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Car dealers should focus on 'cash position' after £63,000 April loss

ASE chairman Mike Jones

ASE chairman Mike Jones has urged car retailers to focus on their "cash position" after the sector's businesses lost an average of £63,000 during April’s COVID-19 lockdown.

A 50% decline in data submissions from retailers meant that Jones stopped short of publishing a full set of KPIs for the month.

But he said that the data received indicated the sizable average loss many expected, compared to a profit of £5,000 for the same period in 2019.

Jones said that click and collect sales had yet to be officially given the green light at the time covered by his report and acknowledged that not all car retailers would have been trading at all.

He added: “Given that these retailers were open enough to submit financial data, they are likely to slightly overstate the overall average picture for the industry.”

ASE reported that, “unsurprisingly, given the closure of the showrooms”, the level of new cars sales was very low during the month of April, with the average retailer averaging four sales in the month, down from 38 during April 2019.

Used car sales fared marginally better than new car sales with an average of eight cars sold.

Jones said: “With click and collect starting in earnest in May, I would expect this number to increase and used car sales in June have started very strongly.”

Retailers speaking to AM the day after car showrooms re-opened in England on June 1 indicated that trade had got back to a strong start to post-lockdown sales.

Retailers in Scotland and Wales are still awaiting final word on when they could be allowed to re-open their doors to customers, however.

Despite the fact that workshops could legally remain open during April, ASE reported that the volume of service hours delivered by the average retailer was 15% of the total for the previous April, indicating that most had remained closed.

ASE said that widespread business closures and a focus across the industry on costs had resulted in a a reduction in overheads in April, mainly through a drop in headcount costs.

Jones said that careful management of cash reserves should remain a priority for car retailers as the sector aims to get back up and running.

He said: “Having survived the shock of lockdown, retailers need to spend significant time forecasting their cash position.

“Many working capital balances will deteriorate as we ramp up trading and retailers need to plan to mitigate.”

Yesterday (June 15) ASE tax director, Chris Cummings, expressed concerns about the impact of a “second wave” of COVID-19 later this year, further highlighting the need for businesses to remain prudent in the months to come.

Cummings said: "Business and society may need to reflect again upon what has been done and whether it can be repeated if a further COVID spike were to occur in the winter to come.

"The economy is already seeing the gentle ripple of redundancies as businesses try to redraw their business plans to adjust for what has already happened; a further spike and a second lockdown maybe a step too far for many businesses and the furloughing of employees for a second time maybe a cost too great for any government."

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