By Kristy Dorsey
The owner of Scotland’s Taggarts chain of car dealerships has revealed a £19 million hole in its accounts as the group faces the prospect of its shares being suspended from trading on the London Stock Exchange.
Lookers has said it will have to “correct overstatements in profitability over several years” after an investigation into potential fraud by Grant Thornton revealed a cumulative total of approximately £19m of non-cash adjustments. About half of the “draft adjustments” impact its results for the 2019 financial year, which were originally due to be published in March.
The troubled car dealership was granted a three-month extension to June 30 to publish its 2019 results, the last date permitted under the Financial Conduct Authority’s disclosure and transparency rules. Failure to meet the extended deadline by the close of play today will lead to the suspension of trading in Lookers shares.
READ MORE: Taggarts owner signals share trading suspension
The group has previously said that it intends to publish its results “by no later” than the end of August. Lookers’ current auditors, Deloitte, will step down after the full-year accounts are signed off.
About £4m of the adjustments revealed yesterday relate to the initial phase of Grant Thornton’s investigation, which focused on activities within one of the group’s operating divisions. Lookers, which has 31 discrete car businesses, has not identified which division those problems pertain to.
“These adjustments include certain misrepresented and overstated debtor balances in respect of supplier bonuses receivable together with a number of fraudulent expense claims,” the company said in a statement.
The remaining £15m relates to the “incorrect or inconsistent application of policies, processes and accounting standards”.
READ MORE: Car dealer closes sites, cuts dividend
Grant Thornton’s investigation has revealed “several areas” where financial controls and cultural aspects of the business “require strengthening”. Remedial measures have been introduced to address these points, and an independent board committee established to ensure their proper implementation.
“Whilst the company is making good progress in resolving the investigation there remain a number of outstanding issues and until such time as these issues are resolved and Deloitte have completed their audit, it is not possible for the company to confirm the full impact,” Lookers said.
The group operates 164 car dealerships across the UK, but announced earlier this month that it plans to close 12 sites and cut 1,500 jobs. This was followed last week by news of a boardroom shake-up that will lead to the resignation of five directors as Phil White takes over the role of executive chairman from July 1.
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