12:34 pm, August 18, 2023
An unexplained stock discrepancy of almost £3.7m has been uncovered at a new and used Vauxhall dealership in Worcestershire.
CMS Kidderminster’s latest available accounts – for the year ended December 31, 2021 – which were published on the Companies House website in April this year state it made a pre-tax profit of £487,475 following a £79,295 loss the year before.
That was on a turnover of £94.3m versus £83.5m in 2020. It received £36,794 and £195,838 in government grants in 2021 and 2020 respectively.
But in the accompanying strategic report, under a section entitled ‘Stock discrepancy’, the board says that before the 2021 year-end audit, the directors found ‘un unexplained discrepancy of £3,689,292 in the accounts in relation to a stock contra account that they were unable to reconcile as at 31 December 2021’.
The report adds: ‘The directors are continuing to investigate the stock difference and have engaged with professional advisors in order to determine the proper accounting treatment.
‘The directors are also working to ensure that the systems and processes ensure that no such issue could occur again.’
According to the Express & Star, administrators are being appointed, but Car Dealer hasn’t been able to verify this so far.
As of writing the report, CMS Kidderminster – which is continuing to trade – said there was ‘a strong profit’ of £368,899 by the end of 2022, while between January and March this year, it had made £30,033.
In the report, auditors Ballards LLP said they’d ‘identified stock and revenue recognition as key audit matters related to the potential risk of fraud’.
The auditors also state: ‘Sufficient evidence has been gathered to confirm the [£3,689,292] amount is not supported by physical stock.’
They add that if the company has to write off the overstated stock balance, then its current liabilities will have exceeded its total assets by £2,918,210.
As such, ‘a material uncertainty exists that may cast doubt on the company’s ability to continue as a going concern’.
However, the directors say that despite any uncertainty relating to the £3,689,292 stock discrepancy, they believe the profit figures for 2022 and so far this year show the dealership’s trading ability hasn’t been directly affected, nor has its ability to show a trading profit.
Car Dealer has contacted CMS Kidderminster to ask for a comment.
The strategic report also notes that the agency model for the dealership’s commercial section was due to be brought in in June 2023 but has been delayed to January 2024, although with contracts still to be agreed, CMS Kidderminster says there is still no guarantee it’ll happen then.
The car section of the franchise, meanwhile, should be switching to agency sales in 2025.
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