Lookers plc (LON:LOOK), one of the leading UK motor retail and aftersales service groups, has published its annual financial reports comprising the audited financial statements, management report and responsibility statements for the financial year ended 31 December 2019.
Key financials:
| FYR 2019 | FYR 2018* | |
| Revenue £m | £4,787.2m | £4,828.3m |
| (Loss)/profit before tax £m | (£45.5m) | £41.9m |
| Underlying profit before tax £m ** | £4.2m | £42.8m |
| Underlying earnings per share (p) ** | 0.87p | 8.78p |
| (Loss)/earnings per share (p) | (10.69p) | 8.26p |
| Total dividend per share (p) | 1.48p | 4.08p |
| Net debt £m *** | £59.5m | £85.9m |
*The 2018 previously audited and published financial results have been restated to reflect the impact of adjustments arising from the Grant Thornton investigation and internal review, IFRS 16 and voluntary presentational changes.
**Underlying profit before tax is profit before tax and non-underlying items. Underlying earnings per share is (Loss)/earnings per share after tax and before non-underlying items.
*** Bank loans and overdrafts less cash and cash equivalents, excluding stocking loans and lease liabilities under IFRS16.
2019 Results Summary:
· The audited 2019 results published today reflect the additional work carried out by Grant Thornton UK LLP, our internal team and our auditor, Deloitte LLP.
· Total revenue for the year was £4,787.2m (2018: £4,828.3m) driven principally by the total 5.0% increase in used car revenue and a total 6.7% increase in aftersales revenue.
· Adjustments identified as relating to 2019 reflect adjustments to previously unpublished results, and adjustments to 2018 and earlier reflect adjustments to previously published and audited results.
· A total of £25.5m of non-cash adjustments are necessary to correct misstatements in PBT over a number of years.
· Adjustments reduce PBT by £10.9m in 2019 and £7.2m in 2018 with the balance cumulatively decreasing PBT by £7.4m in 2017 and earlier.
· Statutory loss before taxation of £45.5m compared with a profit before taxation of £41.9m in the prior year.
· Despite the impact of the adjustments and as previously indicated, 2019 remains profitable at the underlying PBT level £4.2m (2018: £42.8m).
· Net total non-underlying charges for the year totalled £49.7m (2018: £0.9m) reflecting significant restructuring activity, non-cash impairment charges, gain on property disposals and a provision of £10.4m for potential liabilities arising from the ongoing Financial Conduct Authority (FCA) investigation.
· The investigations identified a cash expenses fraud which led to a loss of £327k in a single division and which accumulated over several years.
· As previously announced, no final dividend for 2019 was recommended.
· Continued strong focus on cash management reduced net debt to £59.5m (2018: £85.9m).
2019 Operational Summary:
· Difficult but necessary decisions made to implement the right dealership portfolio and staffing profiles, which led to site closures and the unfortunate redundancy of a number of our colleagues.
· Decisive restructuring activity commenced continuing into the current financial year to reduce costs to sustainable levels.
2020 Trading and Outlook:
· Temporary closure of the Group’s dealerships throughout the initial lockdown had a significant impact on financial performance, with the Group expecting to report a material underlying loss before tax in H1.
· Trading in Q3 was better than expected with underlying PBT significantly ahead of last year.
· Q4 will benefit from the full impact of the Group’s restructuring activity although the financial performance for the remainder of the year will inevitably be impacted by the closure of our dealerships under the second lockdown in England which commenced on 5 November 2020, and any further regional restrictions.
· The Group’s net debt has improved during the year and was £54.4m at the end of October (£59.5m at end December 2019). The Group has recently agreed revised covenants with its banks and is currently in discussions to refinance its £250m banking facilities which are in place until March 2022.
· Despite resilient liquidity and before mitigating actions, ongoing uncertainties of COVID-19 and Brexit mean severe but plausible downside sensitivities indicate material uncertainty regarding going concern.
· Activity is underway to enhance systems, controls and policies and procedures to prevent recurrence of the issues which led to the adjustments to our accounts.
· The Group will publish its full Annual Report and Accounts for the year end 31 December 2019 within two working days.
· The Group will publish its interim results for 2020 as soon as possible in December and expects to submit a request to the FCA seeking to restore the listing of the Company’s shares after the publication of its interim results.
Phil White, Executive Chairman said:
“The last twelve months has been extremely challenging for Lookers with the ongoing impact of COVID-19 and the accounting issues. Significant restructuring activity has been necessary to ensure we lay the right foundations for the future. On behalf of the Board I would like to thank all of our employees for their efforts and our wider stakeholders for their patience and ongoing support. Despite our recent challenges, we are extremely proud of how our people have responded, showing real dedication and flexibility particularly through maintaining critical vehicle servicing for key workers who have needed to remain on the road.”
“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, I would like to apologise unreservedly to all our stakeholders for the uncertainty this has caused.”“We emerged from the initial lockdown in a strong position and are well equipped to deal with the second lockdown in England. We have an industry leading portfolio, underpinned by a talented and dedicated team which means that we can look to the future with confidence.”
“My focus now is to restore the listing of our shares and to strengthen the Board to take advantage of the many opportunities that lie ahead for Lookers, which is fundamentally a great business.”
Publication of 2019 statutory accounts
The financial information for the year ended 31 December 2018 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies and which have been subsequently restated. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act 2006.
The statutory financial statements for the year ended 31 December 2019 will be filed with the Registrar of Companies following a General Meeting to approve those accounts. The report of the auditor dated 25 November 2020 was unqualified and did not contain a statement under s498(2) or (3) of the Companies Act 2006, but did include a section highlighting a material uncertainty that may cast significant doubt on the Group and Company’s ability to continue as a going concern given the possible impact of the COVID-19 pandemic and the effect of Brexit on both customer confidence and the Group’s supply chain.
