Altrincham-based car dealership Lookers plc said on Thursday it plans to cut 1,500 jobs and close 12 more sites as it struggles to emerge from the coronavirus crisis.
The news came in a trading update after the re-opening of Lookers dealerships on Monday June 1 in line with UK Government guidance.
The update gave details of a restructuring the company said will deliver £50 million of annual savings and leave it with 136 dealerships.
Lookers said discussions are progressing with banks to agree amendments to covenants under its revolving credit facility.
Lookers said the previously disclosed investigation by Grant Thornton into “potentially fraudulent transactions” in its operating divisions is nearing completion.
“The initial findings of the investigation have highlighted areas where financial controls require strengthening to prevent a repetition of such accounting irregularities in the future,” said Lookers.
“In addition, the investigation has highlighted the need for Lookers to further strengthen some behavioural and cultural aspects relating to its control environment.
“Robust remediation activity is in progress.”
Lookers shares rose about 8%.
On its current operations, Lookers said: “On 18 May 2020 the group implemented a new contactless vehicle handover and delivery process.
“Since then, we have fulfilled a total of nearly 4,000 new and used retail vehicle orders.
“Following the introduction of new operating and social distancing measures to ensure the health and safety of customers and colleagues, the group reopened most of its dealership sales facilities on 1 June 2020.
“With the benefit of enhanced online functionality which the business has been implementing, in the last two weeks, the group has taken retail orders for 2,865 new and used vehicles which on a like-for-like basis represents approximately 51% of sales for the same period last year.
“The group had approximately 66% of its total current colleague base (c.8,100) remaining on furlough at the end of May. In June it is expected that this will reduce to approximately 55%.”
On its restructuring, Lookers said: “The board has considered the future structure of Lookers in light of potential demand, a smaller dealership estate and the structural changes taking place across the industry.
“As a result, the group has taken the difficult decision to commence redundancy consultations across all areas of the group which could, subject to consultation, result in approximately 1,500 redundancies.
“The board has carefully considered all options and regrettably considers this action as being necessary in the current environment to sustain and protect the Lookers business over the long term.
“This restructuring could, subject to consultation, deliver annual payroll savings of approximately £50m. The one-off cash restructuring cost will be circa £9m.”
In its outlook, Lookers said: “Given the ongoing uncertainties faced by the group in the early days of reopening the business, the board continues to believe that it is too early to make any reasonable estimate of the financial impact on the group during 2020 and beyond …
“The results for 2019 are expected to be published by the end of June subject to the conclusion of banking discussions and audit.”
Lookers CEO Mark Raban said: “We are pleased to have reopened our dealerships and have been careful to do this in a way that is safe for our customers and colleagues.
“At the same time, we are having to reflect on the outlook for the Group and how we must adapt to ensure a positive future in what is likely to remain an uncertain economic and industry environment.
“Against this backdrop we have taken the decision to restructure the size of the group’s dealership estate to position the business for a sustainable future, which regrettably means redundancy consultation with a number of our colleagues.
“This has been a very difficult decision and we will be supporting our people as much as possible throughout the process.
“We have used the time as the business has been closed to adapt and evolve to meet changes in consumer behaviour, not just for a post Covid environment, but also to enhance our digital offering and the trend towards electrification.
“We will also ensure that our systems and processes are reliable and robust enough to position us as a leading UK motor retailer.
“There is still a lot more work to do, but we have the determination, platform and brand partnerships to take the business forward.”