A MOTORCYCLE dealership which went into administration earlier this year had liabilities that outstrip its assets by £1.8million, administrators have reported.

Three Cross Motorcycles had suffered falling turnover and made staff redundant last year as part of efforts to get into “manageable shape” for 2020.

But the coronavirus lockdown put the business in an “impossible situation” and put paid to hopes of recovery.

The business owed trade creditors a total of £1.43million as well as owing HMRC £95,181. Preferential creditors are set to receive 1p in the pound, but no other creditors are expected to be paid.

Three Cross Motorcycles was started in 1978 and was bought in 1980 by Keith Davies, whose family remained the only shareholders. It had been based at Woolsbridge Industrial Park near Three Legged Cross since 1980.

A report by the administrators said the business had 92 staff at its peak, selling 12,000 bikes in 2005, when it turned over more than £25million.

But sales dropped at around 20-30 per cent a year after the arrival in the UK of Chinese scooters, which were around a third of the price of other brands including the Peugeots which were the business’s main source of income.

The business began a “managed reduction of overheads”, disposing of leasehold properties and reducing staff, according to the report by joint administrators David Taylor and Gareth Roberts of KRE Corporate Recovery.

By 2019, turnover had dropped to around £7m. The loss-making business sold a freehold property for £390,000 and cleared outstanding loans, but Lloyds removed its overdraft facility.

Towards the end of last year, it made a final round of redundancies to help “put the company into manageable shape for 2020”, and set a budget which would turn a profit of £150,000, the report said.

By early March, the business was “on budget with a good order bank of vehicles to deliver to retail customers and dealers”, but after the “normal January/February” losses, cash flow was “extremely concerning”.

“The advent of coronavirus and subsequent government enforced lockdown put the company in an impossible situation, from which the directors judged recovery to be impossible,” the joint administrators wrote.

Twenty-three staff were made redundant when administrators were appointed in May.

The administrators said the lack of working capital and the halt to trading made it impossible to restructure the business. No buyer was found to take it over as a going concern.

Finance company Wells Fargo has collected stock worth around £560,000, while bikes worth £464,456 were funded by DF Finance. Twenty bikes worth £46,952 were in a warehouse whose owner was owed £41,000 in storage costs.

The company owns 21 bikes worth an estimated £28,830 which were being sold at auction.