Australian businesses are running out of cash according to a survey done by the Australian Bureau of Statistics (ABS).

Reporting by the Australian Financial Review of the survey showed that around 30% of small businesses have cash on hand that will last for less than three months of business operations. It gets worse for larger businesses – 24% of medium businesses and 12% of large businesses have less than three months of cash to support business operations.

The survey was done on 2,000 businesses between 10 June 2020 and 17 June 2020.

The ABS said: “Several businesses commented that existing cash on hand would not be sufficient to maintain operations if not for government support measures.” Government measures like jobkeeper and the cashflow support are due to expire at the end of September 2020.

Revenue has also been heavily affected. Around a quarter of businesses suffered a revenue fall of up to 25%, 37% of businesses saw revenue drop between 25% to 50%, 17% of businesses lost 50% to 75% of revenue and 14% suffered a revenue hit of more than 75%.

What does low cash mean for ASX shares?

Cash is extremely important. You could say cash is king. Businesses need cash to pay for their wages and other expenses.

Many businesses have done capital raisings to ensure their balance sheets remain in good shape through this difficult time. Shares like National Australia Bank Ltd (ASX: NAB), Bapcor Ltd (ASX: BAP), InvoCare Limited (ASX: IVC), Webjet Limited (ASX: WEB), Challenger Ltd (ASX: CGF), Flight Centre Travel Group Ltd (ASX: FLT), Cochlear Limited (ASX: COH), Lendlease Group (ASX: LLC), Ramsay Health Care Limited (ASX: RHC) and Bendigo and Adelaide Bank Ltd (ASX: BEN) are just some of the news to undertake a capital raising to ensure they have enough liquidity.

For me, I think businesses running low on cash is obviously worrying for ASX shares that have a focus on business customers like NAB and Australia and New Zealand Banking Group (ASX: ANZ).

There are other ASX shares with a focus on business customers like Xero Limited (ASX: XRO) and Prospa Group Ltd (ASX: PGL), but it’s hard to say how they will be affected.

Banks are already expecting that not all businesses will make it through this difficult period. That’s why the big ASX banks of ANZ, NAB, Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have all collectively provisioned billions of dollars for COVID-19 impacts.

Prime Minister Scott Morrison himself has warned that not every job and business can be saved. Time will tell how many businesses end up going under.

Thankfully most ASX shares seem to be doing okay through this period. Virgin Australia Holdings Ltd (ASX: VAH) has been the highest profile casualty so far, but it’s getting close to a rescue deal. The airline is in the final stages of a saviour selection process.

What ASX shares could be worth buying?

There is a still a lot of uncertainty. There are growing infection numbers in several countries.

Valuations of some shares like Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Xero are running hot again. Growth shares will probably do well over the long-term, but over the short-term they may be a little too expensive today if growth is hurt over the rest of 2020.

I like the idea of investing in shares that can keep growing regardless of what happens next. I’m thinking of shares like Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), Bubs Australia Ltd (ASX: BUB), A2 Milk Company Ltd (ASX: A2M) and Pushpay Holdings Ltd (ASX: PPH). These businesses are generating positive operating cash flow. 

Defensive shares that may be fairly immune to more COVID-19 disruptions could also be solid ideas like APA Group (ASX: APA), TPG Telecom Ltd (ASX: TPM), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and CSL Limited (ASX: CSL).

More reading

• 3 ASX payments shares that could double your money
• Give your portfolio a boost with these ASX blue chip shares
• Bapcor and 1 other quality ASX share to add to your portfolio
• 3 ASX shares I’d buy if the market crashes again
• Is the share market facing another February 2020 moment?

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Bapcor, BUBS AUST FPO, Challenger Limited, PUSHPAY FPO NZX, Washington H. Soul Pattinson and Company Limited, and Webjet Ltd. The Motley Fool Australia owns shares of A2 Milk, AFTERPAY T FPO, and APA Group. The Motley Fool Australia has recommended Cochlear Ltd., Flight Centre Travel Group Limited, InvoCare Limited, and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Looking for 2 quality ASX shares to add to your investment portfolio?

I think Bapcor Ltd (ASX: BAP) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) are worth taking a good look at.

Both have established market positions and strong long-term growth prospects.

Bapcor

Bapcor is the largest and leading second-hand car parts distributor in Australia and New Zealand. It has a range of brands under its umbrella including Burson, Autobarn and Autopro.

The company has grown its presence in both countries in recent years. It has achieved this through acquisitions and the expansion of its existing business chains. It has now grown to the point where it has a strong scale advantage against its major competitors.

Bapcor is also expanding into Thailand. This could provide it with a launching pad for further expansion across Asia.

Following a recent capital raising of $180 million, the company’s balance sheet is now much more robust. These funds will see it through prolonged downturn caused by the coronavirus pandemic.

Bapcor was impacted harshly during the early phase of the pandemic. However, business activity now looks set to pick-up as lockdown restrictions are easing in both Australia and New Zealand.

The growth of the electric vehicles market could potentially be a long-term risk to Bapcor. Electric vehicles have far fewer parts and require significantly less maintenance than internal combustion engine cars. However, I don’t see this trend having any significant impact on Bapcor’s operating margins in the short-to-medium term.

Bapcor currently offers a fully franked forward annual dividend yield of 2.95%.

Soul Patts

Another quality ASX share to consider adding to your share portfolio is Soul Patts. It has investments in a wide range of industries. These span from pharmacies to telecommunications, mining and building products. This provides Soul Patts with a high level of diversification and helps make it a strong defensive share. It also helps provide Soul Patts with a buffer to any market volatility.

Soul Patts has a strong long-term track record of outperforming the ASX index. In addition, it has been listed on the ASX for over a century and has paid a dividend every year in that time.

The company also keeps significant levels of cash on its balance sheet. This places it in a strong position to snap up any future investment opportunities that may arise.

Soul Patts currently offers an attractive fully franked forward annual dividend yield of 2.99%.

More reading

• Australian businesses are running out of cash
• Is the share market facing another February 2020 moment?
• Coronavirus second wave potential could drive investment portfolio changes
• 3 ASX shares that I’d invest $1,000 into EVERY month
• 2 ASX shares I plan to hold til I’m 100

Motley Fool contributor Phil Harpur owns shares of Bapcor. The Motley Fool Australia owns shares of and has recommended Bapcor and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Paragon Care Ltd (ASX: PGC) share price is a standout performer on the market today as investors react to a business update.

At the time of writing, Paragon Care shares have rocketed 83.33% to 22 cents apiece.

Paragon Care is a provider of medical equipment, devices and consumables for the Australian and New Zealand healthcare market.

The company also offers equipment repair, maintenance and total equipment management through its service and technology division.

Over the years, the primary way Paragon Care has grown its business has been through acquisitions. As such, the company has a many number of brands under its banner, including Insight Surgical, REM Systems, MediTron, and Immulab.

Why is the Paragon Care share price spiking?

This afternoon, Paragon provided an update regarding the impact of COVID-19 on its business.

In prior trading updates, Paragon noted demand for its products and services were being affected by restrictions and the cancellation of non-essential elective surgery.

As such, Paragon’s revenue in April 2020 tracked at 30% less than the prior year, allowing the company to be eligible for JobKeeper payments.

When Paragon disclosed these developments to the market in late April, it expected the significantly lower revenues to continue throughout the remainder of the June 2020 quarter.

However, the company announced today it has seen a “solid” improvement in its May and June revenues. Paragon attributed this to a higher than expected level of elective surgery cases due to recent favourable policy changes by the Federal Government.

As a result, the company is expecting its FY20 revenues to exceed $220 million. For context, Paragon delivered full-year revenues of $236 million in FY19.

Other developments

According to today’s release, Paragon has made “significant progress” towards its previously announced strategy of delivering a more efficient cost structure. 

To date, the company has achieved more than $4 million of permanent annualised cost savings. It expects this amount to double over the next financial year.

Additionally, Paragon advised that its rationalisation of 14 individual businesses into four main pillar businesses is “well advanced”. This rationalisation has seen the company integrate its businesses into the four pillars of devices, diagnostics, services, and capital & consumables.

Paragon said it will provide more details of this restructure, along with the associated costs, when it reports its full-year FY20 results in late August 2020.

More reading

• 3 ASX payments shares that could double your money
• Give your portfolio a boost with these ASX blue chip shares
• The latest ASX 200 stocks to be slapped with a broker downgrade
• Australian businesses are running out of cash
• Bapcor and 1 other quality ASX share to add to your portfolio

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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