Profitable June fails to live up to 2018 performance for dealers

Time 11:46 am, August 6, 2019

THE average UK motor retailer made a profit of £28,000 during June 2019 – a year-on-year fall of £13,000 – according to figures out today by ASE Global.

The dealer profitability specialist said that while there were significant bonus earnings for retailers in the final month of the quarter, it was down on the total in 2018.

Chairman Mike Jones said: ‘Given the year-on-year increase in end-of-quarter registrations I expected some bonus to be held back for future disposals. The fall in June profitability sees the overall profit for the quarter down by £18,000.

‘In addition to the low level of general sentiment felt by all retail sectors, motor retailers have been hit by a tightening of the used vehicle market during the quarter, with some significant residual value falls. This, along with the deferred recognition of some registration bonuses, has depressed profitability.

‘After the hit to used vehicle performance from the residual drops during April and May, we saw some stability return to used vehicle profitability in June. Average gross profit margin for the month bounced back above 10 per cent and, whilst an improvement in stock turn would be desirable, profit opportunities remain in used car sales.’

He added: ‘It is likely that we will have further uncertainty to deal with as we move through the third quarter. Registrations for July were down on the prior year and we are likely to see some significant market disruption as brands cope with their derogation requirements, bringing significant volumes of certain models into the market.

‘The general level of consumer and business confidence looks unlikely to improve prior to October as the politicians talk up the likelihood of “no deal”. There will, however, remain opportunities in used cars and aftersales for retailers, given the high level of registrations over recent years.’

MORE: Tough May sees retailers rack up losses of almost £10,000

MORE: Steady April result for retailers as profitability holds up despite volume drops

MORE: Profitability improves in March as retailers prosper despite uncertainty

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Car Dealer has been covering the motor trade since 2008 as both a print and digital publication. In 2020 the title went fully digital and now provides daily motoring updates on this website for the car industry. A digital magazine is published once a month.

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