ADLER share -12%: KPMG is not available as auditor in 2022 – Consus Real Estate will have to make write-downs

“This decision by KPMG comes as a great surprise to ADLER, it is disappointing and irritating,” said Stefan Kirsten, Chairman of the Board of Directors, in Luxembourg on Tuesday. All members of the board of directors have had “very professional discussions” with those responsible at KPMG in the past few weeks. After all, the goal is to receive an unrestricted certificate for 2022.

ADLER will initiate a selection process to appoint a new auditor for the company, Kirsten said. However, a new auditor must first familiarize himself with the new position. This will take a certain amount of time, which ADLER management would have liked to have saved by having KPMG conduct a professional, naturally independent and, given its previous work, detailed review.

ADLER management originally wanted to re-appoint KPMG as the auditor for the annual financial statements.

ADLER subsidiary Consus Real Estate will have to make write-downs

After the real estate group ADLER Group, which was confronted with serious allegations, had to write down Consus Real Estate in 2021, the subsidiary is now threatened with the same fate. Consus will probably have to write down investments and loans to affiliated companies due to increased construction costs and a significant reduction in the expected project development volume, ADLER Group announced on Tuesday in Luxembourg. The ADLER subsidiary had to report a loss because the company’s balance sheet equity (HGB) amounts to less than half of the share capital.

“Consus Real Estate is our problem child,” said the head of the board of directors, Stefan Kirsten, in a conference call. ADLER must and will restructure its balance sheet and personnel here. As the owner of more than 90 percent, the company will of course reorganize its balance sheet, but the reorganization should not cost any money, with the exception of transaction costs. “In principle, I do not include or exclude any measures at Consus – except for insolvency,” emphasized the manager.

In addition, a gap in coverage has opened up at the ADLER subsidiary BCP, on whose takeover the competitor LEG has a purchase option, said Kirsten. Adler will take short-term measures to bind society more closely. Among other things, ADLER’s management is examining taking over the majority of BCP’s board of directors.

The financial supervisory authority BaFin is currently examining ADLER’s books. The agency intervened after the property company first came under fire from short seller Fraser Perring in October. Perring and his research service Viceroy had raised serious allegations against ADLER, including the valuation of real estate projects.

The ADLER management has again made comprehensive materials available to the Bafin and is expecting further questions and comments, said Kirsten. An investigation by the Luxembourg supervisory authority CSSF is also ongoing. According to the manager, he has a personal appointment with the authority at the end of May to introduce himself.

ADLER presented figures for 2021 at the end of April despite the refusal of the attestation by the auditors from KPMG. According to the published figures, operating profit increased last year. The bottom line was a loss of almost 1.2 billion euros after a profit of 191 million euros in the previous year due to depreciation.

Meanwhile, the auditor Thomas Echelmeyer will temporarily take over the position of CFO at ADLER on June 1st. His former colleague will take over the post as chief financial officer until the position is permanently filled, Kirsten said. Both had started their careers at Arthur Andersen.

ADLER Group under pressure – 2022 final exam not by KPMG

ADLER Group investors continue to react very nervously to any news from the environment of the ailing real estate group. On Tuesday morning there were initially significant price losses due to the threat of write-downs by the subsidiary Consus, but these were made up for in the course of the year. The next price slide followed in the afternoon due to the announcement that KPMG was not available as an auditor for 2022. At times, the course collapsed by 12 percent. At EUR 5.065, it reached its lowest level since the beginning of May.

The ADLER Group, which was faced with serious allegations, announced in the afternoon that KPMG was not available as the auditor for the company’s annual and consolidated financial statements for the 2022 financial year. “This decision by KPMG comes as a great surprise to us, it’s disappointing and irritating,” said Stefan Kirsten, Chairman of the Board of Directors.

With the price slide, the ADLER price moved back towards the record low of EUR 3.88. This was achieved at the beginning of the month, when the refusal of the attestation by KPMG’s auditors and the billions in losses reported for the past year weighed on the price. At the end of April, the shares had recovered briefly, according to the first statements on a special investigation. However, KPMG then found itself unable to issue an audit opinion for the consolidated and individual financial statements for 2021.

LUXEMBOURG / FRANKFURT (dpa-AFX)

Image sources: ADLER Group