Losses deepened, revenue dropped for Cinch and WeBuyAnyCar owner by over £100m
【Summary】Constellation Automotive Group, the owner of Cinch and WeBuyAnyCar, has reported a deeper loss of £140.7m for the latest financial year, compared to a profit of £34.3m the previous year. Revenue also dropped by 16% to £6.961bn. The company attributed the underperformance to challenging market conditions, including a scarcity of vehicle volumes and disruptions in the supply chain caused by the war in Ukraine.
Constellation Automotive Group, the parent company of brands such as Cinch, BCA, WeBuyAnyCar, and Marshall, has reported a significant increase in its loss for the latest financial year. According to its recently published accounts, the company recorded a pre-tax loss of £140.7m for the year ended April 2, 2023, compared to a profit of £34.3m the previous year. This loss was accompanied by a decline in revenue from £8.315bn to £6.961bn, representing a decrease of 16%.
After accounting for income tax, Constellation Automotive Group's post-tax deficit deepened from an £800,000 loss the previous year to £103.9m. Additionally, the company's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) decreased by 40.1% from £336.3m to £201.6m.
In the accompanying report, signed by director James Mullins on behalf of the board, Constellation attributed the underperformance to challenging market conditions. The company stated that the scarcity of vehicle volumes in the market significantly impacted activity and profitability, as their strength in physical assets could not be efficiently utilized. The ongoing war in Ukraine and its implications on the supply chain and macroeconomy also diverted the company's focus from recovering from the Covid-impacted trading periods to adapting to the current conditions and protecting liquidity.
Despite the deepening loss, Constellation reported an increase in liquidity, with £271.4m at the end of the financial year compared to £247.1m the previous year. This increase was achieved through a combination of reduced inventory holding and actions taken following a property review. The company reduced its retail-ready estate to a more appropriate size for near-term production.
Constellation highlighted the underperformance of its UK vehicle remarketing division, with adjusted EBITDA down by 36.4% to £87.8m from £138.1m, while revenue increased by 11.8% to £2,901.7m from £2,596.2m. The decrease in adjusted EBITDA was attributed to significantly reduced auction entry volumes and higher unabsorbed overheads caused by overcapacity in retail operations.
Constellation's WeBuyAnyCar division provided 491,000 vehicles for auction customers, but the remarketing division operated at only 60 to 70% capacity for the first three-quarters of the financial year, impacting operating leverage, efficiency, and profitability. Auction volumes fell by 15% to 950,000 units from 1.1m. The company also faced challenges due to a slowdown in demand for retail-ready vehicles, resulting in excess refurbishment capacity and unabsorbed production overheads.
Supply chain disruptions, including extended lead times for parts and paints, further added to Constellation's challenges, resulting in increased costs. Despite lower auction volumes, WeBuyAnyCar volumes fell by 13% to 491,000 units, but the division still experienced significant growth compared to pre-pandemic levels.
The highest-paid director at Constellation earned £1.2m for the year, representing a 71% decrease from the previous year's earnings of £4.1m. The company ended the financial year with net cash and cash equivalents of £96.4m, compared to £77.1m the previous year.
In its report, Constellation emphasized its appreciation for long service, highlighting the number of employees who had been with the company for various periods. The company had four employees with 40 years or more of service, 18 employees with 35 to 39 years of service, 43 employees with 30 to 34 years of service, and 100 employees with 25 to 29 years of service.
Under the "Events after the balance sheet date" section, Constellation announced the sale of its Rockingham car park site for £22.9m on April 28.
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