Lookers’ fraud investigation opens up a can of worms

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Lookers’ fraud investigation opens up a can of worms

Lookers PLC (LON:LOOK), the car seller, revealed it was having a tough time of it this year even before the UK lockdown started.

In the first two months of 2020, new vehicle sales were down 4.8% year-on-year (YOY) on a like-for-like (LFL) basis. On the plus side, the trade as a whole saw a 5.8% decline in LFL sales of new vehicles, according to Lookers.

Lookers said like-for-like unit sales of used vehicles declined by -2.6% YOY while its like-for-like aftersales revenue was up by 0.9%.

The company said it also suffered margin pressure in the period, as it cut the prices of older cars in an attempt to get them off the forecourts.

The company’s sales outlets were all closed on 23 March in keeping with government advice. Since then, Lookers has reopened 31 locations that are providing essential repairs and maintenance to key workers’ vehicles and 10 parts distribution centres.

Having identified 15 of its outlets in November for permanent closure, it has sold seven of the sites, raising £17.6mln in 2019, with the rest earmarked for sale in the current year.

Investigation into potential fraud is extended to other divisions

On 10 March, the group announced it was delaying publication of its full-year results owing to a fraud investigation; the first phase of this investigation is now complete and has identified certain misrepresented debtor balances in respect of bonus receivables together with a number of fraudulent expenses claims in the operating division concerned.

These items are expected to give rise to a one-off, non-cash charge, in the 2019 financial statements of circa £4mln.

In view of the findings, the board has decided to extend the investigation to other divisions, as a result of which further transgressions have been identified that are likely to lead to a one-off, non-cash charge in the 2020 accounts.

While the aggregate impact of the fraud investigation is not yet known, the board currently anticipates that the group will still be profitable for 2019 on an underlying profit before tax basis.

“These are challenging times,” admitted Mark Raban, the chief executive officer of Lookers.

“I want to thank all my colleagues who have been furloughed for their patience and understanding during a difficult time for all.

“We are also continuing to take prudent steps, with the support of our major stakeholders, to ensure that the business returns to full operation in the best possible condition,” he added.

Shares in Lookers were down 8.8% in early deals.

Proactiveinvestors.co.uk

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