ItemCurrent PeriodPrevious Period
YearN/A N/A
Period12 Months12 Months
Adjusted Earnings
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Commentary History
Commentary On Lookers Plc
Title: Lookers – Its Looking Worse Than Previously Thought
Company: LOOK - Lookers Plc
Share Price Then: 19p
Author: Ian Smith
Date: Tue 30 Jun 2020
Comments: The core selling cars business has looked decent although heavily affected by COVID-19 and I was thinking have they been oversold.

Then on the 10th of March 2020 it was announced that the accounts were going to be delayed until the second half of April as a result of some non material issues and Grant Thornton would investigate them as fraud.

On the 24th of April these issues were expected to give rise to a one-off, non-cash charge in the 2019 financial statements of circa £4m.

On the 4th of June the fraud investigation was nearly complete and the accounts would be ready by the end of June.

On the 8th of June the accounts would not be ready by the end of June and share trading may have to be suspended on the 1st of July. Deloittes stated their intention to resign as auditors after the publication of the 2019 accounts.

On the 29th of June the Grant Thornton report says there is £19 million of adjustments roughly half applicable to 2019 and the rest to previous years

As well as the £4m found earlier there is £15m related to the incorrect or inconsistent application of policies, processes and accounting standards. That is meaningless to me and the audit of the 2019 accounts is still incomplete.

However, the Board believes that 2019 will remain profitable at the underlying profit before tax level.

So is there a big buying opportunity here, with shares currently at 19p valuing the group at £75m and a suspension of the shares apparently due should anyone buy on the expectation of a significant rise the day that the shares are restored.

If there is £19m of lost cash then this would seem unwise.

But if most of the £19m can be treated as misstatements and there is minimal amount of money expected that is not going to be received and none to payout then under normal circumstances this could be an interesting decision. The problem is that there are many other weakly priced shares that will not tie your money up in un-tradable shares.

I have been burnt in the past thinking that all the bad news is out there.
Read Count: 34

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