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DEAG ‘substantially overstated’ financial success

Deutsche Entertainment AG has revised several claims made in previous financial reports after an investigation by the Financial Reporting Enforcement Panel (FREP)

By Jon Chapple on 02 May 2017

Peter Schwenkow, Deutsche Entertainment AG (DEAG), FREP

image © Raymond Gubbay Ltd

Deutsche Entertainment AG (DEAG) has been criticised by Germany’s Financial Reporting Enforcement Panel (FREP) for allegedly misrepresenting its financial strength in its 2014 full-year and 2015 half-year fiscal reports.

According to German business weekly WirtschaftsWoche, FREP took issue with DEAG’s 2014 financial report describing “very good presales” for its three new festivals, Rock im Revier, Rockavaria and Rock in Vienna – when, in fact, less than a month before the festivals were due to kick off, “not even half of their costs were covered by ticket sales”.

The launch of the new festivals led to a €17.8m million loss in 2015, which on Friday was revised retroactively to -€26.2m as a result of FREP’s investigation. Only Rock in Vienna remains following the cancellations of Rock im Revier and Rockavaria.

According to its 2016 annual report, which followed the release of preliminary figures on 13 April, DEAG was expecting losses relating to the three festivals, but was found by FREP to have failed to take into account the effect a €26.2m loss could have on the health of the company. “For the rock festivals held for the first time in May and June 2015, an expected loss was already becoming apparent as of the reporting date on 31 December 2014, for which a risk provision was made for onerous contracts,” it reads.

FREP took issue with DEAG’s 2014 financial report describing “very good presales” for its three new festivals

“FREP has determined that on the basis of the scenarios assumed by DEAG, and against the background of the possible risk to the survival of the company presented in the group management report, no adequate risk provision was made.”

FREP also ruled that DEAG had, at €7.9m, “substantially overstated” the value of the Jahrhunderthalle Frankfurt convention centre, in which it agreed in March 2016 to sell its 49% stake.

WirtschaftsWoche further reports that DEAG CEO Peter Schwenkow (pictured) is the target of a lawsuit by the Handelsblatt publishing house over an alleged false affidavit in connection with an unspecific “interim injunction”.

In a statement provided to MusikWoche, a DEAG spokesperson denies the allegations, saying: “Contrary to the assertion of Wirtschaftswoche, the public prosecutor has already closed its case [against DEAG].”

 


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