Car group issues update on auditor’s report that reveals £19m discrepancies
Car dealerships group Lookers said it will remain profitable, at the underlying pre-tax profit level, despite remedying issues found in the Grant Thornton investigation into its results that reveal a £19m deficit.
In March this year the group postponed publication of its annual results after announcing it had identified “potentially fraudulent transactions” in one of its operating divisions.
Lookers received the Grant Thornton draft report in early June.
Today, it said it has now completed its initial review of the report and is in discussions with Grant Thornton and Deloitte, the group’s auditors, with a view to concluding outstanding matters at the earliest opportunity.
It said the draft report identified a cumulative total of approximately £19m of non-cash adjustments necessary to correct overstatements in profitability over several years.
The company has reviewed and agreed the draft adjustments and currently considers that approximately half of the draft adjustments impact the 2019 results, with the remainder accumulated in prior years.
Analysis is ongoing to determine the historical impact of the draft adjustments prior to 2019, but, at present, it is not possible to determine if the historical elements of the draft adjustments would be material in any year.
As previously reported, circa £4m of the draft adjustments relate to the initial phase of the investigation which focused on one of the group’s operating divisions.
These adjustments include certain misrepresented and overstated debtor balances in respect of supplier bonuses receivable, together with a number of fraudulent expense claims.
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.
Lookers said it has started 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.
It said while 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 have completed their audit, it is not possible for the company to confirm the full impact.
However, the board said it believes that 2019 will remain profitable at the underlying profit before tax level.
The group warned earlier this month that its shares are likely to be suspended from July 1, if it fails to publish its annual results to December 31, 2019, by June 30.
Also, its auditor, Deloitte, will resign once the figures are finally published.