Lookers reports £25m profit before tax over-statements
26 Nov 2020
National car dealership Lookers has finally published its 2019 annual results, which were delayed following the discovery of accounting irregularities, and has revealed profit overstatements of more than £25m
26 Nov 2020
The accounts show a total of £25.5m of non-cash adjustments are necessary to correct misstatements in profit before tax figures. The adjustments reduce profit before tax by £10.9m in 2019 and £7.2m in 2018, with the balance cumulatively decreasing by £7.4m in 2017 and earlier.
The listed company was due to release its results for the financial year ended 31 December 2019 in the first quarter of this year, but in March announced a postponement after uncovering potentially fraudulent transactions in one of its operating divisions.
A subsequent investigation by Grant Thornton initially identified £19m of non cash adjustments to previous years’ reporting, and in August Lookers said the scope of the audit had been expanded in light of the findings.
The latest update confirms that the investigations identified a cash expenses fraud which led to a loss of £327,000 in a single division and which accumulated over several years.
The annual results also show a provision of £10.4m for potential liabilities arising from the ongoing Financial Conduct Authority (FCA) investigation into legacy sales processes at Lookers between the period 1 January 2016 to 13 June 2019.
The company had raised concerns with the regulator after identifying ‘some control issues’ via an independent review of its practices in December 2018.
In relation to the accounting issues, Lookers said these arose ‘from weaknesses in the design and implementation of policies and procedures, an insufficiently resourced and skilled finance function and instances of failure to follow policies and procedures where they existed’.
Lookers noted: ‘Activity is underway to enhance systems, controls and policies and procedures to prevent recurrence of the issues which led to the adjustments to our accounts.’
The group plans to publish its full annual report and accounts within two days and is looking to re-list after its shares were suspended on 1 July, a day after the last date permitted for publication of the 2019 Results under the FCA’s disclosure guidance and transparency rules.
Phil White, executive chairman at Lookers, said: ‘The last twelve months has been extremely challenging for Lookers with the ongoing impact of Covid-19 and the accounting issues.
‘The Investigation into our financial systems and accounting controls, the delay in the publication of our 2019 results and the subsequent temporary suspension of our shares have been a great disappointment.
‘As chairman of Lookers, I would like to apologise unreservedly to all our stakeholders for the uncertainty this has caused.’