Lookers reveals £19m hole in suspected fraud probe
Troubled car dealership firm Lookers today said that it would make a £19m adjustment to its accounts in order “to correct overstatements in profitability over several years”.
The dealership chain is having its accounts reviewed by Grant Thornton and Deloitte after identifying “potentially fraudulent transitions” this year.
As a result of the probe, Lookers has been unable to publish its financial results, which were originally due in March.
Unless it can publish by 30 June, the firm has warned that the trading of its shares will be suspended after consultation with the Financial Conduct Authority (FCA).
Shares in the firm rose 6.3 per cent after this morning’s update.
According to today’s update, roughly half of the £19m in the necessary adjustments relates to last year’s results, with the remainder accumulated over a number of years.
Lookers said that around £4m of the adjustments relate to the initial phase of the investigation which focused on one of the group’s operating divisions.
These adjustments include misrepresented and overstated debtor balances in respect of supplier bonuses together with a number of fraudulent expense claims.
The remaining £15m relates to the incorrect or inconsistent application of policies, processes and accounting standards.
Auditor Deloitte has said it will resign as soon as the 2019 accounts are released.
Kate McMahon, partner at law firm Edmonds Marshall McMahon, said the firm was dealing with a raft of civil and criminal issues, including:
“Fraud on its shareholders, presumably significant internal fraud and false accounting for a start, with regulator investigation by the FCA underway, presumably in relation to failures of financial controls, issues with internal procedures and consumer harm”, she said.
“This sort of investigation and these significant legal problems are likely to lead to a further loss in share value.
“The FCA and shareholders alike will be looking to the entire management board for explanation, as well as the now ex-auditors”.
Last week Lookers announced a raft of changes to its board, with five directors due to step down in a wholesale shake-up.
The firm said that Phil White will take on the role of executive chairman from 1 July to oversee this transitional period.
Richard Walker, senior independent director and Sally Cabrini, non-executive-director and chair of the remuneration committee, have confirmed that they will not stand for re-election at today’s general meeting.
Stuart Counsell, non-executive director and chair of the Audit and Risk Committee has agreed to remain on the Board until the completion of the 2019 results and the appointment of his successor.
Tony Bramall, non-executive director, has indicated he will not stand for re-election at next year’s annual geenral meeting.