Car dealer Lookers today admitted the scandal over its overstatement of profits last year meant its accounts would be delayed as the scope of the investigation into the affair spreads.
The company has been left reeling by revelations that it overstated its profits by £19 million over a period of several years amid fraudulent expense claims, inconsistent accounting and inflated debtor balances.
It made the £19 million estimate in June after an investigation by accountant Grant Thornton.
However, today, having now received GT’s final report into the scandal, the board said it was extending its audit of 2019’s figures to closer examine its corporate leasing division and vehicle financing arrangements.
It is also going back over its earlier years’ balance sheets to make sure the numbers are right.
Lookers, which is in the process of cutting 1400 jobs and closing 12 dealerships, has retained its long term auditor Deloitte to go back over the numbers.
As a result of the extended inquiry, 2019’s financial statements will no longer be publishable by the end of August as previously promised, it said.
Deloitte has said it will resign after those accounts are finally published.
“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,” Lookers said.
It added that it did not believe the potential errors would result in 2019 being lossmaking.
The company remains in close dialogue with its banking partners.
Separately, the group said its trading in the two months to the end of July had been “encouraging” and saw a 17% increase in sales over the same weeks last year, suggesting pent up demand from customers prevented from buying during lockdown.
Service levels were also higher as people were able to get out of the house to get their car check-ups.
“The release of pent up demand from over two months of closure, together with an ongoing consumer demand trend to avoid public transport in favour of the private car, has helped to drive activity.”
However, the prolonged period of closure of its dealerships meant it would still be making a “material loss” for the first half of the year, not helped by the costs associated with the Grant Thornton inquiry. The loss would come even after Lookers received £29 million from the Government’s furlough scheme.
It warned the outlook remained uncertain due to the unpredictable future for the UK economy.
Mark Raban, chief executive, said: “This has been a very challenging period for Lookers, but it is encouraging that we are beginning to see some healthy signs of recovery in vehicle sales since the easing of lockdowns…
“We remain cautious about the future given ongoing uncertainties in the wider environment, but confident in the opportunities for the Lookers business moving forward.”