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Lookers reveal significant drop in profits for 2019 as much-anticipated annual results are finally released

Time 10 months ago

Lookers have finally released their accounts for 2019 that show profit plummeting and a cash expenses fraud.

Adjusted profit on an underlying basis for the group in 2019 was just £4.2m on revenue of £4.78bn.

The 2018 number has also been adjusted down from £53.9m down to £42.8m on revenue of £4.82bn.

However, the group says there ‘were a number of non-underlying credits and charges to the profit and loss account’ which has led to a statutory loss before tax of £45.5m for 2019 compared to a profit of £41.9m in 2018.

A cash expenses fraud in a single division of the company has resulted in a loss of £327,000 which had been accumulated over several years.

Lookers said this was ‘perpetrated by one individual’ and he is now the subject of a criminal investigation.

The FCA investigation into the group is also still on-going.

Lookers says it is ‘cooperating fully’ with the regulator and has made a £10.4m provision against any fine that may arise as well as a cost of £4.7m.

Executive chairman Phil White apologised to shareholders for the delay in the publication of the results and the suspension of shares in July.

It is expected shares will be reinstated in December after the group releases its next interim results.

White said: ‘The last 12 months has been extremely challenging for Lookers with the ongoing impact of Covid-19 and the accounting issues.

‘Significant restructuring activity has been necessary to ensure we lay the right foundations for the future.

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.’

The group is worried about Brexit and the on-going Covid-19 pandemic and said it ‘indicates material uncertainty regarding going concern’ for the business.

White said the group had emerged from the lockdown in a ‘strong position’ and are ‘well equipped’ to deal with the second lockdown, though.

He added: ‘We have an industry leading portfolio, underpinned by a talented and dedicated team which means that we can look to the future with confidence.

 ‘My focus now is to restore the listing of our shares and to strengthen the board to take advantage of the many opportunities that lie ahead for Lookers, which is fundamentally a great business.’

The results were released after many months of delay and a full review by Grant Thornton into the business, an internal investigation and intense work by auditors Deloitte.

A total of £25.5m non-cash adjustments have been made to ‘correct misstatements in PBT over a number of years’.

The board blames the failures on ‘weaknesses in the design and implementation of policies and procedures’ and a finance department that was ‘insufficiently resourced and skilled’.

The group says it is now working on the improvements needed to prevent ‘any recurrence of these issues’.

Lookers also said it had made ‘difficult but necessary decisions’ to ‘right the dealership portfolio and staffing’, but this has led to site closures and redundancies.

However, it says in Q3 this year it performed well ahead of last year and that profit was ‘significantly ahead’ of last year.

Mike Jones, chairman of ASE Global and compiler of the Car Dealer Top 100, said: ‘Lookers will be very glad to draw a line under 2019 and move forwards as we emerge from lockdown.

‘There are a huge number of control failings identified and adjusted for, in addition to significant restructuring costs including a significant write down of Ford and BMW goodwill.

‘Of great importance to both Lookers and the wider industry is the quantification of the FCA fine, which was depressing overall sentiment while it remained an unquantified liability.’

Lookers said full accounts will be released in two days.

Lookers timeline: What’s happened when? 

October 31, 2020 – Long standing Lookers non executive director Tony Bramall, one of the group’s major investors, bought forward the date he would leave the board to the end of December. No reason was given for his early departure.

October 19, 2020 – Lookers updates market on performance in Q3, but still no word on its 2019 accounts or the FCA investigation. Analysts expect results to be out before December.

August 20, 2020 – Accounts delayed for the fourth time and no promise given as to when they’ll be published.

June 9, 2020 – Lookers says it will suspend shares on July 1. Delays accounts for third time and says they’ll be published ‘no later than the end of August 2020’.

June 5, 2020 – Lookers says it will axe 12 dealerships, cut 1,500 jobs.

May 2020 – Pendragon CEO Bill Berman admits he wrote to Lookers to discuss a merger and updates Stock Market to that effect. Move described as ‘two drunk men bumping into each other in a bar’.

April 2020 – Fraud investigation deepens. £4m charge revealed and firm says there could be more. Delays accounts to June.

March 12, 2020 – New chief operating officer Cameron Wade leaves role after only a month in post

March 11, 2020 – Lookers delays results saying in final stages of preparation ‘potentially fraudulent transactions’ in one division were discovered. Promises results in April.

November 2019 – Chief executive Andy Bruce and chief operating officer Nigel McMinn leave firm abruptly

June 2019 – FCA launches review into sales processes at Lookers between January 2016 and June 2019. Lookers cannot ‘estimate what effect, if any, the outcome of the investigation may have’.

December 2018 – Lookers launches independent internal audit into sales process. It eventually finds ‘control issues’ in sales process where ‘improvements’ are needed. Findings handed to FCA.

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