Lookers’ aim to publish its 2019 financial statement by the end of August has been derailed by extended investigations into its financial irregularities.
The top 10 AM100 car dealer group’s board and its auditors Deloitte have extended the scope of their audit at group and individual company level, and found more work is needed on the Lookers Leasing division and vehicle financing arrangements, plus on previous years’ balance sheets to make necessary adjustments.
This comes after the board reviewed the final report of Grant Thornton, the motor accounts specialists which Lookers brought in during March for an internal investigation after it suspected financial irregularities.
That probe discovered a £19m hole in the accounts, going back several years, due to overstated supplier bonuses, fraudulent expenses claims and inconsistent application of policies, processes and accounting standards.
Trading in Lookers shares has since been suspended.
Today Lookers, which trades under the Lookers, Charles Hurst and Taggarts brands, said: “The board remains committed to ensuring the issues identified in the report are fully considered and addressed and continues to work with the auditors to progress the finalisation of the 2019 audit as quickly as possible.
“The board continues to believe that the likely magnitude of the potential restatements referred to above will not prevent 2019 from remaining profitable at the underlying profit before tax level. The company remains in close dialogue with its banking partners.”
In an operational update, Lookers reported that trading in the two months to July 31 “was encouraging” as UK motor retail began a phased return from the COVID-19 lockdown.
In June its dealerships in England outperformed the UK new car retail market and increased like-for-like used car volumes and retained margins.
It improved further in July, Lookers said, as its Scottish sites reopened, and its sales volume for the month was 17% up on July 2019, and it said “momentum has continued into August and new vehicle order take for the important September plate change is building well”.
However it expects its half-year trading result to show a £1 billion drop in revenues versus H1 2019, due to the lockdown period, to about £1.6bn.
Lookers restructuring continues. By the end of 2020 it will have closed, consolidated or refranchised 27 dealerships since November 2019, and reduced its workforce by about 22% through redundancies and a recruitment freeze.
It expects to continue with a 6,700 strong workforce.
“This has been a very challenging period for Lookers, but it is encouraging that we are beginning to see some healthy signs of recovery in vehicle sales since the easing of lockdowns,” said Lookers chief executive Mark Raban, who has headed the group since February and joined Lookers from Marshall Motor Holdings in July 2019 to replace its chief financial officer Robin Gregson who had spent 10 years at Lookers.
“I would like to thank all my colleagues for their amazing commitment in difficult circumstances and the efforts they have made to adapt, innovate and improve our physical and online proposition to customers, ensuring a safe and smooth retail environment.”
He said he was also extremely grateful to all Lookers other stakeholders, including its carmaker partners, for their support through this period.
“We remain cautious about the future given ongoing uncertainties in the wider environment, but confident in the opportunities for the Lookers business moving forward,” Raban added.