Firstly looking at the profit and loss, over 97% of the groups we work with had a profitable result in 2020 – an exceptional result and the best I have seen since the unusual year that was 2009 (another year when used vehicle prices were rising strongly). For the five months to May 2020 I would estimate the reverse was true with the vast majority in a loss making position due to a weak March and losses in the total lockdown months of April and May – a truly remarkable turnaround with some incredible performances particularly in the bounce back months over the Summer.
The combination of reduced manufacturer pressure, some impressive cost saving measures, strong customer demand and government support has been intoxicating and many have noted all time record performances between June and October before the impact of the second lockdown began to be felt.
Turning to the financial position, again the picture is overwhelmingly positive. Of course, the profits have turned into cash helping the position, but more importantly much improved working capital levels and a freeze on most capital investment projects have turbo charged the cash positions to record levels. This is great news, but a note of caution is required in my view.
In some cases, talk is turning to using the funds to plan significant investments, expansion or cash extractions. This is entirely reasonable of course, but care must be taken to ensure sufficient reserves are held for the expected (and longed for) return to normality. Increases in volumes, manufacturer pressure, slower turning stock, VAT repayments to HMRC are all likely to come with this return to normality and any deployment of cash must make allowance for them.
2021 has clearly been challenging so far given the lockdown situation but again the results I am seeing don’t show anybody bleeding heavily. The typical result is a breakeven position to the end of February and the expectation of a small profit in March before the post lockdown demand returns again in Q2 to boost the position and bring results more closer into alignment with dealer budgets.
However, as the next few years pan out, 2020 results have done much to strengthen the position as well as prove yet again to the stakeholders the inherent resilience of this sector.