is in compliance with all banking covenants and has cash of
$3.8m, no net debt.
20232022Change
$’000$'000%
Earnings before taxation 1,820 3,196 (43%)
Net consideration f rom re-assignment of leases - (885)
Non-recurring costs 977 -
Underlying earnings before taxation 2,797 2,311 21%
Interest expense 1,090 689 58%
Underlying earnings before interest and taxation 3,887 3,000 30%
Depreciation & amortisation 2,134 1,779 20%
Underlying earnings before interest, taxation, depreciation and amortisation 6,021 4,779 26%
Underlying EBITDA margin7.3%7.2%0.0%
20232022Change
$’000$'000%
Proceeds from sale of goods 82,768 65,068 27%
Payments to suppliers & employees(71,160) (63,047) 13%
Other operating activities(700) (1,456) (52%)
Underlying cash flows from retail operating activities 10,908 565 1831%
Proceeds f rom loan receipts 4,450 3,514 27%
Advances to loan customers(1,785) (6,576) (73%)
Cash flows from operating activities 13,573 (2,497) (644%)
Net purchase & proceeds of property, plant & equipment(167) (414) (60%)
Investing cash flow(167) (414) (60%)
Free cash flow 13,406 (2,911) (561%)
Borrowing repaid(10,900) 3,380 (422%)
Dividends paid(287) (3,025) (91%)
Other financing activities(2,319) (1,832) 27%
Cash flows from financing activities(13,506) (1,477) 814%
Net cash flow(100) (4,388) (98%)
Effect of exchange rate 77 (89) (187%)
Cash & cash equivalents 3,767 3,790 (1%)
2322
Annual Report For The Year Ended 31 March 2023.
Explanation
The financial summary section should be read in conjunction with the consolidated financial
statements and the related notes contained within this report. This commentary may include
information regarding plans and strategies that may involve risk and uncertainties.
All figures are represented in New Zealand Dollars (NZD) except where indicated. References to
‘this period’ or ‘FY23’ are to the year ended 31 March 2023. References to the ‘prior period’ or to ‘FY22’
are for the 12-month period ended 31 March 2022.
Non-GAAP measures have been included as management considers that they provide useful
information for readers of the Annual Report to assist in understanding the Company’s financial
performance. Non-GAAP measures should not be viewed in isolation or considered as substitutes
for measures reported in accordance with New Zealand equivalents to International Financial
Reporting (NZ IFRS).
FINANCIAL SUMMARY
CONTINUED
DRIVING
BETTER
DEALS
EVERY DAY
2524
Annual Report For The Year Ended 31 March 2023.
FINANCIAL
STATEMENTS
Annual Report For The Year Ended 31 March 2023.
FOR THE YEAR
ENDED 31 MARCH
2023
Independent auditors report
CONSOLIDATED FINANCIAL STATEMENTS
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting entity
2. Basis of preparation
3. Significant accounting policies
PERFORMANCE
4. Revenue f rom contracts with customers
5. Sundry income
6. Segment reporting
7. Determination of fair values
8. Finance expenses
9. Key operating expenses
10. Earnings per share
11. Dividends
CURRENT ASSETS
12. Cash and cash equivalents
13. Inventories
14. Loans receivable
15. Trade and other receivables
TRADE LIABILITIES & TAX
16. Trade and other payables
17. Leases
18. Derivative financial instruments
19. Employee benefit liabilities
20. Income Tax
21. Imputation credits
FUNDING AND RISK
22. Borrowings
23. Share capital
24. Share-based payment arrangements
25. Related parties
26. Financial instruments
NON CURRENT ASSETS
27. Property plant & equipment
OTHER
28. Notes supporting statement of cash flows
29. Contingent liabilities
30. Subsequent events
26
30
31
32
33
34
34
34
42
42
43
44
45
45
46
46
46
46
47
48
49
50
51
51
51
52
52
53
53
54
55
57
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58
Level 11 | 1 York Street | Sydney | NSW | 2000
GPO Box 4137 | Sydney | NSW | 2001
t: +61 2 9256 6600 | f: +61 2 9256 6611
sydney@uhyhnsyd.com.au
www.uhyhnsydney.com.au
An association of independent Ƃ rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting Ƃ rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
Independent Auditor’s Report
To the Shareholders of 2 Cheap Cars Group Limited
Opinion
I have audited the consolidated financial statements of 2 Cheap Cars Group Limited (“the Company”)
and its subsidiaries (“the Group”), which comprise:
• the consolidated statement of financial position as at 31 March 2023;
• the consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then
ended; and
• the notes to the consolidated financial statements including a summary of significant
accounting policies.
I am a partner with UHY Haines Norton Chartered Accountants Sydney (the Firm) and I have used the
staff and resources of the Firm to perform the audit of the Group.
In my opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at 31 March 2023, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance with New
Zealand Equivalents to International Financial Reporting Standards (“NZ IFRS”) issued by the New
Zealand Accounting Standards Board.
Basis for Opinion
I conducted my audit in accordance with International Standards on Auditing (New Zealand) (“ISAs
(NZ)”) issued by the New Zealand Auditing and Assurance Standards Board. My responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of my report.
I am independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International
Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code), and I have fulfilled my other ethical
responsibilities in accordance with these requirements and the IESBA Code.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my
opinion.
Other than in my capacity as auditor, neither myself, the firm or the firm’s staff have no relationship
with, or interests in, the Group.
Key Audit Matters
Key audit matters are those matters that, in my professional judgement, were of most significance in
my audit of the consolidated financial statements of the current year. These matters were addressed
2726
Annual Report For The Year Ended 31 March 2023.
An association of independent Ƃ rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting Ƃ rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
in the context of my audit of the consolidated financial statements as a whole, and in forming my
opinion thereon, and I do not provide a separate opinion on these matters.
Why the audit matter is significant How my audit addressed the key audit matter
Revenue recognition
The Group has recognised revenue of
$83m (FY 2022: $ 64m) (Note 4). The
Group’s net sales comprises revenue
from the sale of cars, insurance agent
commissions and finance agent
commissions.
Revenue is recognised when the control
associated with a good or service (or in
aggregate thereof) representing a
distinct performance obligation is
transferred from the Group to the
customer.
There are a number of factors that could
affect this reported amount, including
the risk for revenue recognition policies
being incorrectly applied or recognised
in an incorrect period. This presents a
key audit matter due to the financial
significance and nature of net sales in
the financial statements.
To address the risk associated with revenue
recognition, the following audit procedures were
carried out:
• Evaluated the design of management's internal
controls related to revenue recognition.
• Reviewed revenue recognition policies for
appropriateness and compliance with relevant
accounting standards.
• Selected a sample of transactions and
inspected supporting sales documentation,
cash received and assessed whether all criteria
related to revenue recognition has been met
before being recognised as revenue.
• Reviewed credit notes posted after year end to
ascertain revenue recognition during the year.
• Performed revenue cut off procedures by
selecting revenue samples before and after
year end and testing whether cut off on
revenue was accurate.
• Performed analytical procedures by comparing
average gross margins by make of the cars on
a year on year basis, and by analysing the
movement of gross margins relative to the
prior period and on a monthly basis.
• Reviewed manual revenue journals as part of
the journal entry testing process.
• Assessed the reasonability and completeness
of the revenue related disclosures to ensure
compliance with the requirements of the
accounting standards.
Valuation of loan receivables with
waiver clauses
Loan receivables have been classified
into those with waiver clauses and those
without. The Group has recognised loan
receivables with waiver clauses at fair
value through profit of loss at $ 1.8m (FY
2022: $ 3.4m) (Note 14). There was a fair
value loss on revaluation recognised
through profit or loss of $ 222k (FY 2022:
gain of $ 8k) (Note 4 and 14). Accounting
policies relevant to loan receivables
To address the risk associated with the valuation of the
waiver loan receivables at fair value through profit or
loss, the following audit procedures were carried out:
• Evaluated the design of key controls related to
valuation of loan receivables.
• Reviewed the loan receivables measurements
policies for appropriateness and compliance
with relevant accounting standards.
• Performed substantive procedures by selecting
a sample of loans, agreed key information to
supporting documentation and recalculated
the closing fair value amount.
An association of independent Ƃ rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting Ƃ rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
have been disclosed under Note 3(d),
3(i), 7 and 14.
The Group has early adopted NZ IFRS 17
Insurance Contracts and applied the
scope exemption allowing them to
measure the loan receivables that
include waiver clauses as financial assets
in their entirety at fair value through
profit or loss. Repayments of the loans
are recognised as reductions in carrying
amount, with any fair value gains or
losses at each reporting date recognised
in profit or loss.
The determination of the fair value for
loan receivables with waiver clauses
requires management judgment and
continuous monitoring.
• Assessed the reasonability and accuracy of
management’s fair value model, ensuring the
valuation is in compliance with the
requirements of the relevant accounting
standards.
• Assessed the reasonability of key management
estimates and judgements by recalculating the
balance using independently sourced inputs
relating to key assumptions (including discount
rate, default provision rate, asset and income
waiver provision, etc).
• Assessed the reasonability and completeness
of the loan receivables related disclosures to
ensure compliance with the requirements of
the relevant accounting standards.
Information Other than the Consolidated Financial Statements and Auditor’s Report thereon
The Directors are responsible for the annual report, which includes information other than the
consolidated financial statements and auditor’s report.
My opinion on the consolidated financial statements does not cover the other information and I do
not express any form of audit opinion or assurance conclusion thereon.
In connection with my audit of the consolidated financial statements, my responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or my knowledge obtained in the audit, or otherwise
appears to be materially misstated.
If, based upon the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Directors’ Responsibilities for the Consolidated Financial Statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the
Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do
so.
2928
Annual Report For The Year Ended 31 March 2023.
An association of independent Ƃ rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting Ƃ rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
My objective is to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not
a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
A further description of the auditor’s responsibilities for the audit of the consolidated financial
statements is located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/.
This description forms part of my auditor’s report.
Restriction on use of my report
This report is made solely to the Group’s shareholders, as a body. My audit work has been undertaken
so that I might state to the Group’s shareholders, as a body those matters which I am required to state
to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, I do
not accept or assume responsibility to anyone other than the Group and the Group’s shareholders, as
a body, for my audit work, for this report or for the opinion I have formed.
Vikas Gupta
Audit Partner - UHY Haines Norton Chartered Accountants Sydney
Signed at Sydney, Australia on 28 June 2023
3130
Annual Report For The Year Ended 31 March 2023.
2 CHEAP CARS GROUP LIMITED
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the Year Ended 31 March 2023
2 CHEAP CARS GROUP LIMITED
Consolidated Statement of Financial Position
As At 31 March 2023
NoteMAR 2023MAR 2022
$'000$'000
Revenue
Revenue and Income4 82,704 64,231
Sundry Income5 33 1,725
Expenses
Cost of sales(67,905) (51,680)
Administration expenses(3,265) (2,720)
Advertising expenses(1,738) (1,192)
Depreciation expenses(2,134) (1,779)
Employee benefits(4,105) (3,847)
Finance expenses8(1,090) (689)
Property expenses(680) (853)
Profit before Income Tax 1,820 3,196
Income Tax Expense20(528) (602)
Profit for the period 1,292 2,594
Other Comprehensive Income
Items that may be reclassified subsequently to profit or loss
Translation of foreign operations 77 (90)
Total Other Comprehensive Income 77 (90)
Total Comprehensive income for the Period 1,369 2,504
Earnings per share
Basic earnings per share 10 0.03 0.06
Diluted earnings per share 10 0.03 0.06
NoteMAR 2023MAR 2022
$'000$'000
Equity
Share Capital23 39,344 39,365
Amalgamation Reserve(35,956) (35,956)
Foreign Currency Translation Reserve(8) (85)
Retained Earnings 12,794 11,789
Total Equity 16,174 15,113
Current Liabilities
Trade and Other Payables16 2,743 1,890
Employee Benefit liabilities19 834 933
Borrowings22 900 11,800
Income tax Payable 91 -
Derivative financial liabilities18 55 414
Related Party Payable25 10 10
Lease liability17 1,856 1,484
Other Current Liabilities 81 126
Total Current Liabilities 6,570 16,657
Non-Current Liabilities
Lease Liability17 6,078 5,833
Total Non-Current Liabilities 6,078 5,833
Total equity and liabilities 28,822 37,603
Current assets
Cash and cash equivalents12 3,767 3,790
Trade and other receivables15 669 739
Other current assets15 2,871 4,126
Income tax receivable - 288
Loans receivable14 1,767 2,954
Inventories13 8,377 13,008
Total current assets 17,451 24,905
Non-current assets
Plant, property and equipment27 1,319 1,335
Intangible assets 5 4
Loans receivable 14 2,142 3,870
Deferred tax asset20 445 433
Right-of-use assets 17 7,461 7,056
Total non-current assets 11,371 12,698
Total assets 28,822 37,603
Approved on behalf of the Board on 28th June 2023
DirectorDate28 June 2023
DirectorDate28 June 2023
The accompanying notes form part of these consolidated financial statements.The accompanying notes form part of these consolidated financial statements.
3332
Annual Report For The Year Ended 31 March 2023.
2 CHEAP CARS GROUP LIMITED
Consolidated Statement of Changes in Equity
For the Year Ended 31 March 2023
2 CHEAP CARS GROUP LIMITED
Consolidated Statement of Cash Flows
For The Year Ended 31 March 2023
MAR 2023MAR 2022
$'000$'000
Cash flows from operating activities
Cash receipts f rom customers 82,768 65,068
Government Grants Received 31 351
Cash paid to suppliers and employees(71,160) (63,047)
Interest received 130 26
Interest paid - retail operations(700) (263)
Tax paid(161) (1,570)
Net cash inflow from operating activities before Changes in
Operating Assets and Liabilities
10,908 565
Loan receivables advanced(1,785) (6,576)
Proceeds f rom loan receivables 4,450 3,514
Net cash inflow / (outflow) from operating activities 13,573 (2,497)
Cash flows from investing activities
Proceeds f rom sale of property, plant and equipment 138 242
Purchase of property, plant and equipment(305) (656)
Net cash outflow from investing activities(167) (414)
Cash flows from financing activities
Dividend paid(287) (3,025)
Interest paid - finance operations(310) (187)
Principal elements of lease payments(2,009) (1,645)
Trade finance advance / (repayments)(10,900) 3,380
Net cash outflow from financing activities(13,506) (1,477)
Net decrease in cash and cash equivalents(100) (4,388)
Cash and cash equivalents at beginning of period 3,790 8,267
Effect of exchange rate 77 (89)
Cash and cash equivalents at end of period 3,767 3,790
The accompanying notes form part of these consolidated financial statements.The accompanying notes form part of these consolidated financial statements.
Share
Capital
$’000
Retained
Earnings
$’000
Foreign
Currency
Translation
Reserve
$’000
Amalgamation
Reserve
$’000
Total Equity/
(Accumulated
Losses)
$’000
Balance as at 1 April 202139,344 12,220 5 (35,956) 15,613
Profit for the Period - 2,594 - - 2,594
Translation of Foreign Operations - - (90) - (90)
Total Comprehensive Income for the Period - 2,594 (90) - 2,504
Share options recognised at fair value net of options lapsed2100021
Dividends paid - (3,025) - - (3,025)
Total transactions with owners of the Group 21 (3,025) - - (3,004)
Balance as at 31 March 202239,365 11,789 (85) (35,956) 15,113
Balance as at 1 April 202239,365 11,789 (85) (35,956) 15,113
Profit for the Period - 1,292 - - 1,292
Translation of Foreign Operations - - 77 - 77
Total Comprehensive Income for the Period - 1,292 77 - 1,369
Share options recognised at fair value net of options lapsed(21) - - (21)
Dividends paid - (287) - - (287)
Total transactions with owners of the Group(21) (287) - - (308)
Balance as at 31 March 202339,344 12,794 (8) (35,956) 16,174
3534
Annual Report For The Year Ended 31 March 2023.
Notes to the Financial Statements
1. Reporting entity
2 Cheap Cars Group Limited (the Company) is a company domiciled in New Zealand.
The Company is incorporated in New Zealand, registered under the Companies Act 1993 and is publicly traded on the
New Zealand Stock Exchange.
These consolidated financial statements comply with the requirements of the Companies Act 1993 and the Financial
Markets Conduct Act 2013.
These consolidated financial statements as at 31 March 2023 comprise the Company and its subsidiaries:
2 Cheap Cars Limited, NZ Motor Finance Limited, 2CC International Limited, 2 Cheap Rental Cars Limited and Car Plus
K.K. (collectively, the Group).
2. Basis of preparation
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with Generally Accepted Accounting
Practice in New Zealand (GAAP) and the requirements of the Financial Markets Conduct Act 2013.
These financial statements comply with New Zealand equivalents of International Financial Reporting Standards
(NZ IFRS). As such, they also comply with International Financial Reporting Standards (IFRS).
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except that certain assets and
liabilities are measured at fair value where stated under their specific accounting policies.
• Derivative financial instruments (Note 18)
• Loans receivable (Note 14)
(c) Functional and presentation currency
These consolidated financial statements for the Group are presented in New Zealand dollars ($), which is the Group’s
functional and the Group’s presentation currency. All financial information presented has been rounded to the
nearest thousand dollars.
d) Going Concern
The Directors consider that the Group is a going concern and the consolidated financial statements have been
prepared on that basis.
(e) Critical accounting estimates and judgements
The preparation of the consolidated financial statements, requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ f rom these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
(f) Changes in accounting policies
None during the period.
(g) Changes in accounting estimates
None during the period.
(h) New and amended standards adopted by the group
The group has applied the following amendments for the first time for their annual reporting period commencing
1 April 2022:
- Property, plant and equipment: proceeds before intended use - Amendments to IAS 18
- Annual improvements to IFRS standards 2018-2020
- Onerous contracts - cost of fulfilling a contract - amendments to IFRS 3.
- Reference to the conceptual f ramework - amendments to IFRS 3.
Certain new accounting standards and amendments have been published that are not mandatory for 31 March 2023
reporting periods. These standards are not expected to have a material impact on the entity.
a) Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to,
variable returns f rom its involvement with the entity and has the ability to affect those returns through its power over
the entity. The financial statements of subsidiaries are included in the consolidated financial statements f rom the
date that control commences.
The consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if they
formed a single entity. Intra-group transactions and balances are therefore eliminated in full.
Subsidiaries are fully consolidated f rom the date on which control is transferred to the Group. They are deconsolidated
f rom the date that control ceases.
Subsidiaries
The subsidiaries of 2 Cheap Cars Group Limited, all of which have been included in these consolidated financial
statements, are as follows:
3. Significant Accounting Policies
The Group has applied the same accounting policies and methods of computation in these financial statements as its
previous annual financial statements, except for those detailed in note 2(f) and (g) above.
Details of the Group’s significant accounting policies are provided below.
In preparing the consolidated financial statements, all intercompany balances, transactions, unrealised gains and
losses resulting f rom intra-group transactions and dividends have been eliminated in full.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency at exchange rates at the dates of the
transactions. Foreign currency differences arising f rom settlement at a different exchange rate are recognised in
profit or loss.
(ii) Foreign currency monetary assets and liabilities
At balance date, foreign monetary assets and liabilities are translated to the functional currency at the closing rate
and exchange variations are recognised in profit or loss.
(iii) Foreign currency non-monetary assets and liabilities
Foreign non-monetary assets and liabilities that are measured based on historical costs are translated using the
exchange rate at the date of the transactions. Any foreign currency difference arising due to translating to functional
currency are recognised in profit or loss.
(c) Revenue
The specific revenue recognition policies associated with the Group’s distinct performance obligations (as presented
in Note 4) are detailed below:
(i) Vehicles sold
Revenue is recognised at a point-in-time, with the transfer of control determined as the point purchaser takes final
physical possession of the vehicle.
(ii) Insurance policies
Commission revenue is recognised on an agent basis at a point-in-time , with the transfer of control determined
at the point the end customer enters into a signed insurance policy with the insurance provider (principal). As the
uncertainty associated with any commission clawbacks is resolved, previously deferred revenue recognised as
contract liabilities is released and recognised as revenue.
(iii) Sale of scrap parts
Revenue is recognised at a point-in-time, with the transfer of control determined as the point that the purchaser
takes final physical possession of the scrap parts.
NameCountry of incorporation and
principal place of business
Proportion of ownership interest
MAR 2023MAR 2022
2 Cheap Cars LimitedNew Zealand100%100%
NZ Motor Finance LimitedNew Zealand100%100%
2CC International LimitedNew Zealand100%100%
2 Cheap Rental Cars LimitedNew Zealand100%100%
Car Plus K.KJapan100%100%
3736
Annual Report For The Year Ended 31 March 2023.
(iv) Commissions received (booking fee, sales, finance)
Revenue is recognised on an agent basis at a point-in-time , with the transfer of control determined as the point
the end customer enters into a signed finance agreement with the finance provider (principal). As the uncertainty
associated with any commission clawbacks is resolved, previously deferred revenue recognised as contract liabilities is
released and recognised as revenue.
(v) Interest revenue calculated using the effective interest method
Interest revenue comprises interest on loans receivable and cash and cash equivalents. Interest revenue is recognised
based on the effective interest method.
Performance obligations and timing of revenue recognition
Revenue is measured based on the consideration to which the Group expects to be entitled to, excluding amounts
collected on behalf of third parties and net of rebates, discounts and payments to customers that are not in
consideration for separate goods or services provided. This represents the fair value of total consideration payable,
including both cash and in the case of vehicles sold, any vehicle trade-ins.
Where the ultimate transaction price receivable is subject to variability (such as in the case of vehicle returns or
clawbacks on commissions) revenue is recognised only to the extent that it is highly probable that the revenue
recognised would not be subsequently reversed.
Revenue is recognised when the control associated with a good or service (or in aggregate thereof) representing a
distinct performance obligation is transferred f rom the Group to the customer.
Where a single contract contains two or more distinct performance obligations, the total transaction price of the
contract is allocated between the separate performance obligations based on their stand-alone-sales-prices, and
represents the revenue to be recognised with respect to that separate performance obligation.
Revenue is recognised on an over-time basis subject to meeting specific criteria, otherwise, revenue is recognised at a
point-in-time , being the point that the customer obtains control of the good or service subject to various indicators.
Payment received f rom customers before revenue is recognised and presented as a “Contract liability” in the
consolidated statement of financial position.
Receivables resulting f rom revenue being recognised before the Company is able to contractually invoice for the
goods or services provided is recognised and presented as a “Other current asset” in the consolidated statement of
financial position.
The Group recognises revenue on a net basis as an “Agent” (rather than on a gross basis as “Principal”) when
(i) it is not the party primarily responsible for fulfilling to provide goods or services to the end customer,
(ii) when it does not assume the (inventory) risk of the goods or services, and/or
(iii) it does not have discretion in setting the price payable by the end customer.
(d) Insurance contracts
NZ IFRS 17 Insurance contracts becomes effective for annual reporting periods commencing on or after 1 January 2023.
NZ IFRS 17 Insurance contracts provides a scope exception for certain contracts that provide waivers (forgiveness)
of loan balances upon the occurrence of specified events. Rather than accounting for these waivers as insurance
contracts, the scope exemptions permits the Group to elect to account for such loans entirely as financial instruments.
The Group has elected to apply this scope exemption. Further details of the accounting policy relating to Loans
receivable to which the scope exemption directly effects can be found in Note 7.
(e) Tax
Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss, except
to the extent that they relate to items recognised directly in equity or in other comprehensive income. In such cases,
the tax is also recognised directly in equity or in other comprehensive income, respectively.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years. Current tax also includes any tax liability arising f rom the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
(i) temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss,
(ii) temporary differences arising on the initial recognition of goodwill; and
(iii) temporary differences related to investments in subsidiaries and jointly controlled entities to the extent
that the timing of the reversal of the temporary differences is controlled by the Group and it is probable
that they will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the reporting date.
In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax
positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities
are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and
prior experience.
This assessment relies on estimates and assumptions and may involve a series of judgements about future events.
New information may become available that causes the Group to change its judgement regarding the adequacy of
existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is
made.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
(f) Employee benefits
(i) Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits and accumulating annual leave that are expected
to be settled wholly within 12 months after the end of the period in which the employees render the related service
are recognised in respect of employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled.
These include salaries and wages accrued up to the reporting date and annual leave earned, but not yet taken at the
reporting date. The Group recognises a liability and an expense for bonuses where they are contractually obliged or
where there is a past practice that has created a constructive obligation.
(ii) Defined contribution plans (Kiwisaver etc.)
Contributions to defined contribution plans are recognised in the consolidated statement of profit or loss and other
comprehensive income in the year to which they relate.
(iii) Share-based payment arrangements
Equity Settled Transactions.
The Group has provided benefits to key management personnel in the form of share-based payments, whereby
employees render services in exchange for shares or rights over shares (equity settled transactions). The cost of
these equity-settled transactions with employees is measured by reference to the fair value benefit of the equity
instruments at the date at which they are granted. In valuing equity-settled transactions, conditions linked to the
price of the shares of NZ Automotive Investments (NZX:NZA - market conditions) are considered where applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the
relevant employees become fully entitled to the award (the vesting date).
(g) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net
proceeds f rom disposal and the carrying amount of the item) is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with
the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.
(iii) Depreciation
For plant and equipment, depreciation is based on the cost of an asset less its residual value. Significant components of
individual assets that have a useful life that is different f rom the remainder of those assets are depreciated separately.
3938
Annual Report For The Year Ended 31 March 2023.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component
of an item of property, plant and equipment.
The useful lives and depreciation method used for significant items of property, plant and equipment are as follows:
Depreciation methods, useful lives and residual values are reviewed at reporting date and adjusted if appropriate.
(h) Inventories
Inventories are measured at the lower of cost and net realisable value with due allowance for any damaged and obsolete
stock items. The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in
acquiring the inventories and other costs incurred in bringing them to their existing location and condition.
Vehicles acquired via trade-in f rom car sales with customers are initially measured at their trade-in date fair value.
(i) Financial instruments
The Group recognises financial instruments when it becomes a party to the contractual provisions of the instrument.
Financial instruments are initially measured at fair value. For those financial instruments that are classified as
amortised cost this includes directly attributable transaction costs. For those financial instruments classified as at
fair value through profit or loss, any directly attributable transaction costs are expensed in profit or loss as incurred.
Financial liabilities are measured net of transaction costs.
(i) Financial assets – classification and subsequent measurement
Financial assets are classified based on whether their repayments represent solely payments of principal and interest
(SPPI), and whether the instrument is held to collect those repayments, and/ or to be sold.
At Amortised cost
These financial assets represent those held to collect SPPI, and include: Trade and other receivables; Loans receivable
(those that do not include waiver clauses); Cash and cash equivalents (including cash in hand, deposits held at call
with banks).
These financial assets are subsequently measured at amortised cost using the effective interest rate method, less
impairment.
Impairment allowances for Trade receivables
Are recognised based on the simplified approach within NZ IFRS 9 using a provision matrix in the determination of
the lifetime expected credit losses. On confirmation that the trade receivable will not be collectible, the gross carrying
value of the asset is written off against the associated impairment allowance.
Impairment allowances for Loans receivable
Are recognised based on a forward-looking expected credit loss (“ECL”) model. The methodology used to determine
the amount of the allowance is based on whether there has been a significant increase in credit risk since initial
recognition of the financial asset.
For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve
month expected credit losses along with gross interest income are recognised (“Stage 1”).
For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross
interest income are recognised (“Stage 2”). The Group assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due.
For those that are determined to be credit impaired (in default), lifetime expected credit losses along with interest
income on a net basis are recognised (“Stage 3”). The Group considers a financial asset to be in default when the
financial asset is more than 90 days past due, as well as observable evidence with respect to:
- significant financial difficulty of the borrower;
- a breach of contract, such as a default or being more than 90 days past due;
- granting to the borrower a concession for economic or contractual reasons relating to the borrower’s financial
difficulty; that the Group would not consider otherwise; or
- it is probable that the borrower will enter bankruptcy or other financial reorganisation.
When determining whether there has been a significant increase in credit risk since initial recognition of the financial
asset, and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and
available without undue cost or effort.
This includes both qualitative and quantitative information and analysis, based on the Group’s historical experience
and informed credit assessment and includes forward looking information.
The gross carrying amount of Loans receivable is written off when the Group has no reasonable expectation of
recovering the balance in its entirety or a portion thereof.
Impairment allowances for Cash and cash equivalents
Balances held with “investment grade” counterparties a significant increase in credit risk is deemed not be present.
At Fair value through profit or loss (non-derivatives)
These financial assets represent Loans receivable (that include waiver clauses). In applying the scope exemption in NZ
IFRS 17 Insurance Contracts to these contracts, such that they are accounted for as financial assets in their entirety,
the presence of the waiver clauses results in repayments not representing SPPI. Loans receivable includes loans on
which customers voluntarily elect to opt for additional Asset Waiver and/or Income Waiver products which are offered
by the Group.
Accordingly, these balances are classified and measured subsequently as at fair value through profit or loss.
Repayments of these loans are recognised as reductions in the carrying amount, with fair value gains or losses at each
reporting date recognised in profit or loss.
At Fair value through profit or loss (derivatives)
Derivatives financial assets represent “in the money” derivative contracts that are classified and measured
subsequently as at fair value through profit or loss, with fair value gains or losses at each reporting date recognised in
profit or loss.
(ii) Financial liabilities - classification and subsequent measurement
Financial liabilities are classified as at fair value through profit or loss if it is held-for-trading, it is a derivative or it is
designated as such on initial recognition, otherwise the it is classified as At Amortised cost.
At Amortised cost
Includes; Trade and other payables; Borrowings; Lease liabilities.
These financial liabilities are subsequently measured at amortised cost using the effective interest rate method.
At Fair value through profit or loss (derivatives)
Derivatives financial liabilities represent “out of the money” derivative contracts that are classified and measured
subsequently as At Fair value through profit or loss, with fair value gains or losses at each reporting date recognised in
profit or loss.
(iii) Derecognition of financial assets and financial liabilities
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows f rom the financial asset expire,
or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks
and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains
substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified
liability are substantially different, in which case a new financial liability based on the modified terms is recognised at
fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the
consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Leasehold improvements6.7% - 20.0% SL
Furniture and fittings6.3% - 50.0% SL
Motor vehicles10.0% - 50.0% SL
Computer equipment20.0% - 100% SL
Workshop equipment10.0% - 50.0% SL
4140
Annual Report For The Year Ended 31 March 2023.
(iv) Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets and inventories, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
Impairment losses directly reduce the carrying amount of assets and are recognised in profit or loss.
The estimated recoverable amount of non-financial assets is the greater of their fair value less costs to sell and value
in use. Value in use is determined by estimating future cash flows f rom the use and ultimate disposal of the asset and
discounting these to their present value using a pre-tax discount rate that reflects current market rates and the risks
specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
A cash-generating unit is the smallest group of assets that generates cash inflows f rom continuing use that are
largely independent of the cash inflows of the other assets or groups of assets.
Impairment losses are reversed when there is a change in the estimate used to determine the recoverable amount
and there is an indication that the impairment loss has decreased or no longer exists. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised. All impairment losses are
reversed through profit or loss, other than those related to goodwill.
( j) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are
recognised as a deduction f rom equity, net of any tax effects.
(k) Goods and services tax
With the exception of trade payables and receivables, all items are stated exclusive of Goods and Services Tax.
(l) Reserves
Amalgamation reserve
The amalgamation reserve represents the difference between the fair value of consideration paid and the carrying
amount of net assets in a business combination where the acquirer and acquiree are controlled by the same
(ultimate) party (business combination under common control).
(m) Leases
All leases in which the Group is a lessee are accounted for by recognising a Right-of-use asset and a Lease liability
except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
Payments associated with all leases of low-value assets and short-term leases of equipment and vehicles are
recognised on a straight-line basis as an expense in profit or loss.
(i) Initial measurement
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term,
with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this
is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is
used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index
or rate, however in such cases the initial present value determination assumes that the variable element will remain
unchanged throughout the lease term.
Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the Lease liability also includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the Group if it is reasonable certain to assess that option;
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of
termination option being exercised.
Right-of-use assets are initially measured at the amount of the Lease liability, reduced for any lease incentives
received, and increased for:
• Lease payments made at or before commencement of the lease;
• Initial direct costs incurred; and
• The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore
the leased asset (typically make-good provisions on buildings).
(ii) Subsequent measurement
Subsequent to initial measurement Lease liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made.
Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining
economic life of the asset if, rarely, this is judged to be shorter than the lease term. Right-of-use assets are also subject
to impairment assessment at reporting date.
(iii) Remeasurement
When the Group revises its determination of the use (or non-use) of renewal and/or termination options, the carrying
amount of the lease liability is adjusted to reflect the payments to make over the revised term, which are discounted
at the revised discount rate.
The carrying value of lease liabilities is similarly revised when the variable element of future lease payments
dependent on a rate or index is revised, however this is discounted at the original discount rate.
In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised
carrying amount being amortised over the remaining (revised) lease term.
For changes in lease payments as a result of COVID-19, the carrying value of lease liabilities is revised and discounted
at the original discount rate, with a corresponding adjustment to profit or loss (variable lease payment).
(iv) Modifications to lease agreements
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature
of the modification:
Increases in scope:
• If the renegotiation results in one or more additional assets being leased for an amount commensurate with the
stand-alone price (i.e. market rate) for the additional rights-of-use obtained, the modification is accounted for as a
separate lease in accordance with the above policy.
• In all other cases (whether that is an extension to the lease term, or one or more additional assets being leased), the
lease liability is remeasured using the revised discount rate applicable on the modification date, with the right-of-use
asset being adjusted by the same amount
Decreases in scope:
Both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect
the partial of full termination of the lease with any difference recognised in profit or loss.
The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated
payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the
modification date.
The right-of-use asset is adjusted by the same amount.
(n) Government grants
Grants that compensate the Group for expenses incurred are recognised as income in profit or loss on a systematic
basis in the periods in which the associated expenses are recognised.
(o) Finance income and finance expenses
Interest income is recognised as it accrues in profit or loss, using the effective interest method.
Finance expenses comprise interest expense on borrowings.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset
are recognised in profit or loss using the effective interest method.
(p) Intangible assets
Finite Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, f rom the
date that they are available for use.
The estimated useful lives for the current and comparative periods are as follows:
- Trademarks 10 years
Amortisation methods and useful lives are reviewed at each reporting date and adjusted if appropriate.
(q) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the
consolidated statement of financial position.
4342
Annual Report For The Year Ended 31 March 2023.
6 During the period the Group received government grants in the form of COVID-19 related Wage subsidies f rom the
New Zealand Government.
7 The Group received consideration f rom an external party for the assignment of two leased properties.
Notes to and Forming part of the Consolidated the Financial Statements
4. Revenue from Contracts with Customers
5. Sundry Income
6. Segment reporting
Description of segments
Management has determined the operating segments based on the components of the Group that engage in
business activities, which have discrete financial information available and whose operating results are regularly
reviewed by the Group’s chief operating decision maker. The chief operating decision maker has been identified as
the Board of Directors. The Board of Directors makes decisions about how resources are allocated to the segments
and assesses their performance. Geographically the Group’s business activities are located in New Zealand.
Reportable segments have been identified as follows:
Operating Segments
MAR 2023MAR 2022
$'000$'000
Sale of cars 74,902 56,653
Fair value gain/(loss) on revaluation(222) 8
Contractual income earned on loans at fair value through profit or loss 508 762
Interest on bank accounts, short term deposits and investments 693 463
Agent commissions received
- Interest agent commissions 4,427 4,132
- Insurance agent commissions 2,396 2,213
Total revenue from contracts with customers 82,704 64,231
Timing of transfer of goods and services
Point of sale income 82,564 64,204
Over time income 139 27
Total Revenue 82,704 64,231
As at 31 March 2023Automotive
Retail
Finance
Other
Entities
Inter-entity
transactions
Total
$’000$’000$’000$'000$'000
Revenue including interest 81,990 909 1,979 (2,174) 82,704
Sundry Income(22) 3 50 2 33
Cost of sale(68,871) 2 (1,008) 1,972 (67,905)
Interest expense - finance - (222) - - (222)
Operating expense(8,112) (510) (3,299) 1 (11,920)
Operating profit 4,985 181 (2,278) (199) 2,689
Dividend received - - 287 (287) -
Interest expense - trading(781) (336) (7) 255 (869)
Net profit before tax 4,204 (155) (1,998) (231) 1,820
As at 31 March 2022Automotive
Retail
Finance
Other
Entities
Inter-entity
transactions
Total
$’000$’000$’000$'000$'000
Revenue including interest 63,381 1,185 2,547 (2,882) 64,231
Sundry Income 1,681 16 28 - 1,725
Cost of sale(52,649) - (1,567) 2,536 (51,680)
Interest expense - finance - (90) - - (90)
Operating expense(7,208) (674) (2,690) 181 (10,391)
Operating profit 5,205 437 (1,682) (165) 3,795
Dividend received - - 3,025 (3,025) -
Interest expense - trading(361) (441) - 203 (599)
Net profit before tax 4,844 (4) 1,343 (2,987) 3,196
MAR 2023MAR 2022
$'000$'000
Gain/(loss) on sale of property, plant and equipment 2 6
Government grants received6 37 351
Consideration for reassignment of leases7 - 1,085
Other(6) 283
Total sundry income 33 1,725
4544
Annual Report For The Year Ended 31 March 2023.
7. Determination of fair values
Face value versus carrying amounts
The fair value of financial assets and liabilities, together with the carrying amounts shown in the Consolidated
Statement of Financial Position, are as follows.
8. Finance Expenses
9. Key operating expenses
The sensitivity analysis of a reasonably possible change in one significant unobservable input, holding other inputs
constant, of level 3 financial instruments is provided below:
The carrying amount of cash and cash equivalents, trade and other receivables and trade and other payables has
been determined to be a reasonable approximation of the fair value of the financial instrument given the short-term
nature of these financial instruments.
Borrowings relate to facilities that are repaid within a short timef rame.
Refer to Note 14 for fair value measurement information regarding Loans receivable.
Carrying
Amount
Fair value
(level 3)
31 March 2023Note$'000$'000
Assets
Cash and cash equivalents12 3,767 3,767
Trade receivables at amortised cost15 669 669
Other receivables15 2,871 2,871
Loans receivable - Amortised Cost14 2,240 2,248
Loans receivable - Fair Value through Profit or Loss14 1,769 1,769
Total 11,316 11,324
Current Liabilities
Trade and Other Payables16 2,743 2,743
Borrowings22 900 900
Derivative financial liabilities18 55 55
Related Party Payable25 10 10
Total 3,708 3,708
Carrying
Amount
Fair value
(level 3)
31 March 2022Note$'000$'000
Assets
Cash and cash equivalents12 3,790 3,790
Trade receivables at amortised cost15 739 739
Other receivables15 4,126 4,126
Loans receivable - Amortised Cost14 3,456 3,673
Loans receivable - Fair Value through Profit or Loss14 3,442 3,442
Total 15,553 15,770
Current Liabilities
Trade and Other Payables16 1,890 1,890
Borrowings22 11,800 11,800
Derivative financial liabilities18 414 414
Related Party Payable25 10 10
Total 14,114 14,114
Profit or lossOther comprehensive income
(net of tax)
Significant unobservable inputsIncreasesDecreasesIncreasesDecreases
$’000$’000$'000$’000
Discount rate used
(+/- 5%) 106(97) 76 (70)
Default provision used
(+/- 5%)94(94) 68 (68)
Waiver provision rate used
(+/- 5%)68(68) 49 (49)
NoteMAR 2023MAR 2022
$'000$'000
Interest expense on financial liabilities measured at
amortised cost
(715) (263)
Interest expense on lease liabilities17(310) (189)
Other(66) (237)
Finance Expenses(1,090) (689)
NoteMAR 2023MAR 2022
Key operating expenses includes the following:$'000$'000
Audit fees(104) (87)
Depreciation - property, plant and equipment27(211) (204)
Depreciation - right-of-use assets17(1,924) (1,574)
Employee benefit expenses - excluding direct wages
included in cost of sale
Wages and salaries, Including Kiwisaver contributions(2,673) (2,620)
Expenses related to restructuring business 8(977) -
Expenses related to reassignment of leases - (200)
8 The business incurred non-recurring restructuring costs of $0.98m associated with significant changes at Board and management
level during the year.
4746
Annual Report For The Year Ended 31 March 2023.
10. Earnings Per Share
Basic earnings per share (EPS) is calculated by dividing the profit attributable to shareholders of the Group by the
weighted average number of ordinary shares on issue during the year, excluding shares held as treasury stock.
Diluted earnings per share assumes conversion of all dilutive potential ordinary shares in determining the denominator.
12. Cash and Cash Equivalents
Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and short term
deposits with an original maturity of three months or less which are subject to an insignificant risk of changes in value.
13. Inventories
As cash and cash balances are held with counterparties with “investment grade” credit ratings, there is not deemed
to be a significant increase in credit risk associated with the Group’s Cash and cash equivalents balance. Credit rating
is as per Standard & Poor.
Term deposits are presented as cash equivalents if they have a maturity of three months or less f rom the date
of acquisition and are repayable with 24 hours’ notice with no loss of interest. See note 3(q) for the group’s other
accounting policies on cash and cash equivalents.
The effective interest rate on Loans receivable at Amortised cost are 9.95% - 17.95%. (2021: 15.95% - 17.95%)
Loans Receivable measured at amortised cost (financial assets which represent solely payments of principal and
interest) have been impaired at 4.6% (2022: 2%), using the expected credit loss model.
Loans receivable measured at fair value (financial instruments that include waiver based clauses) are modelled at fair
value and include an effective default risk impairment rate of 4.6% (2022: 2%), collection costs of 1% and a discount rate
of 11.1% which are factored into the inputs of the valuation.
11. Dividends
MAR 2023MAR 2022
Numerator$'000$'000
Profit for the period 1,292 2,594
Denominator
Weighted average number of shares 45,554,500 45,554,500
EPS basic 0.03 0.06
EPS Diluted 0.03 0.06
MAR 2023MAR 2022
$'000$'000
Final Dividend 287 2,296
Interim Dividend - 729
Total2873,025
MAR 2023MAR 2022
$'000$'000
Gross stock on hand 8,664 13,334
Inventory provision(288) (326)
Total inventories 8,377 13,008
Held with
Credit Rating
31 Mar 2023
Credit
Rating
Interest
31 Mar 2023
Interest
31 Mar 2022
MAR 2023MAR 2022
$'000$'000
Cash at BankASB Bank &
Mitsui Bank
AA- & A-4.61%0.11% 3,767 3,790
14. Loans Receivable
Opening balance (1 Apr 2021)
Amortised Cost
Fair value
through profit
and loss
Total
Gross carrying value 829 2,998 3,827
Less: Impairment allowance (24) - (24)
Total Loans receivable 805 2,998 3,803
Movements during the period
Advances of loans to customers 3,611 2,677 6,288
Repayments of loans by customers(1,273) (2,241) (3,514)
Movement in accrued interest 288 - 288
Movement in Impairment Allowance(49) - (49)
Fair value gain/(loss) on revaluation - 8 8
Total Movements 2,5774443,021
Gross carrying value 3,455 3,442 6,897
Less: Impairment allowance (73) - (73)
Total Loans receivable 3,382 3,442 6,824
Closing balance (31 March 2022)
Current portion 1,343 1,684 3,027
Non-current portion 2,112 1,758 3,870
Less: Impairment allowance (73) - (73)
Total Loans receivable 3,382 3,442 6,824
Opening balance (1 Apr 2022)
Amortised Cost
Fair value
through profit
and loss
Total
Gross carrying value 3,455 3,442 6,897
Less: Impairment allowance (73) - (73)
Total Loans receivable 3,382 3,442 6,824
Movements during the period
Advances of loans to customers 622 707 1,329
Repayments of loans by customers(2,292) (2,158) (4,450)
Movement in accrued interest 456 - 456
Movement in Impairment Allowance(28) - (28)
Fair value gain/(loss) on revaluation - (222) (222)
Total Movements(1,242) (1,673) (2,915)
Gross carrying value 2,241 1,769 4,010
Less: Impairment allowance (101) - (101)
Total Loans receivable 2,140 1,769 3,909
Closing balance (31 March 2023)
Current portion 1,029 839 1,868
Non-current portion 1,212 930 2,142
Less: Impairment allowance (101) - (101)
Total Loans receivable 2,140 1,769 3,909
4948
Annual Report For The Year Ended 31 March 2023.
The impairment rate used is higher than the current actual current rate of impairment, which stood at 0.51% at 31
March 2023 (31 March 2022: 0.05%). Consideration was made with reference to additional default risks that could be
caused f rom the effects that COVID-19 could have on borrowers ability to repay debt and was taken into account when
determining the impairment rate.
The following table details the risk profile of the Group’s provision matrix for loan receivables collectively assessed for
impairment. The provision disclosed relates to loans assured at amortised cost only. Provision on loans valued at fair
value are included in the fair value gain or loss.
31 Mar 2023
Expected loss
rate
Gross finance
receivable
$’000
Collective
impairment
provision
$’000
Net finance
receivables
$’000
Current2% 3,316 (46) 3,270
Past due up to 30 days7% 427 (11) 416
Past due 30 - 60 days17% 144 (12) 131
Past due 60 - 90 days27% 7 (2) 5
91 days and over53% 116 (30) 86
4.6% 4,010 (101) 3,909
31 Mar 2022
Expected loss
rate
Gross finance
receivable
$’000
Collective
impairment
provision
$’000
Net finance
receivables
$’000
Current2% 6,528 (29) 6,499
Past due up to 30 days2% 211 (8) 203
Past due 30 - 60 days2% 56 (8) 48
Past due 60 - 90 days2% 71 (18) 53
91 days and over2% 31 (10) 21
2% 6,897 (73) 6,824
15. Trade and other Receivables
MAR 2023MAR 2022
$'000$'000
Movement in the impairment provisions:
Specific impairment provision
Opening balance(73) (24)
Impairment Movement through profit or loss(46) (49)
Amounts written off 17 -
(102) (73)
MAR 2023MAR 2022
$'000$'000
Trade receivables 538 461
Less: Impairment allowance(83) (42)
Net trade receivables 455 419
Lease deposits and bonds 214 320
Trade receivables at amortised cost 669 739
MAR 2023MAR 2022
$'000$'000
Prepayments 2,600 3,797
Other current assets 271 329
Other current assets 2,871 4,126
MAR 2023MAR 2022
$'000$'000
Trade payables 2,210 1,319
Financial liabilities at amortised cost 2,210 1,319
Contract liabilities 152 207
Other payables 381 364
Total trade and other payables 2,743 1,890
Trade receivables generally have terms of 30 days and are interest f ree. Trade receivables of a short-term duration are
not discounted.
These financial assets are subsequently measured at amortised cost using the effective interest rate method, less
impairment.
Trade payables generally have terms of 30 days and are interest f ree. Trade payable of a short-term duration are not
discounted.
16. Trade and other payables
5150
Annual Report For The Year Ended 31 March 2023.
(i) Right of use AssetsMAR 2023MAR 2022
$'000$'000
Opening Balance 7,056 6,246
Additions and modifications 2,406 4,958
Less:
Depreciation(1,924)(1,574)
Terminations(78)(2,574)
Closing Balance 7,461 7,056
(ii) Lease Liabilities
Opening Balance 7,317 6,603
Additions and modifications 2,402 4,958
Interest 310 189
Gain on changes to leases(12) (154)
Less:
Terminations(78) (2,574)
Repayments(2,009) (1,645)
COVID Relief - (45)
Effects of movements in exchange rates 3 (15)
Closing Balance 7,934 7,317
Current portion 1,856 1,484
Non-current portion 6,078 5,833
Total lease liabilities 7,934 7,317
(iii) Balance sheet and cash flow statementMAR 2023MAR 2022
$'000$'000
Carrying amount of RoU asset (by asset class)
• Premises 7,461 7,056
• Equipment - -
Total cash outflow related to leases (principal repayments)(2,009)(1,645)
Total cash outflow related to leases (interest)(310) (189)
MAR 2023MAR 2022
$'000$'000
Liability for annual leave 560 730
Wages payables 274 203
Total 834 933
(a) Income tax recognised in profit or loss and other comprehensive incomeMAR 2023MAR 2022
$'000$'000
Income tax recognised in profit or loss
Current tax 540 558
Deferred tax(12) 44
Total income tax expense 528 602
(b) Reconciliation of income tax expenseMAR 2023MAR 2022
$'000$'000
Income tax recognised in profit or loss
Profit before income tax expense 1,820 3,196
Tax expense at the domestic tax rate (28%) 510 895
Permanent differences 52 (278)
Timing differences(35) (43)
Intergroup eliminations(4) 21
Effects of tax rate in foreign jurisdictions 6 7
Income tax expense 528 602
(c) Deferred taxMAR 2023MAR 2022
$'000$'000
Income tax recognised in profit or loss
Balance at the beginning of the period 433 477
Current period movement
12
(44)
Deferred tax asset 445 433
Made Up Of:
Deferred tax asset 2,411 2,399
Deferred tax liability(1,966) (1,966)
Net balance as per above 445 433
17. Leases
The Group leases a number of properties and equipment in the jurisdiction f rom which it operates.
(i) Variable lease payments
As standard industry practice, several of the Groups property leases are subject to periodic CPI increases and/or
market rent reviews. A 1% increase in these payments would result in an additional $20,090 (2022: $16,510) cash outflow
compared to the current period’s cash outflow. (2022: 1%)
(ii) Lease term – use of renewal and termination options
The Group’s property leases typically include renewal and termination options. The Group must assess whether it
reasonably expects (or not) to exercise these when determining the lease term.
As at 31 March 2023, there is no leases where the group has assessed it does not reasonably expect to exercise all
available renewal options, resulting in potential future lease payments not currently being included in the lease liability
recognised for these leases:
(i) Amounts recognised in the financial statements
(ii) Short-term lease expense (excluding leases of 1 year or less) being $75,150 (2022: $400,186).
These are all leases that exclude 1 month or less in duration, which management have assessed do not qualify as a lease
under NZ IFRS16 leases and have not been capitalised as a result.
18. Derivative financial instruments
Forward contracts were taken out during the year to provide cover for risks that could potentially arise f rom foreign
currency fluctuations in the buying & selling of inventories. If the contracts are realised at fair market value at balance
date, this would result in a foreign exchange loss on derivatives of $55k as at 31 March 2023 (31 March 2022: Foreign
exchange loss of $414k).
19. Employee benefit liabilities
20. Income tax
5352
Annual Report For The Year Ended 31 March 2023.
Deferred tax assets are attributable to the following:MAR 2023MAR 2022
$'000$'000
Inventory provision 81 91
Employee benefits 143 179
Doubtful debt 51 32
Others - 7
Contract liabilities 37 51
Lease liabilities 2,215 2,039
Right-of-use asset(2,082) (1,966)
Total 445 433
MAR 2023MAR 2022
$'000$'000
Imputation credits at 1 April
(3,595) (3,461)
New Zealand Tax payments, net of refunds
(142) (1,310)
Imputation credits attached to dividends received - -
Imputation credits attached to dividends paid
112
1,176
Total(3,625) (3,595)
MAR 2023MAR 2022
$'000$'000
Motor Vehicle Finance Credit Facility 900 3,800
Retail Trade Finance Facility
-
8,000
Total Trade finance facility 900 11,800
Number of Ordinary SharesMAR 2023MAR 2022
Opening balance
45,554,500
45,554,500
Total issued and authorised capital 45,554,500 45,554,500
Dollar value of Ordinary SharesMAR 2023MAR 2022
$'000$'000
Opening balance
39,365
39,344
Share Option Scheme(21) 21
Total issued and authorised capital 39,344 39,365
21. Imputation Credits
22. Borrowings
23. Share capital
24. Share-based payment arrangements
The imputation credits are available to shareholders of the group:
- Through the company
- Through subsidiaries
The Retail Trade Finance Facility was due to expire on 30 April 2023 and the Motor Vehicle Finance Credit Facility will
expire on 1 October 2023. Post balance date, a new retail trade finance facility is in place. See note 30, Subsequent
events for further details. The Company was in compliance with all covenants throughout the year.
All issued shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends
as declared f rom time to time and are entitled to one vote per share at meetings of the Group and rank equally with
regard to the Group’s residual assets.
The Vesting Conditions are linked to Profitability, Share price and Liquidity in publicly traded shares of NZ Automotive
investments.
Each option entitles the holder to subscribe for one ordinary share in the group, for nil consideration, in the event
that certain performance hurdles are met and they remain employed by the Company at the end of the performance
period.
The Fair Value of the options was determined using a Monte Carlo option pricing model.
The significant inputs in the model were share price at grant date of $0.83, Annual Volatility of 41.6% and an annual
Risk f ree rate of 1.52%.
31 March 2023
The share option programme has become non active as at 31 March 2023 with the departure of the previous CEO.
31 March 2022
Refer accounting Policy in Note 3 (f)
On 1 October 2021 the group established a share option programme that entitles key management personnel to
purchase shares in the group. Under this programme holders of vested options are entitled to purchase shares at a
pre-determined rate at the grant date. The programme is limited to select key management personnel approved by
the Board.
This Programme is active as at 31 March 2022.
TrancheAverage ESOP ValueGrant DateNumber of InstrumentsVesting DateContractual life
Tranche 1 0.31 1 October 2021 175,000 30 September 2024 3 years
Tranche 2 0.13 1 October 2021 150,000 30 September 2024 3 years
Tranche 3 0.62 1 October 2021 94,230 30 September 2024 3 years
419,230
5554
Annual Report For The Year Ended 31 March 2023.
MAR 2023MAR 2022
$'000$'000
Short-term employee benefits 1,460 1,496
Defined contribution plans 33 45
Termination benefits 250 -
Total key management personnel remuneration 1,743 1,541
‘31 March 2023Credit rating *Cash and cash
equivalents
InvestmentsTotal
$’000$’000$’000
ASB BankAA- 3,491 - 3,491
Mitsui BankA- 276 - 276
3,767 - 3,767
‘31 March 2022Credit rating *Cash and cash
equivalents
InvestmentsTotal
$’000$’000$’000
ASB BankAA- 3,705 - 3,705
Mitsui BankA-1 85 - 85
3,790 - 3,790
Transactions with related parties
Transactions for the periodBalance outstanding at balance date
MAR 2023MAR 2022MAR 2023MAR 2022
$'000$'000$'000$'000
Eugene Williams 10 - -
Yusuke Sena - - 10 10
- 10 10 10
25. Related parties
Identity of related parties
The group has a related party relationship with its key management personnel being the Directors and Executive
Officers.
Key management personnel
Key management personnel represent the Board of Directors, and the Senior Leadership team including the Managing
Directors, Chief Executive Officer and Chief Financial Officer.
26. Financial instruments - risk management
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and,
whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Board
receives monthly reports f rom the Chief Financial Officer through which it reviews the effectiveness of the processes put
in place and the appropriateness of the objectives and policies it sets. The Group’s internal finance team also review the
risk management policies and processes and report their findings to the Audit Committee.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting
the Groups competitiveness and flexibility. Further details regarding these policies as they relate to the specific
financial risks that the Group is exposed to are set out below.
Through its operations, the Group is exposed to the following financial risks:
(a) Credit risk
(b) Market risk
(c) Liquidity risk
(d) Currency risk
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial asset fails to meet their contractual
obligations.
The Group’s exposure to credit risk is represented by the carrying amount of cash and cash equivalents and
investments.
The Group only holds cash and cash equivalents and investments with financial institutions that are independently
determined credit ratings of “A” or higher.
The Group has an Audit & Risk Committee that monitors credit risk as part of its wider duties.
Cash and cash equivalents held with financial institutions are presented in the table below:
* Standard & Poor’s
Interest rates on interest bearing cash and cash equivalents and investments range between 0.86% - 4.61%
(2022: 0.11% - 0.86%).
5756
Annual Report For The Year Ended 31 March 2023.
27. Property, plant and equipment
(b) Market risk
Market risk arises f rom the Group’s:
- Use of interest-bearing borrowings (interest rate risk); and
- Purchases in foreign currencies (foreign currency exchange risk).
i. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instruments will fluctuate because of
changes in market interest rates.
The Group is exposed to fair value interest rate risk f rom its fixed / variable rate borrowing and lease liabilities, with rates
between 9.4% - 3.75% (2022: 3.3% - 3.75%).
ii. Foreign currency exchange risk
The Group currently does not have any sales transactions denominated in foreign currencies, however the Group has
purchases transactions denominated in foreign currencies.
During the current reporting period the Group has purchased used cars with purchase prices denominated in foreign
currencies (YEN).
To mitigate foreign exchange risk on significant purchases, the Group enters into forward exchange contracts to match
the timing and amount of payments due. Derivatives are initially recognised at fair value on the date a derivative
contract is entered into, and they are subsequently remeasured to their fair value at the end of each reporting period.
The Group does not apply hedge accounting to these transactions, and they are classified as held for trading for
accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or
liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period. They are
considered level 2 fair value measurements being based on the present value of future cash flows based on the forward
exchange rates at the reporting date.
There are open forward exchange contracts of $5.2m at the end of the reporting period (2022: $6.3m).
The net foreign exchange loss recognised for the year was $0.32m (2022: $0.78m loss).
(c) Liquidity risk
Liquidity risk arises f rom the Group’s management of working capital. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become
due. To achieve this the Group maintains a monthly forecast on its future cash position to ensure it can meet financial
obligations when they fall due.
The Board receives monthly financial statements which include statements of financial position, performance and cash
flows, as well as budge/forecast variance reports, to ensure it holds or will hold cash equivalents to meet its obligations.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial
liabilities:
The Group has reviewed each items of property, plant and equipment and no impairment charge was recognised for
the year ended 31 March 2023 (March 2022: Nil).
Depreciation Methodology
The group recognises depreciation on a Straight line basis.
As at 31 March 2023Up to
3 months
Between
3 and 12
months
Between
1 and 2 years
Between
2 and 5 years
Over 5 yearsTotal
$’000$’000$’000$’000$’000$’000
Trade and other payables 2,357 339 20 27 - 2,743
Borrowings 900 - - - - 900
Lease liabilities 486 1,370 1,357 3,240 1,481 7,934
Total 3,743 1,709 1,377 3,267 1,481 11,577
Leasehold
improvements
Motor
vehicles
Furniture
and
fittings
Computer
equipment
Workshop
equipment
Total
Cost$’000$’000$’000$’000$’000$’000
Balance at 1 April 2022 511 593 644 578 112 2,438
Additions 125 26 102 44 8 305
Disposals - (94) (28) (12) (4) (138)
Balance at 31 March 2023 636 525 718 610 117 2,605
Leasehold
improvements
Motor
vehicles
Furniture
and
fittings
Computer
equipment
Workshop
equipment
Total
Cost$’000$’000$’000$’000$’000$’000
Balance at 1 April 2021 706 349 602 519 62 2,238
Additions 213 255 70 68 50 656
Disposals(408) (11) (28) (9) - (456)
Balance at 31 March 2022 511 593 644 578 112 2,438
Accumulated depreciation
Balance at 1 April 2022(115) (238) (297) (429) (24) (1,103)
Depreciation(43) (52) (42) (59) (14) (211)
Disposals - 15 2 1 1 19
Effect of exchange rate - 9 - - - 9
Balance at 31 March 2023(158) (266) (337) (487) (38) (1,286)
Accumulated depreciation
Balance at 1 April 2021(212) (181) (273) (382) (14) (1,062)
Depreciation(42) (66) (35) (51) (10) (204)
Disposals 139 4 11 4 - 158
Effect of exchange rate - 5 - - - 5
Balance at 31 March 2022(115) (238) (297) (429) (24) (1,103)
Net Book Value
As at 31 March 2023 477259381123791,319
Net Book Value
As at 31 March 2022396 355 347 14988 1,335
As at 31 March 2023Up to
3 months
Between
3 and 12
months
Between
1 and 2 years
Between
2 and 5 years
Over 5 yearsTotal
$’000$’000$’000$’000$’000$’000
Trade and other payables 1,809 26 48 7 - 1,890
Borrowings 11,800 - - - - 11,800
Lease liabilities 380 1,104 1,409 2,620 1,804 7,317
Total 13,989 1,130 1,457 2,627 1,804 21,007
5958
Annual Report For The Year Ended 31 March 2023.
Deferred tax assets are attributable to the following:MAR 2023MAR 2022
$'000$'000
Net Profit for the year 1,292 2,594
Non-cash / Non-operating items:
Depreciation of property, plant and equipment 2,134 1,779
Amortisation of intangible fixed assets
Loss/(gain) on sale of property, plant and equipment(2) (6)
Foreign exchange 77 (90)
Income tax expense 528 602
Finance expense(255) 277
- -
2,482 2,562
Movements in working capital:
(Increase)/decrease in trade and other receivables 4,528 (3,669)
Increase/(decrease) in trade and other payables 801 (1,298)
(Increase)/decrease in Inventory 4,631 (1,116)
9,960 (6,083)
Cash generated from operations 13,734 (927)
Income taxes paid(161) (1,570)
Net cash flows from operating activities 13,573 (2,497)
28. Notes supporting statement of cash flows
29. Contingent liabilities
30. Subsequent events
Reconciliation of Profit after tax with Net Cash Flow f rom Operating Activities
ASB Bank Limited has given a guarantee to the landlord on behalf of the Group to secure premises.
The maximum guarantee is for $1,316,959 (March 2022: $1,643,000).
The retail trade finance facility with ASB was due to expire on 30 April and has been extended until 31 May 2023 to
provide the business time to execute a new trade facility. The Company executed a new retail trade facility agreement
with Finance Now, with a limit of $5.0m, effective 1 June 2023.
The company closed down the Napier dealership as at 31 May 2023.
There are no other significant events have occurred subsequent to balance date. (2022: None)
61
60
Annual Report For The Year Ended 31 March 2023.
STATEMENT OF CORPORATE GOVERNANCE
This statement of Corporate Governance is correct as of 30 May 2023
and was approved by the Board on 28 June 2023
The Board of 2 Cheap Cars Group Limited is committed
to ensuring that it has best practice corporate
governance principles in place and high standards of
business behaviour and accountability. The Company
is committed to conducting business in the right
way, ethically and in line with its legal and regulatory
obligations.
The Board has set the Company’s corporate
governance arrangements. They have regard to the
recommendations set out in the NZX Corporate
Governance Code (Code). The Company believes that its
corporate governance practices in FY23 are materially
in line with the Code published on 17 June 2022. This
governance statement summarises:
• The Company’s corporate governance practices.
• The areas where the recommendations of the Code
are not fully complied with; and
• Those areas where further work is being undertaken
to ensure full compliance.
The Company takes a continuous improvement
approach to corporate governance such that its policies
are reviewed on a regular basis in line with best practice.
Key governance policies and charters can be viewed
on the Company’s website at www.2cheapcars.co.nz/
investors/.
Principle 1: Culture and ethical behaviour
The Company has adopted a written Code of Culture
and Ethical Behaviour (CCEB) that is a statement of the
Company’s core values. It sets out explicit expectations
for ethical decision making and personal behaviour
for the Board of Directors (Directors, and the Board)
and employees. The CCEB is available to all Directors,
volunteers, employees and contractors of the Company
and its subsidiaries (2 Cheap Cars Group personnel), and
is publicly available on the Company’s website.
The CCEB establishes a f ramework for ‘whistle blower’
protection if Company personnel report a breach or
suspected breach of law, regulation, Company policy or
other serious wrongdoing.
The Company’s Financial Products Dealing Policy,
along with the Financial Markets Conduct Act 2013,
imposes limitations and requirements on Directors and
employees in dealing in the Company’s shares. These
limitations prohibit dealing in shares while in possession
of inside information, and impose requirements for
seeking consent to trade.
Principle 2: Board composition and
performance
On 19 July 2022, four members of the Board resigned.
Resignations, effective f rom 21 August 2022, were f rom
two Independent Directors - Charles Bolt and Tim Cook,
a Non-executive Director - Tracy Rowsell and Executive
Director - Eugene Williams. These Board positions were
replaced by two current Independent Directors - Michael
Stiassny and Gordon Shaw, who were appointed by the
remaining Executive Director - David Sena.
Michael Stiassny and Gordon Shaw were nominated for
election at the Company’s Annual Shareholders Meeting
held on 2 September 2022. They were unanimously voted
in as Independent Directors, confirming their respective
roles. Michael Stiassny was confirmed as the Board
Chairperson.
Samantha Sharrf temporarily joined the Board for six
months as an Independent Director, allowing Gordon
Shaw to take the vacant Chief Executive Officer role on
a temporary basis. At this time, Gordon Shaw became
an Executive Director. On 9 January 2023, Paul Millward
was appointed as the Company’s Chief Executive Officer.
On 1 February 2023, after a hand-over period with Paul,
Gordon Shaw again became an Independent Director
and Samantha Sharif stepped down f rom the Board.
As at 31 May 2023, the Board has three Directors, two of
whom are Independent Directors – Michael Stiassny and
Gordon Shaw and an Executive Director David Sena.
In order for a Director to be independent, the Board has
determined that he or she must not be an employee
of the Company or any of its subsidiaries and have no
disqualifying relationships. Independence is determined
by the Board in accordance with the independence
requirements of the NZX Listing Rules; and having regard
to the factors described in the Code.
Each Director has experience, skills and expertise that
are of value to the Company. Profiles of Directors are
available on the Company’s website, and Directors’
interests are disclosed on page 73 of the Company’s 2023
Annual Report.
The roles and responsibilities of the Board are detailed
in the Board Charter. This is reviewed f rom time to time
and is available on the Company’s website. The Board’s
primary objective is to act at all times in a manner
designed to create and grow sustainable value for our
shareholders. The Directors are expected to be cognisant
of the duties and obligations imposed on them by the
Company’s Constitution, the NZX Listing Rules and
by law.
The Board has delegated authority for day-to-day
leadership and management of the business to the
CEO, who in turn has sub-delegated authority to other
Company management with specified financial and
non-financial limits.
The Company’s Delegations of Authority Policy is
reviewed annually by the Board.
The number of elected Directors, and the procedure
for their retirement and election at annual meetings,
is determined in accordance with the Company’s
Constitution and the NZX Listing Rules.
STATEMENT
OF CORPORATE
GOVERNANCE
6362
Annual Report For The Year Ended 31 March 2023.
STATEMENT OF CORPORATE GOVERNANCE
Continued
STATEMENT OF CORPORATE GOVERNANCE
Continued
The Company has not established a separate
nominations committee to recommend Director
appointments to the Board (in accordance with
Recommendation 3.4 of the Code), as this function
is carried out by the whole Board. All Directors are
involved in the consideration of Board composition and
nominations and take into account a number of factors
including qualifications, capability, experience, judgment
and skills, and the ability to work with other Directors.
Shareholders may also nominate candidates for election
to the Board. Reference checks are carried out on all
candidates and key information about candidates is
provided to shareholders to assist their decision as to
whether or not to elect or re-elect a candidate. Board
members enter into written agreements with the
Company, outlining the terms of their appointment.
Directors are encouraged to undertake appropriate
training and education to ensure they remain up-to-
date on best practice to perform their duties. In addition,
management provide regular updates on relevant
industry and Company issues such as briefings f rom
Senior Executives.
All Directors have access to Executives to discuss issues,
get information on specific areas in relation to matters
to be discussed at Board meetings and for other areas
as they consider appropriate. Subject to the approval
of the Board Chair, Committees and Directors have the
right to seek independent professional advice where the
Committee or individual deems it necessary to carry out
their functions. This advice is at the Company’s expense.
The Company has arranged a policy of Director and
Officer’ liability insurance with Vero Liability Insurance
Limited. This policy covers Directors and Officers so that
any monetary loss suffered by them, as a result of actions
undertaken by them as a Director or Officer, is insured to
specified limits (and subject to legal requirements and/or
restrictions).
The Chair meets regularly with Directors to discuss and
assess individual performance of the Directors.
In accordance with its Charter, the Board will review and
assess its performance as a whole on an annual basis,
and in such manner as the Board deems appropriate.
Diversity
The Company is committed to equal employment
opportunities and treating all individuals fairly and with
respect. The Company has a diverse workforce and
recognises that everyone has individual differences
which can be leveraged to create stronger teams and
drive stronger business performance.
The Company’s approach to diversity is outlined in
the Company’s Diversity and Inclusion Policy, which is
available on the Company’s website. Key areas of
focus are:
• Recruitment and retention of a diverse workforce
• Creating a supportive working environment
• People development
• Recognition and reward based on merit.
The Board has set diversity objectives in accordance
with the Diversity and Inclusion Policy; however, they
are not currently being measured (as recommended
under Recommendation 2.5 of the Code).The Board has
reviewed its required diversity profile and considers the
make-up of the Board is currently sufficiently diverse
for the purposes of forming a strong team, providing
specialised knowledge and expertise in relevant markets
and driving business performance.
The Board considers that while the Company has
performed in accordance with its Diversity and Inclusion
Policy, this is an area that should attract greater focus in
the next financial year.
Although there were one to two female Directors on
the Board throughout the year, as at 31 March 2023 the
composition of Directors and Officers of the Company
were all male.
As At 31 March 2023:MaleFemale
Directors 3 -
Officers
2
-
CommitteeRoleMembers
Audit, Finance and Risk
Management Committee
The main purpose of this Committee is to assist the
Board in providing oversight of matters relating
to the quality and integrity of financial reporting,
independence and performance of the external
auditors, effectiveness and objectivity of the internal
audit programme and oversight of business risks and
compliance activities.
Gordon Shaw (Chair)
Michael Stiassny
David Sena
Remuneration CommitteeThis Committee has been established to assist the
Board in fulfilling its responsibilities in relation to the
following matters:
1.Formal and transparent method for determining
Directors’ remuneration.
2.Remuneration of the CEO.
3.Review of the remuneration recommendations
made by the CEO for the senior management team.
4.Consideration and review of any incentive plans or
payment targets and calculations for the CEO and
senior management team.
5.Review of the overall Company-wide salary and
incentive policies.
Gordon Shaw (Chair)
Michael Stiassny
David Sena
As At 31 March 2022:MaleFemale
Directors42
Officers
2
-
Principle 3: Board Committees
The Board has delegated a number of its responsibilities to Committees to assist in the execution of the Board’s
responsibilities. The use of Committees allows issues requiring detailed consideration to be dealt with separately
by members of the Board who have specialist knowledge and experience, thereby enhancing the efficiency and
effectiveness of the Board. However, the Board retains ultimate responsibility for Committee functions, and determines
their responsibilities. Copies of relevant Committee Charters can be found on the Company’s website.
Although the Code recommends that the Audit Committee should be majority independent and comprise solely of
non-executive Directors, the current composition of the Board means that all Directors are currently members of all
committees. Committees are comprised of a majority of Independent Directors.
Members of the Board can attend any Committee meeting and minutes of Committee meetings are available to
all members. Each Committee is empowered to seek any information it requires f rom the Company’s personnel to
undertake their duties. Committees can also get independent legal or other professional advice.
Special purpose Committees may be formed to review and monitor specific projects with senior management. In the
case of a takeover offer, the Company would engage expert legal and financial advisors to provide advice.
Formal ‘takeover protocols’ have been developed and formally adopted by the Board (in compliance with
Recommendation 3.6 of the Code). The Company’s Takeovers Code can be found on the Company’s website.
The Board Committees as at 30 May 2023 were:
The Audit, Finance and Risk Management Committee is comprised of a majority of Independent Directors and only
Non-Executive Directors. The Chair of the Audit, Finance and Risk Management Committee is not the Chair of the Board.
Audit, Finance and Risk Management Committee Charter sets out the policies and practices of the Board of Directors
regarding the financial audit and risk management processes and is available on the Company’s website.
Employees of the Company only attend meetings of the Audit, Finance and Risk Management Committee at the
invitation of the Committee.
The Remuneration Committee is comprised of a majority of Independent Directors. Management attendance at
meetings of the Remuneration Committee is by invitation of that Committee.
(An Officer is a person who is concerned or who takes
part in the management of the Company’s business and
reports directly to the Board or the CEO).
6564
Annual Report For The Year Ended 31 March 2023.
STATEMENT OF CORPORATE GOVERNANCE
Continued
STATEMENT OF CORPORATE GOVERNANCE
Continued
Attendance at Board and Committee meetings during FY23 was:
AttendeeBoardAudit, Finance and Risk
Management Committee
Remuneration
Committee
Michael Stiassny623
Gordon Shaw623
David Sena1323
Eugene Williams81-
Tracy Rowsell81-
Charles Bolt81-
Tim Cook81-
Total Meetings Held 143 3
Principle 4: Reporting and disclosure
The Company is committed to keeping investors and the
market informed of all material information about the
Company and its performance in a timely manner. In
addition to all information required by law, the Company
seeks to provide sufficient meaningful information to
ensure stakeholders and investors are well informed.
The Company’s Continuous Disclosure Policy sets out
the principles and requirements of this commitment to
timely and balanced disclosures.
For the financial year ended 31 March 2023, the Directors
believe that proper accounting records have been
kept which enable, with reasonable accuracy, the
determination of the financial position of the Company
and facilitate compliance of the financial statements
with the Financial Markets Conduct Act 2013.
The CEO and the CFO are required to provide a letter of
representation to the Board confirming that:
• The 2 Cheap Cars Group’s financial statements
have been prepared in accordance with accepted
accounting standards in New Zealand, are f ree of
material misstatements, including omissions, give a
true and fair view of the financial performance and
position of the 2 Cheap Cars Group and the financial
records have been properly prepared.
• The representations are based on a sound system of
risk management, internal compliance and controls
that provide for the implementation of the policies
adopted by the Board; and
• 2 Cheap Cars Group’s risk management and internal
control systems are operating effectively in all material
respects.
A letter of representation confirming those matters was
received in relation to the FY23 financial statements.
The Board has given due consideration to the
importance of non-financial disclosure and recognises
the importance of non-financial disclosure including
environmental, economic and social and government
(ESG) considerations. However, given the size of the
Company it has elected to not yet implement a
formal ESG policy or provide the level of reporting on
environmental, economic and social stability factors and
processes to the level recommended in principle 4.3 of
the Code. The Company’s Annual Report does discuss
the role the Company is playing with respect to the
implementation of lower emission vehicles in the ‘FY23
in Review’ section, and in the commentary provided on
pages 68-69 of this Annual Report.
Principle 5: Remuneration
Remuneration of Directors and the senior management
team is the key responsibility of the Remuneration
Committee. External advice has been sought to ensure
remuneration is benchmarked to the market for senior
management positions.
The Company has adopted a Remuneration Policy that
relates to Non-Executive Directors and senior managers.
The Remuneration Policy is designed to ensure that
remuneration practices of the Company are fair and
appropriate, and that there is a clear link between
remuneration and performance.
At present, the weightings of remuneration for
senior management are geared towards a fixed basis
remuneration with a short-term incentive scheme in
place for select senior management. No equity-based
incentive scheme is currently in place. An equity-based
incentive scheme will be in place for the CEO in FY24.
Fixed remuneration is determined having regard to
the scale and complexity of the relevant employee’s
role. It includes all benefits, allowances and deductions.
Adjustments to fixed remuneration are not automatic,
they are based on performance and reviewed annually by
the Remuneration Committee.
Remuneration of Non-Executive Directors is determined
by the Board on the recommendation of the
Remuneration Committee.
There is no requirement for Directors to hold shares.
Details of Director and Executive remuneration (including
remuneration arrangements for the CEO) in FY23 are
provided on pages 74-75 of this Annual Report.
Principle 6: Risk management
The Board has overall responsibility for the Company’s system of risk management and internal controls, and procedures
are in place to provide control within the management and reporting structure.
In addition, the Audit, Finance and Risk Management Committee provides an additional and more specialised oversight
of Company risks. The Audit, Finance and Risk Management Committee Charter provides detail around the specific
responsibilities of the Committee related to risk management.
The Committee reviews and recommends to the Board for approval the Company’s half year and annual financial
statements. The Committee also advises the Directors as to whether the Company’s financial statements comply with
applicable laws and regulations.
Monthly management reporting is provided to the Board in order to monitor the Company’s performance against
budget and other objectives. The responsibilities of the Audit, Finance and Risk Management Committee include :
• Ensuring that management is implementing, and reporting to the Committee, the Company’s risk management
f ramework (including the maintenance of the risk register) and policies.
• Reporting to the Board on the development of existing risks and the emergence of new risks.
• Reporting to the Board on the main risks to the Group’s performance, how these main risks are being managed under
the Group’s risk management f ramework and on any incident involving f raud or other breakdown of internal controls.
A structured f ramework is in place for capital expenditure. This includes appropriate authorisation and approval levels
that place an emphasis on the commercial logic for an investment. Under a formal Delegation of Authority policy, the
Board has set limits on management’s ability to incur expenditure, enter into contracts and acquire or dispose of assets.
Risk profiles that identify, assess, monitor and report the Company’s key business risks are formally reviewed by the
Board annually as part of the Board’s risk assessment process. Risk profiles also identify key risk mitigation strategies
which are in place as shown below.
Key RiskDescription of RiskMitigation
Import
Concentration
Risk
Almost all of the Company’s vehicles are
imported f rom Japan. The Company is
therefore fully reliant on the auction and export
process as it stands in Japan, and is exposed
to fluctuations in foreign exchange rates,
border restrictions and regulation changes.
If the Company could no longer source most
of its cars f rom Japan, it may need to set up a
similar process in one or more other countries,
incurring costs in doing so.
Japan is exposed to typhoons and is home
to marmorated stink bugs, an invasive pest
to New Zealand, both presenting a level of
specific risk to importing f rom Japan
While the Company takes forward cover on
currency exchange rates, long-term trends
in the Japanese Yen to New Zealand dollar
exchange rate cannot be fully hedged and may
affect margins.
During stink bug season (September to April),
all imported cars are heat treated, adding a
small additional cost. NZ’s Ministry of Primary
Industries usually refuses entry for any ship
where a stink bug is discovered (unless the
cargo ship has been heat treated). This has
affected used car imports f rom Japan in the
past, affecting available inventory and sales.
Key Person RiskThe Company’s operation is reliant on certain
key personnel, including its founder David
Sena. If the key person was to leave the
Company without a suitable transition period,
financial performance could be materially
affected.
This risk can be mitigated with suitable
transition periods. Further, the founder has
a sizeable cornerstone equity stake in the
business, incentivising him to prioritise the
Company’s financial performance over the
medium to longer term.
6766
Annual Report For The Year Ended 31 March 2023.
STATEMENT OF CORPORATE GOVERNANCE
Continued
STATEMENT OF CORPORATE GOVERNANCE
Continued
Key RiskDescription of RiskMitigation
Regulatory RiskThe Company’s importation costs on vehicle
purchases have increased in FY23 since
the Government introduced the Clean Car
Discount rebate scheme and the Clean Car
Standard.
The Clean Car Discount rebate scheme is
targeted at consumers to encourage them to
purchase vehicles that emit less carbon dioxide
(CO2). Consumers receive a rebate on certain
vehicles that emit lower levels of CO2 or no
CO2 and may pay a penalty if the vehicles they
purchase emit higher levels.
The Clean Car Standard for used light vehicles
requires vehicle importers to lower the carbon
dioxide emissions of the vehicles they are
importing or pay a fine. There is a credit / debit
system that has been introduced.
The business faces a risk that vehicle import
costs could continue to rise, and may have to
pay penalties on some vehicles it imports.
The Government has introduced new
regulations in the past, such as the electronic
stability control system requirement for all
used light passenger vehicles imported f rom
1 March 2020, and the Company has proven it
can adapt its procurement model to adhere to
new requirements.
The Company has adapted to new clean car
regimes and is meeting its customers’ needs
through procurement of smaller cars that are
more fuel efficient, as well as a mix of fully
electric and hybrid electric vehicles.
The Company expects that fuel efficiency
standards will continue to evolve and will
monitor and comply with the standards.
Any additional costs incurred by the Company
during the importation process are directly
passed on to consumers through higher
retail pricing. Given all used car importers are
subject to the same requirements, 2 Cheap
Cars’ market position as one of the more
affordable used car dealerships is expected to
be maintained.
The Company is currently in a credit position
under the Clean Car standard scheme.
NZMF’s vehicle finance loan book exposes the
Company’s balance sheet to poor performing
loans. If a significant number of NZMF loans
default, the Company’s financial performance
could be materially affected.
The Company has stringent lending criteria
and processes, including thorough checks into
the borrower’s credit worthiness, employment
status and ability to service the requested
loan. Under Responsible Lending Guidelines,
the Company is also required to ensure that
the requested loan is suitable for the specific
clients’ needs and circumstances of the
borrower.
In addition, the Company has professional
back-end or collection and recovery systems
in place using qualified and approved third
party collection houses and agents. This
allows the Company to deal with any arrears
at the earliest possible stage and if the arrears
become problematic, it can engage the
services of experienced collectors and recovery
services to take the required action to enforce
repayment.
Health and Safety
The Board is responsible for monitoring corporate
risk assessment processes; this is not delegated to a
subcommittee. Staying safe, keeping others safe and
being corporately responsible are fundamental to
the Company.
The Board is committed to ensuring a high-quality, safe
and healthy environment for everyone who works at
the Company, its visitors and partners. This means that
the Company makes the safety and wellbeing of the
Company’s employees and contractors a top priority.
People safety is a key priority and an essential component
to everything the Company does. The Company is
committed to developing, improving and reinforcing
its safety culture. Key to this commitment is improving
leadership capacity and simplifying tools and systems.
Paragraph 2.3.3 of the Board Charter describes how the
Company manages its health and safety risks.
The Board receives monthly reports on health and safety
performance, including performance against plan and
‘near miss’ reporting.
The Company seeks to provide a healthy and safe
workplace with a key performance indicator (KPI) goal
of zero serious harm accidents and incidents. This was
achieved, with no major incidents, during the FY23 period.
The Company strives to create an environment where
employees report all near miss accidents and incidents,
however minor, with the objective to identify potential
harm and promote continuous improvement.
Vehicles are the biggest risk area for our staff. This
includes risks associated with vehicle movements at
our dealerships as well as in our logistics and vehicle
processing Hub.
2 Cheap Cars Group engages a third-party specialist
to perform health and safety reviews. These reports
are focused on the identification of site hazards, with
recommendations of appropriate corrective actions to
ensure staff are working in a safe environment and all
relevant compliance is adhered to.
All staff are provided with the Company handbook which
contains the risk management policy, health and safety
policy and guidelines for keeping safe while at work.
Staff are required to read and confirm that they have
received this.
Principle 7: Auditors
For the year ended 31 March 2023, UHY Haines Norton
Sydney was the external auditor of the Company.
The Audit, Finance and Risk Management Committee
monitors the ongoing independence, quality and
performance of the external auditors and audit partner
rotation. The Audit, Finance and Risk Management
Committee Charter establishes a f ramework for the
Company’s relationship with its external auditors in
accordance with Recommendation 7.1 of the Code.
The Committee pre-approves any non-audit work
undertaken by UHY Haines Norton Sydney. UHY Haines
Norton Sydney did not provide any non-audit services to
the Company or its subsidiaries during FY23.
The fees paid for audit services in FY23 are identified
on page 45 of the Company’s 2023 Annual Report. The
Company’s external auditors are expected to attend the
2023 Annual Shareholders’ Meeting.
Given the size of the Company, it does not have an internal
audit function. Through the normal operations of the
Company, a number of internal controls are embedded
within the business, including but not limited to; risk
management, information systems, security, health and
safety, conflicts of interest and prevention and detection
of f raud.
Principle 8: Shareholder rights and relations
The Company aims to promote open and regular
communication with shareholders and interested
stakeholders and seeks to encourage effective
participation at Company shareholder meetings,
distributing shareholder communications in accordance
with NZX Listing Rules and relevant legislation.
The Company uses a variety of channels and technologies
to keep its shareholders informed and to allow access to
information such as market announcements through
NZX, the Company’s share registry, the Company’s
website, results conference calls, shareholder roadshows,
annual reports and annual meetings of shareholders.
The Company also provides options for its shareholders
to communicate with the Company, and the Company’s
share registry, electronically.
All market releases carry contact details for shareholders
to communicate with the Company. The Company
responds to all shareholder communications within a
reasonable timef rame.
Shareholders are actively encouraged to attend the
annual meeting and may raise matters for discussion at
this event, they can also vote on major decisions which
affect the Company. Voting is by poll, upholding the ‘one
share, one vote’ philosophy. Shareholders can also vote
by proxy ahead of meetings without having to physically
attend those meetings.
Notices of annual or special meetings of the shareholders
are posted on the Company’s website and to the NZX as
soon as possible, and at least 20 working days prior to
the meeting.
In addition to shareholders, the Company has a wide
range of stakeholders and maintains open channels of
communication for all audiences such as brokers, the
investing community and the New Zealand Shareholders’
Association, as well as staff, suppliers and customers.
The Company has a number of policies which uphold
stakeholder interests, including but not limited to the
Continuous Disclosure Policy and Financial Products
Dealing Policy.
6968
Annual Report For The Year Ended 31 March 2023.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Environmental
2 Cheap Cars is committed to being more sustainable and to developing practices that minimise impact on the
environment. The Company has several initiatives in place to support the role it should play in this area.
Contribution to reducing New Zealand’s transport emissions
It is part of the Company’s strategy to sell a higher proportion of lower carbon emitting vehicles to consumers,
contributing to an overall reduction in carbon emissions in NZ. 2 Cheap Cars is aligned with the Government’s clean car
programme to increase the demand for low emission vehicles.
In the financial year ended 31 March 2023, 41% of all vehicles sold by 2 Cheap Cars were lower emitting, that is, EV and
HEVs. 2 Cheap Cars is a market leader in selling such a high proportion of low emitting vehicles in NZ; we intend to retain
this leadership position and continuing to make a difference in this important area.
Hybrid / Electric vehicles
Social
Our people
Supporting our team is of high importance to the success of 2 Cheap Cars Group. The Company is committed to
providing employees with a safe working environment and a focus on wellbeing.
Flexible working conditions such as hybrid work f rom home, support for relevant office staff and flexible working hours
for production staff and office staff are in place as needed.
Being an industrial based business, the Company takes health and safety very seriously. Staying safe, keeping others safe,
and being corporately responsible are fundamental to the Company and we aim to provide a healthy and safe workplace
with a KPI goal of zero serious harm accidents and incidents. This was achieved with no major incidents during the FY23
period.
The business runs conferences and team building events with staff and suppliers to enhance employee engagement
and relationships.
The Company offers staff access to the Xero Assistance programme. This programme provides f ree and confidential
mental health counselling and resources to our staff.
2 Cheap Cars Group has a diverse employee base. We have people f rom a range of different cultures and backgrounds
and we are committed to providing equal opportunities for all staff.
Community
2 Cheap Cars is a humble business, proud to be part of the wider NZ community. We’re focused on ‘Driving better deals
every day’ to ensure that we source and retail a wider range of quality cars that are more affordable by leveraging the
Company’s vertically integrated business to sell the best value vehicles possible.
The finance business, NZMF, is signed up to the Financial Markets Authority’s responsible lending code. When the
business was lending, the team assessed the needs and means of each individual customer and tailored appropriate
financial products to suit their needs. Whilst running the ledger down, we ensure we are flexible and we work with
customers in hardship situations.
Future areas of focus
We are progressing our leadership expectations model to grow our pool of capability, focusing on high-potential
team members.
We have a continued focus on having a diverse organisation across all areas including our retail operations, supply chain
and support staff.
Reducing the Company’s internal emissions
2 Cheap Cars Group recognises the need to protect the natural environment and believes that a clean and unpolluted
environment is a benefit to all.
A large portion of the Company’s emissions is derived f rom the transportation of vehicles in the form of emissions, f rom
shipping between Japan and NZ, and f rom transporting vehicles nationally, f rom the vehicle processing Hub in Auckland
to dealerships across the country.
The Company has implemented several sustainability initiatives to help offset its carbon footprint. These are:
• 90% of all Company owned cars driven by staff are hybrid or fully electric.
• The vehicle processing Hub warehouse has been equipped with LED light bulbs to light the building more efficiently.
The Company has installed lighting with day/night sensors to consume less power.
• We follow best practice when disposing of garbage and using chemical substances.
• Effective recycling is a natural part of our waste disposal programme. The business collects oil, extracted during the
vehicle service process, which is provided to an external company that recycles the used oil in an environmentally
f riendly method. Old vehicle batteries are also recycled.
• We encourage the use of electronic filing to reduce paper usage.
• Company energy usage - We completed an audit of the energy use at the vehicle processing Hub and have now
installed utility meters. Once calibrated, we have access, via a portal, that will display and record electricity and water
consumption. Irregularities will be flagged, with this process giving us the ability to consistently improve energy and
water consumption.
41%27%
FY22FY23
7170
STATUTORY
DISCLOSURES
STATUTORY DISCLOSURES
Annual Report For The Year Ended 31 March 2023.
Top 20 share holders
The names of the largest 20 holders of 2 Cheap Cars Group Limited shares as at 30 May 2023 are listed below:
NameNumber of Shares held% of issued capital
1Yusuke Sena & Tompkins Wake Trustees 2022 Limited 20,906,993 45.9%
2Eugene Williams & Tlr Williams Trustee Company Limited 15,161,435 33.3%
3Citibank Nominees (New Zealand) Limited - NZCSD 1,017,491 2.2%
4Hobson Wealth Custodian Limited 993,052 2.2%
5Accident Compensation Corporation - NZCSD 537,500 1.2%
6Nicolas Carl Purcell 500,000 1.1%
7Forsyth Barr Custodians Limited 293,133 0.6%
8Ace Finance Limited 290,000 0.6%
9Austen Herbert Stewart Kyle 288,223 0.6%
10Humi Sena 250,000 0.5%
11Ian Archibald Hurst & Gloria Faye Hurst 250,000 0.5%
12Leveraged Equities Finance Limited 208,028 0.5%
13Doo Hyuk Kim 174,167 0.4%
14Jonathan Michael Alan Purdey & Martin James Blockley
& Withers Tsang And Co Trustees Limited
170,000
0.4%
15Nicholas David Sandlant 150,000 0.3%
16Foundation Equities & Contracting Limited 133,300 0.3%
17Mark Henry Pumphrey 129,000 0.3%
18National Nominees Limited - NZCSD 111,452 0.2%
19Samantha Hielkje Sharif 108,000 0.2%
20Desmond Anthony Pender & Kathleen Marie Pender 100,000 0.2%
Total Top 20 Holders 41,771,774 91.7%
Remaining Holders 3,782,726 8.3%
Total Shares On Issue 45,554,500 100%
Forsyth Barr Custodians holds 3,727,462 shares on behalf of Eugene Williams. For the purpose of this disclosure these
shares have been included in the holdings of Eugene Williams and TLR Williams Trustee Company Limited set out in the
table above. New Zealand Depository Nominee Limited holding 1,530,777 shares has been excluded f rom the above list in
line with NZX rule 3.7.1 (c)
7372
Annual Report For The Year Ended 31 March 2023.
Disclosure of Directors’ interests
The Company maintains an interests register in accordance with the Companies Act 1993 in which Directors interests
are recorded.
The following are particulars of general disclosures of interest by Directors holding office as at 31 March 2023 under
section 140(2) of the Companies Act 1993. The Director will be regarded as interested in any and all transactions between
the Company or any of its subsidiaries with the disclosed entity. Particulars of entries made during the year are noted in
brackets for the purposes of section 211(1)(e) of the Companies Act 1993. In addition to the information set out below, the
following other interests were disclosed in the Company’s interest register: the authorisation of Directors’ remuneration;
and entry into the Directors and officers’ liability insurance policies.
Spread of 2 Cheap Cars Group security holders
As at 30 May 2023 the spread of shareholders is set out in the table below:
Substantial product holders
The following substantial product holder information is given pursuant to section 293 of the Financial Markets Conduct
Act 2013. The table below sets out the names of the persons, who as at 31 March 2023, were registered as substantial
product holders in the company. The total number of voting securities (fully paid ordinary shares) of the Company as at
30 May 2023 was 45,554,500.
Directors’ Shareholdings
As at 30 May 2023 the Directors(s) of the company had the following relevant interests in the Company’s shares:
The Sena Trustees previously had a relevant interest in shares in 2 Cheap Cars Group Limited held by Eugene Williams
and TLR Williams Trustee Company Limited as trustees of the E & Co Trust (the Williams Trustees) which were subject to
trading arrangements agreed in the Sale Process Deed dated 15 February 2021 (Sale Process Deed) entered into between
the parties. Those trading arrangements expired on 1 April 2023, in accordance with the terms of the Sale Process Deed,
such that on and f rom 1 April 2023 the Sena Trustees no longer had a relevant interest in any shares in 2 Cheap Cars
Group Limited held by the Williams Trustees.
Escrow Arrangements
On 30 May 2023, being the first day after the date on which 2 Cheap Cars Group Limited released to NZX its results
announcement in respect of the full year ended 31 March 2023, the escrow restrictions set out in the Escrow Deed ended
such that 2 Cheap Cars Group Limited no longer has a relevant interest in any of the Escrowed Shares.
Through the Nicsam Trust, Martin Blockey is the beneficial owner of 170,000 shares currently jointly held by himself and
2 Cheap Cars Group Limited. 2 Cheap Cars Group Limited holds a conditional call option on these shares and the shares
are held under escrow conditions until the 7th of May 2024.
STATUTORY DISCLOSURES
Continued
STATUTORY DISCLOSURES
Continued
RangeNumber of holdersShares% of Holders% of Shares
1 to 100026 16,402 15%0%
1001 to 500041 135,237 24%0%
5001 to 10,00025 215,291 15%0%
10,001 to 100,00056 1,985,019 33%4%
100,001 and over20 43,202,551 12%95%
Totals168 45,554,500 100%100%
Director / Entity Relationship
Gordon Shaw
Institute of Directors (loD) - Nelson Malborough BranchCommittee Member
Nelson Netball Centre Inc. Board Member
Business Leaders’ Health & Safety Forum Steering Group Member
ProMed HR New Zealand Ltd Chairperson
NZ Automotive Investments Independent Director
Car Safety NZ LimitedDirector
Mapua & Districts Business AssociationChairperson
Director / Entity Relationship
Yusuke Sena
2 Cheap Rental Cars Limited Director
2 Cheap Cars LimitedDirector
2CC International LimitedDirector
Car Plus KKDirector
Lan LimitedBeneficiary
Car Safety NZ LimitedDirector
Director / Entity Relationship
Michael Staissny
LPF Group LtdDirector
MS10 LtdDirector
Tower LtdChair
Tower Insurance Ltd (Solomon Islands Branch)Director
New Talisman Gold Mines LtdDirector
NZ Automotive Investments LimitedDirector
Founders Advisory No 3 LtdDirector
Founders Advisory No 7 LtdDirector
Founders Advisory LtdDirector
LPF Litigation Funding No. 28 LtdDirector
West24 LtdDirector
LPF Litigation Funding No 30 LtdDirector
LPF Litigation Funding No 29 LtdDirector
Cocooil Holdings LtdDirector
Founders Advisory No 25 LtdDirector
NZ Motor Finance LtdDirector
Car Safety NZ LimitedDirector
Substantial product holderNumber of ordinary shares in which relevant interest is held
Yusuke Sena 20,906,993
Eugene Williams 15,161,435
36,068,428
DirectorsNumber of ordinary shares in which relevant interest is held
Yusuke Sena 20,906,993
Gordon Shaw 10,000
20,916,993
7574
Annual Report For The Year Ended 31 March 2023.
Share dealings of Directors during the financial period.
Directors disclosed under section 148(2) of the Companies Act 1993 had no acquisitions or disposals of relevant interests
in 2 Cheap Cars Group Limited shares during FY23.
Directors’ renumeration
The total pool of Directors’ fees available to Non-Executive Directors for the year ended 31 March 2023 was $650,000,
which was approved by shareholders. Of this, $261,306 was paid to Non-Executive Directors in FY23. The table below sets
out the total of the remuneration and the value of other benefits received by each Director during the year.
Directors’ insurance
In accordance with the Companies Act 1993, 2 Cheap Cars Group Limited has taken out an insurance policy to insure its
directors and officers against potential liabilities and costs incurred in any proceeding, except to the extend prohibited
by law.
Long term incentive plan
A long term incentive scheme is planned to be in place for the CEO for the FY24.
Board Remuneration in FY23:
* Gordon Shaw was the Interim CEO holding the position between August 2022 and January 2023. During the financial
year Gordon Shaw received $201,125 as the interim CEO.
Board Remuneration per annum
Chairman Of The Board$150,000
Non Executive Director$60,000
Board Committee Chair$12,000
Board Committee Member$6,000
Remuneration RangeFY23
Number Of Employees
FY22
Number Of Employees
100,000 to 109,99932
110,000 to 119,99933
120,000 to 129,99921
130,000 to 139,99912
140,000 to 149,99911
150,000 to 159,99911
160,000 to 169,99920
200,000 to 209,99900
210,000 to 219,99901
250,000 to 260,00001
260,000 to 270,00010
420,000 to 430,00010
430,000 to 440,00001
1513
DirectorDirectors feesSalaryOther BenefitsSubtotal
Karl Smith 5,589 9,692 5,589
Yusuke Sena
304,623
6,285 314,315
Eugene Williams 135,652 141,937
Charles Bolt 56,881 56,881
Tracy Rowsell 28,370 28,370
Michele Kernahan 1,733 1,733
Michael Peter Stiassny 91,935 91,935
Samantha Hielkje Sharif 37,484 37,484
Gordon Shaw* 14,000 14,000
Tim Cook 25,313 25,313
261,306 440,275 15,977 717,558
STATUTORY DISCLOSURES
Continued
Employee remuneration
The following table shows the number of current and former employees of the Company (not being Directors of the
Company) who received remuneration and other benefits in their capacity as employees during FY23 the value of which
exceeded $100,000. The remuneration amounts include all monetary amounts and benefits actually paid during the
year, including the face value of any long term incentive vested during the year (which for FY23 was nil).
CEO remuneration
The CEO’s remuneration as at 31 March 2023 consisted of a base salary and Short Term Incentive (STI). The CEO’s
remuneration is reviewed annually by the Remuneration Committee and approved by the Board.
Paul Millward’s remuneration during the FY23 year was a mix of base salary, certain allowances and short term incentives.
The base salary was $365,000 and Car Allowance of $30,000. Given that Paul’s tenure began in the final quarter of the
fiscal year, there was no short term incentive payment made in respect of FY23.
His total potential short term incentive plan payment is 30% of salary, or $109,500 for FY24. The targets that are needed to
be met are being carefully evaluated by the Remuneration Committee.
STATUTORY DISCLOSURES
Continued
7776
Annual Report For The Year Ended 31 March 2023.
Subsidiaries of 2 Cheap Cars Group Limited contained within the group.
The following persons listed below held office as directors of 2 Cheap Cars Group Limited’s six subsidiaries as at
31 March 2023.
Other Information
Directors
As at 31 March 2023, the Board comprised the following Directors: Yusuke Sena, Gordon David Shaw and Micheal Peter
Stiassny. As at 31 March 2023 Gordon David Shaw was considered by the Board to be an Independent Director. The
factors relevant to the determination of independence are set out on page 61 of the Company’s 2023 Annual Report.
NZX waivers
No waivers were granted by NZX or relied on by the Company during FY23.
Exercise Of NZX Disciplinary Powers
The NZX did not take any disciplinary action against the Company during FY23. In particular, there was no exercise of
powers by NZX under NZX Listing Rule 9.9.3 (relating to powers to cancel, suspend or censure an issuer) with respect to
the Company.
Donations
No donations in FY23.
Credit Rating
2 Cheap Cars Group Limited does not have a credit rating.
Auditor renumeration
UHY Haines Norton is the appointed auditor of the group. During the year ended 31 March 2023, the amount paid by the
Company as audit fees was 104k, as detailed in Note 9 of the Financial Statements. The Non-Audit service paid to UHY
Haines Norton during the year was nil.
STATUTORY DISCLOSURES
Continued
SubsidiaryJurisdictionDirectorsCeased Directors
2 Cheap Cars LimitedNew ZealandYusuke SenaEugene Williams
NZ Motor Finance Limited New ZealandMichael Peter Stiassny
Samantha HielkjeSharif
Martin Blockley
Yusuke Sena
2CC International LimitedNew ZealandYusuke SenaEugene Williams
Car Plus KKJapanYusuke Sena
Humi Sena
2 Cheap Rental Cars LimitedNew ZealandYusuke SenaEugene Williams
(Ceased Trading)
78
Annual Report For The Year Ended 31 March 2023.
79
COMPANY
DIRECTORY
Nature of business
Used automotive vehicle retailer and motor vehicle finance provider
Registered office
102 Mays Road
Onehunga
Auckland 1061
Head office
102 Mays Road
Onehunga
Auckland 1061
Directors
Michael Stiassny (Appointed 21 August 2022)
Gordon Shaw (Appointed 21 August 2022)
Yusuke Sena
Bankers and Trade Finance Partner
ASB Bank
Finance Now
Solicitors
Lowndes Jordan
Independent Auditors
UHY Haines Norton Sydney
Share Register
Computershare Auckland
DRIVING
BETTER
DEALS
EVERY DAY
2 Cheap Cars Group Limited
102 Mays Road
Onehunga
Auckland 1061
Ph: 09 869 3330
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Other issuers discussed similar conditions around this time
Matched by meaning across NZX announcement text, not keywords — based on our semantic index of announcement bodies.
- TRA — Turners Automotive Group: Turners FY23 Annual Report2023-06-28
“WE’RE GETTING STRONGER ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2023 AUTOMOTIVE RETAIL ■ New Zealand’s largest buyer and seller of vehicles ■ One car sold every 5 minutes ■ Branches and sites from Whangarei to Invercargill ■ “Bricks and Clicks” retail model, combinin…”
- TRA — Turners Automotive Group: Turners delivers record FY23 earnings2023-05-22
“TURNERS AUTOMOTIVE GROUP LIMITED Five reportable segments have been identified as follows: Automotive retail -remarketing (motor vehicles, trucks, heavy machinery and commercial goods) and purchasing goods for sale. Finance -provides asset based finance to consumers and SME's. In…”
- TRA — Turners Automotive Group: 2023 Annual Meeting Presentaion2023-08-22
“21• 2023 ASM PRESENTATION TURNERS AUTO GROUP Cars advertised for sale on TradeMe still falling... •Low numbers of cars advertised for sale due to difficulty in sourcing. •Costs of TradeMe increasing and dealers listing fewer cars on TradeMe and using alternatives like Faceboo…”