Car dealerships group publishes delayed accounts and warns of material uncertainty
Lookers, the Altrincham-based car dealerships group, has published its delayed accounts for the year to December 31, 2019.
The results had been subject to audit investigations by Grant Thornton, aided by the group’s internal team and its auditor, Deloitte.
They show revenues for the year of £4.787bn, compared with £4.828bn. A pre-tax profit of £41.9m in 2018 was reduced to a pre-tax loss of £45.5m for 2019.
As previously announced, no final dividend for 2019 was recommended.
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.
Lookers said a total of £25.5m of non-cash adjustments are necessary to correct misstatements in profits before tax (PBT) over a number of years.
Adjustments reduce PBT by £10.9m in 2019 and £7.2m in 2018 with the balance cumulatively decreasing PBT by £7.4m in 2017 and earlier.
Despite the impact of the adjustments, and as previously indicated, 2019 remains profitable at the underlying PBT level £4.2m (2018: £42.8m), the group said.
It revealed that net total non-underlying charges for the year totaled £49.7m (2018: £0.9m) reflecting significant restructuring activity, non-cash impairment charges, gain on property disposals and a provision of £10.4m for potential liabilities arising from the ongoing Financial Conduct Authority (FCA) investigation.
In an update on 2020 trading and future outlook, the group said the temporary closure of its dealerships throughout the initial lockdown had a significant impact on financial performance, with the group expecting to report a material underlying loss before tax in the first half.
Trading in quarter three was better than expected with underlying PBT significantly ahead of last year.
Quarter four will benefit from the full impact of the Group’s restructuring activity, although the financial performance for the remainder of the year will inevitably be impacted by the closure of dealerships under the second lockdown in England, and any further regional restrictions.
The group’s net debt has improved during the year and was £54.4m at the end of October, compared with £59.5m at end December 2019.
The group has recently agreed revised covenants with its banks and is currently in discussions to refinance its £250m banking facilities which are in place until March 2022.
Despite resilient liquidity and before mitigating actions, ongoing uncertainties of COVID-19 and Brexit mean severe, but plausible, downside sensitivities indicate material uncertainty regarding going concern.
Activity is under way to enhance systems, controls and policies and procedures to prevent recurrence of the issues which led to the adjustments to its accounts, Looker said.
The group will publish its interim results for 2020 as soon as possible in December and expects to submit a request to the FCA seeking to restore the listing of the company’s shares after the publication of its interim results.
Executive chairman, Phil White, said: “The last twelve 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.
“On behalf of the board I would like to thank all of our employees for their efforts and our wider stakeholders for their patience and ongoing support.
“Despite our recent challenges, we are extremely proud of how our people have responded, showing real dedication and flexibility, particularly through maintaining critical vehicle servicing for key workers who have needed to remain on the road.
“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.”
He added: “We emerged from the initial lockdown in a strong position and are well equipped to deal with the second lockdown in England.
“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.”