Lookers will amend its accounts with a £19m non-cash adjustment to correct what it calls ‘overstatements’ in its profitability over ‘several years’.
In an announcement to the Stock Market this morning, the troubled dealer group revealed it has now reviewed a report into fraudulent activity prepared by Grant Thornton which has led to the adjustments.
It believes half of the adjustments relate to last year’s accounts – publication of which has already been delayed – and the remainder go further back into previous years.
Lookers, the second biggest dealer group in the UK, said earlier this year that it would take a £4m adjustment to its accounts – but that has now increased by a whopping £15m.
It added that it still could not confirm the ‘full impact’ on the business, but it does believe the dealer group will remain profitable on an underlying basis.
In the statement, Lookers said: ‘The remaining £15m of the draft adjustments relate to the incorrect or inconsistent application of policies, processes and accounting standards.
‘The draft report also highlighted several areas where certain financial controls and some behavioural and cultural aspects require strengthening.
‘The company has commenced implementing remedial measures to address these points and is continuing to invest in its systems and controls to further improve their robustness.
‘An independent board committee has been established to ensure proper implementation of the recommendations from the report.
‘Whilst the company is making good progress in resolving the investigation there remain a number of outstanding issues and until such time as these issues are resolved and Deloitte LLP have completed their audit, it is not possible for the company to confirm the full impact.’
Deloitte have already said they will resign as auditors.
On Wednesday, shares in Lookers are set to be suspended as the final accounts have not been signed off in time.
In an announcement earlier this month, Lookers said if its 2019 results were not published by June 30 shares in the company would be suspended on July 1 at 7am. This looks likely to now happen.
And as the troubled deepened, last week two non executive directors – who were listed as standing for election in the AGM calling notice two weeks previously – decided to stand down and leave the company.
Richard Walker, senior independent director, and Sally Cabrini, non-executive-director and chair of the Remuneration Committee said they’d be leaving after the AGM which is due to be held today.
It is not known why they suddenly changed their minds.
Phil White was also appointed executive chairman who will take up the post this Wednesday to work ‘alongside’ CEO Mark Raban.
Mike Jones, chairman of accountants ASE Global, said: ‘It’s good news that Lookers have nearly completed their investigation.
‘The £4m bonus overstatement and fraudulent expense claims, which initially started the review, is overshadowed by the additional £15m for application of consistent accounting policies.
‘This episode highlights some of the trickier and more judgemental areas of motor retail accounting and you need strong internal controls and robust auditing to ensure nothing goes wrong, particularly in a business the scale of Lookers.
‘It will be good for the entire industry for these accounts to be finalised and us to concentrate on the post-lockdown recovery.’
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