NZ Automotive took a revenue hit in December, January

The ongoing Covid-19 presence and changes in consumer behaviour have continued to impact sales, said NZ Automotive. Photo / 123RF

NZ Automotive Investments - the company behind 2 Cheap Auto Cars - said its revenue had been affected by lower car, finance and insurance product sales in December and early January.

The company, which listed last February, now expects an underlying net profit after tax for the March year to be in the range of $2.3 million to $2.7m, down from $3.8m in the prior comparative period.

NZ Automotive's actual net profit after tax, which includes a one-off gain from the rearrangement of leases of $0.9m, is expected to be in the range of $3.2m to $3.6m, assuming there is no further impact from Covid-19 related events.

The company said it remained in compliance with all bank covenants and was in a solid financial position with cash balances of $5.8m and net debt of $5.4m.

"The ongoing Covid-19 presence and changes in consumer behaviour have continued to impact sales, in particular in the Auckland region," it said.

"Although November's results were in line with expectations, management is not seeing the expected bounce-back in sales previously experienced following the first Covid-19 lockdown."

The company's decision to gear its fleet up on the strength of the Government's proposed Clean Car Rebate implementation from January 1, coupled with the Government's deferral of that to April 1, had negatively affected the business.

Recent changes in the Credit Contract and Consumer Finance Act lending standards also affected finance and insurance product sales, because of time delays and consumers taking time to adjust to the new requirements.

NZ Automotive said it was continuing to experience increased costs for certain vehicles in Japan along with increased freight costs.

A key driver of the increased costs in Japan has been the affect that the semi-conductor shortage is having on the new car market, which in turn is raising demand for used vehicles.

The new 2 Cheap Cars Westgate dealership, due to open next month, was expected to help improve sales volumes, it said.

NZ Automotive debuted on the NZX in February last year as a compliance listing.
Shares in the company last traded at 89c, down from its $1.30 initial reference price.