Covid and short-seller blew €45m-size hole in Grenke’s profit

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renke AG, a German-based global provider of leasing to SMEs, reported that a thorough audit of its 2020 finances “confirms value” in the company, yet losses in its share price and net profit cast a shadow over its growth agenda.

Grenke AG has outlined its profit and loss as part of its published annual report for the year ending 31 December 2020.

Grenke AG reported a net profit of €88.4m for 2020 (2019: €133.3m), which it said met its forecast of consolidated net profit in the upper double-digit millions published on 26 February 2021. Nevertheless, the year-on-year difference, at €44.9m, represents a 34% decline in Grenke’s net profit for 2019.

For the 2021 financial year, Grenke is forecasting a net profit of €50m to €70m, a 20% to 43% decline on 2020.

Shares in Grenke fell sharply in September 2020 after London-based short-seller Fraser Perring (Viceroy Research) raised several accusations against Grenke.

In February 2021, an independent audit by Mazars, under the auspices of the German financial regulator, said it found flawed accounting of Grenke’s franchise arrangements. The BaFin report also found that Grenke Bank made €37m in problematic loans to SMEs which raised questions about risk management at Grenke AG.

Grenke said it took on board the criticisms and that it would make changes to its franchise agreements.

In its annual report, Grenke said: “The extremely thorough audit of the financial statements by KPMG confirmed the value of Grenke’s business.”

The company’s equity ratio (which shows how much a company’s financing comes from debt or equity) was 16.3 per cent, “above the company’s self-imposed minimum target of 16 per cent,” Grenke said.