Adler’s leader resigns after Luxembourg auditor refuses approval

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Most of the Adler Group SA’s board has offered to resign after a loss of € 1.18 billion in annual performance that the auditors of a Luxembourg-based company refused to approve.

The embarrassed German landlord said on Saturday that the loss was heavily tied to the write-down of its real estate development business, and auditor KPMG Luxemburg provided an opinion on the account after Adler withheld information on some transactions. He said he refused. Hours after the company announced its delayed results, another statement said all members of the board that served last year offered to resign.

Chairman Stephen Kirsten, who joined in February, resigned, saying the company will accept the resignation of three directors, including one of the co-chief executive officers, within two months to ensure continuity.

Losses and exits are the latest twist in Adler’s story, which has fought shortseller claims in recent months. They come a few days after Adler announced the discovery of the KPMG probe in a claim made by Fraser Pering’s Viceroy study in October. KPMG’s report was unable to refute many accusations and discovered a series of corporate governance failures, leading to further sales of the company’s shares and bonds.

In a follow-up statement, Adler said it aims to obtain an unconditional audit opinion in 2022. Carsten said Adler was “much more important” to report results by the end of April than to have a longer-lasting audit. procedure. “The company called for dialogue with KPMG to clarify” how these lacks of information can be resolved without legal damage, “he said.

The company wrote down goodwill by € 1.08 billion, including the Consus development business. According to Saturday’s postponed full-year earnings report, it blamed construction inflation and supply chain bottlenecks and was forced to revise assumptions about the project’s profitability potential.

Auditor KPMG refused to provide an opinion on the account after Adler withheld communication about the transactions of related parties focusing on Viceroy’s allegations of fraud. According to KPMG, auditors were still unable to determine if unpaid transactions were properly accounted for in some cases.

“Needless to say, such abandonment of opinion is not good news,” Karsten said. “A note like this reflects a high level of distrust between the company and the auditor. But again, in my opinion, Adler has enough substance, so we’re new. We’re off to a solid start. Our existing portfolio is solid. “

The resignations of Thilo Schmid, Thomas Zinnocker, and co-CEO Thierry Beaudemoulin have been accepted since June 29, the day of the company’s annual meeting. In short, the company has four boards, half the size of today.

The key to the Viceroy’s accusation was the evaluation that Adler imposed on the possession and transaction between the landlord and the companies associated with some of its supporters, including the extended family of Austrian financier Cebudet Canner. .. Adler is still borrowing money for some transactions that date back a few years. Despite KPMG’s recommendation that he should mark down accounts receivable from at least one transaction, he refused to amortize the total.

The company acknowledged on Saturday that it risks failing to recover the € 58.6 million owed by Azeri investor Natig Ganiyev, who agreed to purchase the Accentro unit in 2017. Currently, receivables exceed € 423 million. This is down from the recalculated value of € 461 million in 2020.

The company’s real estate portfolio was valued at € 9.97 billion at the end of December, down from € 11.7 billion in the previous year due to a debt-reducing sale. Adler’s loan-to-value ratio, a key indicator of real estate companies measuring relative debt, fell from 54.3% in the previous year to 50.9%. The company’s liquidity at the end of last year was € 556 million, according to another press release released with earnings.

The Consus write-down took place after KPMG’s forensic study expressed concern about some of Adler’s development ratings. KPMG said in its analysis that Adler’s estimated construction schedule for the project was too optimistic and that construction cost estimates were too low.

Adler, who has rapidly grown into one of Germany’s largest landlords through debt acquisitions and controversial mergers, freed most of last year from adjutant claims, as well as anonymous whistleblowers who sent information to the company’s banks. it was done. The company sold about 40% of its 70,000 apartments to repay the $ 9 billion (€ 8.6 billion) debt pile.

Since KPMG released its report last week, Adler’s stock has lost 38% of its value and is trading at record lows. KPMG investigators were pleased that most of Adler’s portfolio was accurately valued, but could not disprove many of the other claims.

© 2022 Bloomberg LP Adler’s leader resigns after Luxembourg auditor refuses approval

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