The car dealer Lookers has finally revealed that it lost £46m in 2019, eight months after it first delayed its accounts following its discovery of a £300,000 fraud.
Lookers said an unnamed individual in one of its trading divisions was the subject of criminal investigations after it discovered “internal fraud” via “misappropriation of expenses”.
The alleged fraudster “misrepresented debtor balances in respect of bonus receivables” as well as submitting “a number of fraudulent expenses claims”, Lookers said.
The fraud, which was revealed in March, was worth £327,000 accumulated over several years – a minor financial loss for a company whose earnings before tax had not dropped below £30m since 2009. The company’s shares have been suspended since July because of the reporting delay.
However, the fraud investigation uncovered accounting problems which required it to book more than £20m in charges to correct previous inaccuracies.
The fraud and accounting scandal came at the worst possible time for Lookers, just as the car industry was rocked by the twin challenges of Brexit uncertainty followed by the coronavirus pandemic, which forced the closure of all dealers for months during the UK’s lockdowns – although demand has bounced back since restrictions eased. At the same time, car dealers have struggled to adjust to the shift to online sales.
Lookers, which sells vehicles for large manufacturers including Toyota, Ford and Volkswagen, as well as luxury brands including Aston Martin, Bentley and Ferrari, in June closed 12 dealerships with the loss of 1,500 jobs. It runs 164 dealerships in total, employing 8,100 people.
The turmoil at the company had started in July 2019, when it announced a profit downgrade. In November 2019 its chief executive and chief operating officer both left, alongside another 15 closures. Mark Raban was appointed chief executive in February, having only joined Lookers in the previous July.
Lookers acknowledged “significant weakness” in its finance department, following the fraud investigation by auditors Grant Thornton.
The investigation found “weaknesses in the design and implementation of policies and procedures, an insufficiently resourced and skilled finance function and instances of failure to follow policies and procedures where they existed”, Lookers said.
Phil White, Lookers’ executive chairman, said: “The investigation into our financial systems and accounting controls, the delay in the publication of our 2019 results and the subsequent temporary suspension of our shares have been a great disappointment.
“As chairman of Lookers plc, I would like to apologise unreservedly to all our stakeholders and team members for the uncertainty this has caused.”