EQS-News: Allgeier SE: Clarification on the BaFin audit result

Munich, 11 March 2025 – Yesterday, the German Federal Financial Supervisory Authority (BaFin) published the results of its audit, announced on July 12, 2022, on the consolidated financial statements of Allgeier SE (ISIN DE000A2GS633, WKN A2GS63) as of December 31, 2020. With regard to this, the Management Board of Allgeier SE would like to explain and clarify the following:

The findings published by BaFin relate exclusively to issues of the disclosure of the spin-off of Nagarro SE, which took effect on December 15, 2020, in the consolidated financial statements of Allgeier SE in accordance with the IFRS standards addressed in the publication. None of the findings relate to the individual financial statements of the companies involved. The findings are therefore not relevant for determining the taxes attributable to the events in connection with the spin-off and the liquidity of the Group.

The findings published relate only to the presentation of the statement of comprehensive income for the discontinued operations in the consolidated financial statements as of December 31, 2020. They have no effect on the presentation of the Allgeier Group's continuing operations as of December 31, 2020. Thus, the findings also have no effect on the consolidated financial statements of Allgeier SE for the following years from 2021. The findings also have no effect on the financial statements of Nagarro SE as of December 31, 2020 or thereafter. The effectiveness of the spin-off, which occurred upon the legally binding entry in the commercial register on December 15, 2020, is also not affected.

The following should be noted regarding the specific findings:

1. Alleged understatement of earnings in the IFRS statement of comprehensive income

BaFin criticizes the fact that a “result from the spun-off and sold business in the amount of at least EUR 199 million” arising from the spin-off was not reported in the discontinued operations. This assumption factually implies that a dividend liability in the amount of the fair values of the spun-off assets is to be shown in the balance sheet at the same time due to the resolution of the Annual General Meeting on September 24, 2020 regarding the spin-off, which can then be derecognized on the basis of the spin-off that actually took place on December 15, 2020. The “at least EUR 199 million” profit from the spin-off mentioned by BaFin thus arises from the actual execution of the spin-off on December 15, 2020, because the liability for the resolved distribution, which had to be created beforehand, was settled when the spin-off was executed. The accounting profit thus arises from the distribution itself and the resulting “settlement” of the distribution liability. BaFin thus equates the spin-off of the distribution of a non-cash dividend. The recognition of the distribution liability in the amount of at least EUR 199 million and its compensation by the actual distribution in the same amount results in the netting of the two items on the balance sheet. The balance sheet disclosure in the consolidated financial statements as of December 31, 2020 is therefore correct and provides a true and fair view of the net assets and financial position of the Allgeier Group as of December 31, 2020. The BaFin ultimately criticizes the fact that the distribution liability and the result from the execution of the spin-off leading to its compensation were not reported individually, but that it was presented in a netted form. It should be noted that, irrespective of the IFRS disclosure, the entire Nagarro Group effectively left the Allgeier Group with the spin-off and was transferred to the shareholders' securities accounts. Only a portion of the transaction costs remained in the Allgeier Group after the spin-off.

2. Disclosure of depreciation and impairment according to IFRS

The BaFin also criticizes the fact that the scheduled depreciation of the non-current assets of the Nagarro Group intended for the spin-off was carried out until the day the spin-off took effect under civil law, i.e. December 15, 2020. However, in the IFRS presentation, the depreciations should only have been taken into account up to the day on which the assets were available for immediate distribution and the distribution was highly probable. In the opinion of BaFin, this day was already the day of the Annual General Meeting on September 24, 2020, and not, as assumed by Allgeier SE, the day of the spin-off on December 15, 2020. The disclosure of the scheduled amortization of the Nagarro Group's non-current assets in discontinued operations depends on when the implementation of the spin-off was considered likely. In the opinion of Allgeier SE, this was not yet the case at the Annual General Meeting on September 24, 2020. After all, there were objections to the minutes, a stock exchange prospectus had to be written and approved within a narrow time frame for the future listing of Nagarro SE, and, last but not least, it was the first year of the coronavirus pandemic, which was associated with a high degree of uncertainty. There was a not insignificant probability that the spin-off could no longer have taken place in 2020. Therefore, Allgeier SE only considered the probability to be sufficiently high once the entry in the commercial register, which is necessary for it to take effect, had been made and accounted for it accordingly. If the depreciation of the Nagarro Group's assets had only taken place until September 24, 2020, the Nagarro Group's result from discontinued operations as reported in accordance with IFRS would have been EUR 4.9 million higher. In any case, only a pro-rata result would have been shown in the discontinued operations until the actual spin-off. The IFRS disclosure in the consolidated statement of comprehensive income of Allgeier SE for the 2020 financial year has no effect on the actual earnings or assets of the Nagarro Group and also no effect on the continuing operations of the Allgeier Group and the consolidated financial statements after December 31, 2020. For tax purposes, the IFRS disclosure in the consolidated financial statements is not relevant anyway.

3. Total comprehensive income for the period

Finally, BaFin criticizes that the total comprehensive income for the period in the 2020 consolidated financial statements was understated by EUR 14.478 million. In this regard, BaFin refers to two disclosures made below the income statement. In fact, an amount of EUR -1.6 million was reported in the consolidated financial statements for reclassified actuarial gains and an amount of EUR -5.6 million for currency differences. In both cases, there was a mistake in the sign in the presentation. The correct presentation would have been an amount of EUR +1.6 million for actuarial gains and an amount of EUR +5.6 million for currency differences. The difference amounts to a total of EUR 14.478 million. This is an erroneous misstatement in accordance with IFRS standards. It only affects the presentation of the discontinued business in the statement of comprehensive income. The correct prefixes were taken into account in the consolidated balance sheet, so that it is not affected by the error. Furthermore, the disclosure has no effect on the continuing operations of the Allgeier Group and no effect on the consolidated financial statements of Allgeier SE from 2021.

Overall, it can be stated that a sign error occurred in the presentation of the discontinued operations as described above. This presentation in accordance with IFRS standards only affected the discontinued operations in the consolidated statement of comprehensive income. The result of at least EUR 199 million to be shown in the discontinued operations in the opinion of BaFin was offset by a corresponding distribution liability in the consolidated balance sheet. As with the question of the relevant cut-off date for determining depreciation in the discontinued operations, this is therefore purely an IFRS reporting issue. No actual substantial profit remained in the Allgeier Group after the spin-off, as the spin-off led to a complete transfer of the assets and value of the Nagarro Group to the shareholders' accounts. In any case, it should be noted that the continuing operations of Allgeier SE and the consolidated financial statements for the following years are not affected by the IFRS reporting issues. The effectiveness of the spin-off and the consolidated financial statements of Nagarro SE are also not in question. These IFRS reporting issues have no tax relevance.

Contact:

Allgeier SE
Investor Relations
Dr. Christopher Große
Einsteinstrasse 172
81677 Munich
Tel.: +49 (0)89/998421-0
Fax: +49 (0)89/998421-11
E-Mail: ir@allgeier.com
Web: www.allgeier.com

Allgeier SE is a technology company for digital transformation. Allgeier Group companies guide their customers in Germany and abroad through the challenges of digital change with comprehensive software and IT services and support the digitalization and transformation of business-critical processes. With more than 2,000 customers, the broad and stable customer base consists of global corporations, high-performance medium-sized companies and public sector clients at all federal levels. The service portfolio ranges from the company's proprietary software products and high-end software development to consulting, conception and long-term support for software applications in the cloud or other environments. In the two Group segments Enterprise IT and mgm technology partners, more than 3,100 employees work at a total of 48 locations worldwide in the DACH region, France, Spain, Portugal, Poland, Czechia and the Netherlands as well as in India, Vietnam, Canada and the USA. In the 2023 financial year, the Allgeier Group as a whole generated sales of EUR 489 million. According to the Lünendonk® List 2024, Allgeier is one of the leading IT service companies in Germany. Allgeier SE is listed on the Regulated Market of the Frankfurt Stock Exchange in the General Standard (WKN A2GS63, ISIN DE000A2GS633). Further information at: www.allgeier.com