Constellation Automotive Group Reports Deepening Losses as Revenue Drops

The renowned owner of Cinch and WeBuyAnyCar, Constellation Automotive Group, has recently reported a downturn in their financial performance for the latest fiscal year. Their financial statement revealed a pre-tax loss of £140.7m for the year ending April 2, 2023, marking a significant shift from the previous year’s £34.3m profit. This notable loss was directly linked to a decrease in revenue, which fell by 16% from £8.315bn to £6.961bn.

Following income tax deductions, Constellation’s post-tax deficit expanded further to £103.9m. Additionally, their adjusted Ebitda experienced a substantial decrease of 40.1%, plummeting from £336.3m to £201.6m.

James Mullins, the company’s director, attributed Constellation’s underperformance to “challenging market conditions.” The limited vehicle volumes in the market were said to have hindered the company’s operations and profitability, resulting in significant financial losses.

The ongoing conflict in Ukraine exacerbated the situation, causing disruptions in the supply chain of new vehicles and macroeconomic implications. Increased energy prices, high inflation, and rising interest rates diverted the company’s focus from recovering from the impacts of Covid-19 to stabilising its operations and protecting its liquidity.

Despite these challenges, Constellation reported an increase in liquidity, which amounted to £271.4m at the end of the financial year. This was achieved through inventory reduction and strategic actions following a property review, allowing them to optimise their retail-ready estate for near-term production.

The company acknowledged the underperformance of its UK vehicle remarketing division, with adjusted Ebitda declining by 36.4% to £87.8m and revenue growing by only 11.8% to £2,901.7m. They attributed the drop in Ebitda to reduced auction entry volumes and higher unabsorbed overheads due to overcapacity in retail operations.

WeBuyAnyCar also faced similar challenges, with auction volumes decreasing by 13% and a slowdown in growth for retail-ready vehicles, resulting in excess refurbishment capacity and unabsorbed production overheads costing the company £11.7m for the year.

The cost-of-living crisis impacted market demand and consumer preferences, causing disruptions in the supply chain and increasing the company’s total out-of-programme vehicle costs. The company also reported increased costs despite lower auction volumes.

However, Constellation pointed out an increase in revenue from WeBuyAnyCar, which grew by 152.2% to £2,119.3m. This success was attributed to a shift in vehicle-buying to match auction demand and a focus on lower-value vehicles, albeit leading to a decrease in average revenue per vehicle.

The report also disclosed a 71% decrease in earnings for the highest-paid director, reducing from £4.1m to £1.2m for the year. As of April 2, 2023, Constellation held net cash and cash equivalents of £96.4m.

To demonstrate their commitment to their employees, Constellation highlighted the long service of their staff, showcasing a thriving workplace with numerous long-serving employees. Additionally, they announced the sale of their Rockingham car park site for £22.9m.

This news underscores the challenges that even industry giants like Constellation Automotive Group are grappling with in the current market. It serves as a reminder that no company is immune to the ever-changing economic landscape.