Powerland AG / Key word(s): Miscellaneous/Share Buyback
15.07.2013 18:01
Dissemination of an Ad hoc announcement according to § 15 WpHG, transmitted
by DGAP - a company of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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Auditor informs Powerland AG of factors hindering it from issuing an audit
opinion; The Management Board and Supervisory Board of Powerland AG decide
on share buyback
Frankfurt/Main, 15 July 2013 - The Management Board of Powerland AG has
received draft audit reports for its unconsolidated and consolidated
financial statements for 2012 from its auditor, BDO AG
Wirtschaftsprüfungsgesellschaft In a conference call held today in which
the Management Board was heard on the draft audit report, representatives
of the auditor did, also after having heard the position of the Management
Board, not indicate that the final reports will contain different reasons
for denying audit opinions for both financial statements than set out in
the draft audit reports.
According to the draft report, the denial of an Audit Opinion for the
consolidated financial statements is based on certain factors hindering the
audit (so-called 'Prüfungshemmnisse'). This means, that the auditor was not
able to form an opinion with sufficient reliability as to whether the
consolidated financial statements comply with the IFRS standards, as the
following circumstances could not be completely clarified:
- Export revenues: According to the assessment of our auditor, revenues
from the export business with two South African customers amounting to
EUR 35.2 million and the corresponding receivable balance of EUR 5.5
million as at the financial year end have not been proved
satisfactorily. The auditor derives this from the fact that the
delivery addresses on the shipping consignment notes for the supply of
goods to these customers were inconsistent. In a number of cases, the
consignees did not reside at the indicated delivery address. In
addition, Powerland Group has almost exclusively received direct
payments from these end-customers of these South African customers
except for November and December 2012. The auditor claims that it had
not been possible to attribute the incoming payments to individual
orders or invoices as the payments have been made by way of batch money
transfers.
Additionally, our auditor pointed out that a payment in the amount of USD
800,000.00 by one of the South African customers was, according to the
declaration form for revenues from abroad, instructed by Mr. Shunyuan Guo,
the chairman of the Management Board of Powerland AG.
The Management Board of Powerland AG comments on this factor hindering the
audit as follows:
The Management Board has provided BDO with a full package of evidence and
supporting documents for revenue recognition of export business in South
Africa, including delivery order, custom declaration, shipping bill, bill
of lading and banking slips. Furthermore, BDO has paid an on-site visit to
South African customers as well as the Chinese tax bureau and shipping
agent to acquire supporting documents. Confirmations of the accounts
receivable on the outstanding receivables of EUR 5.5 million as at 31
December 2012 were sent by the two South African customers directly to the
auditor. All accounts receivables in question have been settled in full in
the meantime. Due to the above facts, Management Board deems the revenue
recognition of its business with the two South African customers and
accounts receivable balance in its consolidated financial statements to be
fairly stated.
The Management Board of Powerland AG deems the name of the consignee as
well as the delivery address to be irrelevant for the recognition of
revenues. The names of the consignee as well as the delivery addresses have
been provided by both South African customers to Powerland Group and
Management Board did not see a reason to examine and verify this
information. Direct payments by the end-customers to the supplier of a
trading company are very customary in international trade.
Collective payments by the two South African customers for multiple
deliveries are a well-established business practice with the customers who
have been doing business with the Powerland Group for years.
The payment of USD 800,000.00 was a loan granted by CEO Mr. Shunyuan Guo to
Powerland's South African client. This customer instructed CEO Mr. Shunyuan
Guo to directly pay the money to Powerland Guangzhou. That specific
customer has been doing business with Powerland for years. This special
move was to maintain its credit ratings in Powerland and to settle the due
payment on time. However, this borrowing has been repaid by the South
African client to Mr. Shunyuan Guo directly.
- Cash and demand deposits: According to the assessment of our auditor,
cash and demand deposits with banks amounting to a total of EUR 61.1
million have not been proved satisfactorily. The auditor states that
legal representatives of Powerland AG have not agreed to visits of the
headquarters of the account-keeping Chinese Banks by the auditor to
enable a verification of the cash and demand deposits position
mentioned above.
The Management Board of Powerland AG comments on this factor hindering the
audit as follows:
Upon the auditors' request, representatives of Powerland Group visited all
of the six account-keeping branches of Chinese banks where Powerland Group
has deposits and borrowings together with representatives of the auditor.
During these visits, officers of the respective banks provided written
documentation directly to the representatives of the auditor, confirming
the amounts of the deposits and borrowings as stated in the consolidated
financial statements.
Auditors requested further inquiries with the headquarters of the
respective banks to verify the account balances. The Management Board deems
this request as very uncustomary for audit procedures in China. In
addition, the request by the auditors is beyond the scope of what Powerland
Group could possibly coordinate as Powerland has no relationships with the
central headquarters of these banks.
- Long-term bank borrowings: According to the assessment of our auditor,
long-term bank borrowings amounting to EUR 3.7 million and short-term
bank borrowings amounting to EUR 32.7 million have not been proved
satisfactorily.
According to our auditor, the legal representatives of Powerland AG had not
agreed to the use of the so-called 'Borrowing Card' which would grant
comprehensive information by the Chinese Central Bank of the credit lines
which have been drawn.
The Management Board of Powerland AG comments on this factor hindering the
audit as follows:
As stated above, the confirmation documents from the banks have fully
proven the entire long-term and short-term bank borrowings balances. The
Management Board of Powerland AG therefore deems it unnecessary to provide
supplementary documents to verify the borrowings. In addition, the
Management Board is worried that such in-depth-auditing could jeopardize
Powerland Group's relationship with the lending banks and create negative
impacts on Powerland's future business.
- Group of related parties: According to the assessment of our auditor
the delineation of the group of related parties as per IAS 24 has not
been proved satisfactorily:
- The legal representative of a Chinese company, being a distributor
of leather handbags in the luxury segment of Powerland Group, has
received a monthly salary payment in an amount of RMB 5,500.00. The
reason that the auditor claims it was provided with the information
that it had been intended to support the distributing company and
that, in order to simplify the matter, Powerland Group had
continued to pay this salary, although the legal representative of
the Chinese company had not been employed by Powerland Group since
September 2009. In addition, the sales manager of Powerland Group
had owned the distributing company until January 2010.
- In addition, the auditor claims that in December 2012, a loan in
the amount of RMB 30 million, which had been granted to Powerland
Group, was paid out to a Chinese company whose managing director
received salary payments of Powerland Group from February to
December 2012. The auditor was provided with the information that
in the meantime, the loan amount had been fully forwarded to
Powerland Group. Even though the loan was intended to pre-finance
the establishment of an e-commerce platform for the trademark
'Sotto' by the above-mentioned Chinese company, the auditor claims
that Powerland has not been presented with invoices issued by this
company to Powerland Group.
The Management Board of Powerland AG comments on this factor hindering the
audit as follows:
The legal representative of the Chinese distribution company was a former
employee of the Powerland Group. In return, Powerland Group paid her a
salary to compensate her for consulting services, market research, business
development and marketing campaign for the Powerland Group. In addition,
the participation in the Chinese distribution company owned by Powerland
Group's current sales director had been fully transferred in January 2010
and is therefore irrelevant for the year 2012 as the period under review.
The loan over RMB 30 million was paid out via an intermediate at the
request of the lending bank. The RMB 910,000.00 that initially remained
with the Chinese company of a former employee were intended to fund the
establishment of an e-commerce platform for the distribution of 'Sotto'
labelled products by such Company were later on also forwarded to Powerland
Group as the e-commerce platform project did not materialize. In addition,
the respective Chinese company did not have any trade transaction with
Powerland Group.
Mainly with reference to the factors hindering the audit as presented above
and their potential impact on the value of the (direct and indirect)
holdings of Powerland AG in its subsidiaries, our auditor does not see
itself in a position to provide an audit opinion also with regard to the
unconsolidated financial statements of Powerland AG.
The Management Board of Powerland AG will analyse the audit reports
thoroughly. In order to decide on measures to be taken, the Supervisory
Board of Powerland AG decided to instruct an independent and neutral
auditor to review the above factors hindering the audit and carry out a
detailed assessment. Amongst other things, a discussion with BDO AG
Wirtschaftsprüfungsgesellschaft about the possibility and requirements of a
subsequent audit of amended financial statements according to § 316 para. 3
of the German Commercial Code (Handelsgesetzbuch) is to be held. The
Management Board remains committed to continue active communication with
BDO.
The members of the Supervisory Board together with the CEO, Mr. Shunyuan
Guo, are in intense talks with possible candidates for the CFO position at
Powerland AG. It is also the Supervisory Board's intention to finalize the
selection process as soon as possible and to assign the new CFO within a
short time.
In addition, the Management Board and the Supervisory Board have decided to
initiate a Share Buyback Programme and buy back up to 1,500,000 Powerland
AG shares through the stock exchange starting 25 July 2013 until the end of
2013 at a price per share that does not exceed EUR 8.00 per share, as the
current share price does not reflect the intrinsic value of Powerland
Group. The value per share paid by the company must not exceed the opening
price in XETRA trading on the trading day at Frankfurt Stock Exchange by
more than 10% and must not undercut it by more than 10%. Powerland AG will
redeem these shares and reduce the statutory capital or hold these shares
and use the shares as compensation for acquisition purposes, to meet
obligations under the stock option programme 2011, as investment
opportunity for strategic partners or to sell these shares later on again
on the stock market.
For further information please contact:
Powerland AG
Jiangbin He
Investor Relations Director
Lyoner Strasse 14
60528 Frankfurt am Main
Germany
Phone: +49 (0) 69 66 554 - 459
Fax: +49 (0) 69 66 554 - 276
email: ir@powerland.ag
Home: http://www.powerland.ag
15.07.2013 DGAP's Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Media archive at www.dgap-medientreff.de and www.dgap.de
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Language: English
Company: Powerland AG
Lyoner StraÃe 14
60528 Frankfurt am Main
Germany
Phone: +49 69 - 66554-459
Fax: +49 69 - 66554-276
E-mail: ir@powerland.ag
Internet: www.powerland.ag
ISIN: DE000PLD5558
WKN: PLD555
Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin, Düsseldorf, Hamburg, München, Stuttgart
End of Announcement DGAP News-Service
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DGAP-Adhoc: Powerland AG: Auditor informs Powerland AG of factors hindering it from issuing an audit opinion; The Management Board and Supervisory Board of Powerland AG decide on share buyback
| Source: EQS Group AG