Lookers investigation extended as it warns of loss

Troubled Altrincham-based car dealership Lookers plc said on Thursday it expects a “material” underlying pre-tax loss for the first half of 2020 — and said an accounting investigation of the company is being extended across the business.

Lookers’ shares were suspended on July 1.

Lookers said it expects to report first-half revenue of £1.6 billion, down from £2.6 billion at the same stage of 2019.

“The group expects to report a material underlying PBT loss for H1, after receiving c£29m from the Government’s Job Retention Scheme,” said Lookers.

Lookers said the temporary closure of its dealerships throughout the lockdown period had a “significant impact” on the group’s financial performance during the first half — but that post-lockdown trading has been encouraging.

On post-lockdown trading, Lookers said: “Trading in the two-months ended 31 July was encouraging and reflected a period where all trading locations in England were open (from 1 June), followed by reopenings in Northern Ireland and Scotland on 8 June and 29 June respectively.

“In June, our like-for-like dealerships in England outperformed the UK new retail car market and recorded growth in like-for like used unit sales combined with improved margin retention.

“These trends strengthened in July as the group’s dealerships in Scotland reopened.

“During July, on a like-for-like basis, the group invoiced and delivered over 14,000 new retail and used units exceeding last year by 17.0%.

“Like-for-like service revenues also showed growth versus last year.

“As a consequence of these factors, combined with ongoing focus on cost and working capital control, underlying profit before tax was materially ahead of last year during July.

“The release of pent up demand from over two months of closure, together with an ongoing consumer trend to avoid public transport in favour of the private car, has helped to drive activity.

“Given the group’s large internal and external retail premises, social distancing measures are less disruptive than many other forms of retailing which has helped encourage customers back to the dealerships.”

On the accounting investigation, Lookers said: “The board has concluded that publication of the group’s 2019 financial statements is no longer possible by the end of August 2020, as was previously anticipated.

“Following review of the final report from Grant Thornton LLP on 3 August 2020, the board and its auditors, Deloitte LLP, extended the scope of the 2019 audit at consolidated group and individual entity level.

“The extended scope of the audit has identified further work on the group’s corporate leasing division and vehicle financing arrangements and the 2018 and earlier balance sheets to ensure correct identification and allocation of adjustments.

“Further work is ongoing to finalise the 2019 accounts.

“The board is working with Deloitte LLP and its external accounting advisors to assess the impact of these matters on the Group’s 2019 financial statements including restatement of prior year accounts.

“The board remains committed to ensuring the issues identified in the report are fully considered and addressed and continues to work with the auditors to progress the finalisation of the 2019 audit as quickly as possible.

“The board continues to believe that the likely magnitude of the potential restatements referred to above will not prevent 2019 from remaining profitable at the underlying profit before tax level.

“The company remains in close dialogue with its banking partners.”