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    GLJ   DE000A161N30


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PRESS RELEASE : GRENKE AG: GRENKE informs about exonerating statements and points of criticism of BaFin's special auditor

02/25/2021 | 09:41pm EDT
DGAP-News: GRENKE AG / Key word(s): Miscellaneous 
GRENKE AG: GRENKE informs about exonerating statements and points of criticism of BaFin's special auditor 
2021-02-26 / 03:39 
The issuer is solely responsible for the content of this announcement. 
GRENKE informs about exonerating statements and points of criticism of BaFin's special auditor 
- Mazars' interim report commissioned by BaFin reveals no doubt as to the existence of the lease receivables; 
allegation of money laundering not confirmed 
- Points of criticism of Mazars concern specifically the accounting treatment of the franchise companies, lack of 
disclosure of related parties, as well as deficiencies in money laundering prevention and parts of the customer lending 
business at GRENKE Bank 
- Franchise companies will be fully consolidated for the first time 
- Earnings after taxes for the 2020 fiscal year expected to be in the upper double-digit million range 
- Net liquidity of EUR 1,290 million as of February 22, 2021 
Baden-Baden, Germany, February 26, 2021: GRENKE AG today informs about the interim status of the ongoing special audit 
by the auditing firm Mazars, which has been mandated by the German Federal Financial Supervisory Authority (BaFin). The 
Board of Directors and the Supervisory Board of GRENKE AG had requested a respective written interim report from BaFin 
about the current status of the ongoing audit. BaFin has not yet made a final assessment of the findings raised by 
According to Mazars' interim report, no findings have been made that cast doubt on the legal validity and economic 
substance of the lease contracts with outstanding receivables of around EUR 5.6 billion. According to the report, the 
allegation of money laundering has also not been confirmed. Generally, there is no systematic need for goodwill 
impairments on acquired franchises. According to the report, the valuations are justifiable despite methodological 
In addition to the exonerating statements, Mazars' report also contains significant points of criticism. For example, 
Mazars considers it necessary to consolidate the franchise companies. The report also criticised the failure to 
disclose related parties in previous annual financial statements, the procedure of parts of GRENKE Bank's customer 
lending business, and the money laundering prevention process. The report also contains the already known findings in 
the areas of internal audit and compliance. 
GRENKE AG has already responded in the past weeks and months to material findings from the ongoing audits. Meanwhile, 
GRENKE has started to make relevant further improvements in its internal processes, expanded its Board of Directors to 
include a chief risk officer, and structured departmental responsibility more clearly, among other things. Following 
the resignation of Board of Directors member Mark Kindermann, the Supervisory Board intends to strengthen the Board of 
Already in October last year, the Board of Directors announced its intention to terminate the franchise model and 
integrate the franchise companies into the Group. With the planned takeover of the franchise companies under company 
law, the company will terminate all business relations with CTP Handels- und Beteiligungs GmbH and the other financial 
Antje Leminsky, Chair of the Board of Directors of GRENKE AG, said: "Our business model is intact. We are extremely 
good at dealing with our customers and resellers and will now further develop our internal processes with the same 
The following detailed information from Mazars represents an interim status. The final report on the commissioned 
special audit is still pending. 
No indications of money laundering 
According to Mazars, the allegation of money laundering has not been confirmed. Mazars thus confirms the interim 
results of the ongoing audit by the auditing firm KPMG, which GRENKE had reported on in December 2020. 
However, Mazars considers GRENKE AG's internal control measures regarding money laundering prevention to be not 
effective in certain areas and that the material and personnel resources of the money laundering officer show 
substantial deficiencies. 
No doubts as to the existence of the leasing business 
According to Mazars, there are no doubts as to the existence of the leasing business, which constitutes GRENKE's core 
business with leasing receivables of EUR 5.6 billion. This finding also confirms the interim results of the ongoing 
KPMG audit from December 2020. 
In connection with the lease receivables, Mazars also reviewed GRENKE's due diligence on resellers. GRENKE currently 
works with around 36,000 resellers who broker the leasing relationship with the end customer. Mazars identified 
weaknesses in the internal audit system. According to GRENKE, these findings need to be reviewed. Mazars has found no 
evidence to support the allegation of systematic fraud by resellers. 
Goodwill essentially recoverable 
Mazars confirms that no systematic errors were made in testing the recoverability of goodwill on franchises already 
acquired. Despite methodological deficits, the valuations of goodwill are considered justifiable in individual cases. 
When valuing the former franchisees at the time of the acquisition, there were both upward and downward deviations from 
the originally agreed purchase price mechanism. The purchase prices were not systematically overstated. 
Warth & Klein Grant Thornton (WKGT) had already referred to the purchase price deviations in its expert opinion in 
December 2020, but had come to the conclusion that the acquisitions of the 17 franchise companies can be described as 
positive overall for GRENKE AG . 
In this context, Mazars criticizes the returns of CTP and the other financial investors ex post as excessive. Mazars 
concludes this from an analysis of the top 10 acquisitions by amount of goodwill. Mazars points out that for the 
franchise investments between 2003 and 2018, paybacks of EUR 62.6 million compared to investments of EUR 7.2 million 
occurred. Franchise companies not acquired in the past accounted for losses of EUR 6.5 million, which are not included 
in the EUR 62.6 million. 
Reassessment in accounting of the franchise business 
A significant point of criticism by Mazars concerns the accounting of the franchise companies. Mazars is of the opinion 
that these should have been consolidated in the consolidated financial statements as soon as they were established. 
Based on this assessment, the Board of Directors, after consultation with the auditor KPMG, has reassessed the 
accounting treatment of the franchise business. Upon consideration of all available information, the Company believes 
there is greater evidence suggesting that the franchise companies should have been consolidated in the consolidated 
financial statements as soon as they were established, irrespective of the ownership structures, due to de facto 
control in accordance with IFRS 10. Due to this reassessment, the comparative figures for 2019 are also corrected and 
presented in the consolidated financial statements for 2020. The consolidated financial statements of the previous 
years remain unaffected. 
The retroactive full consolidation leads to a change in the depiction of company acquisitions, notably exclusively in 
the consolidated financial statements according to IFRS. This has no effect on the Group's cash flow. No goodwill is 
shown in the consolidated Group's balance sheet for the franchises acquired after December 31, 2012, and thus since 
IFRS 10 came into effect. The acquisitions are accounted for directly in equity. Equity is reduced by around EUR 90 
million compared with what has previously been shown. According to preliminary calculations, the balance sheet equity 
ratio is close to 16 percent, which corresponds to the Group's target level. However, this effect is largely neutral 
for the calculation of the regulatory equity ratio, as the regulatory equity is always adjusted for intangible assets 
such as goodwill. 
As a result of the consolidation of the franchise companies, Mazars' comment that an impairment loss of approximately 
EUR 8 million would have had to be recognized for the former franchise company in Croatia as early as December 31, 2019 
is obsolete. As no goodwill is recognized in the balance sheet for the company in Croatia under the new accounting 
treatment, no impairment losses are required. 
The full consolidation of the franchise companies would have had nearly no impact on earnings in the fiscal year 2019. 
However, it will have a positive impact on earnings in 2020 due to the absence of goodwill amortization. 
Related parties included in the notes 
Mazars has criticized that Corina Stingaciu was not identified as a related party in the group accounting, although the 
relationship with Wolfgang Grenke appeared to be known within the GRENKE Group. According to now available information, 
GRENKE lists her and the entities controlled by her as related parties in the 2020 annual financial statements and will 
also provide this information for the previous year as a precautionary measure. This does not have any impact on the 
Findings in GRENKE Bank's Customer Lending Business 
The Mazars report lists several deficiencies at the subsidiary GRENKE Bank. These include violations of the Minimum 
Requirements for Risk Management (MaRisk), which relate to complaints in the customer lending business. Specifically, a 
number of granted loans were mentioned in which either no or insufficient collateral was provided or the borrower's 
ability to service the loan was not sufficiently verified. 
Essentially, these relate to loans to small and medium-sized enterprises with a volume of around EUR 37 million, which 
is a very small proportion of the Group's total assets of more than EUR 7 billion. Moreover, the bank had already 
stopped accepting any further new business since spring 2020 due to the Corona pandemic and has now decided to 

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Sales 2020 560 M 683 M 683 M
Net income 2020 69,3 M 84,6 M 84,6 M
Net Debt 2020 5 447 M 6 648 M 6 648 M
P/E ratio 2020 23,1x
Yield 2020 1,55%
Capitalization 1 509 M 1 834 M 1 842 M
EV / Sales 2020 12,4x
EV / Sales 2021 12,5x
Nbr of Employees 1 800
Free-Float 56,1%
Duration : Period :
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Technical analysis trends GRENKE AG
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Income Statement Evolution
Mean consensus BUY
Number of Analysts 4
Average target price 55,50 €
Last Close Price 32,46 €
Spread / Highest target 103%
Spread / Average Target 71,0%
Spread / Lowest Target 41,7%
EPS Revisions
Managers and Directors
Antje Leminsky Chairman-Management Board
Sebastian Hirsch Chief Financial Officer
Ernst-Moritz Lipp Chairman-Supervisory Board
Florian Schulte Member-Supervisory Board
Ljiljana Mitic Member-Supervisory Board
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GRENKE AG-16.38%1 834