Bastei Lübbe AG: Publication according to Section 109 paragraph 2 sentence 1 of the German Securities Trading Act (WpHG)

Publication according to Section 109 paragraph 2 sentence 1 of the German Securities Trading Act (WpHG)

Cologne, 24 January 2020 - The German Financial Reporting Enforcement Panel (FREP) has determined that the consolidated financial statements of Bastei Lübbe AG, Cologne, as of the reporting date March 31, 2018 and the combined Group management report and management report for the 2017/2018 financial year are incorrect:

1. Group management report

The combined Group management report and management report of Bastei Lübbe AG for the financial year 2017/18 does not contain adequate reporting on material risks and business transactions.

Firstly, there are no explanations on possible significant increases in collateral and interest rates from the pending refinancing and on the restrictions on dividend payments under the loan agreement.

Secondly, the risk of missing promising titles in the programme with a maximum loss of € 2.5 million with a medium probability of occurrence (over 25% to under 50%) is rated too low in the risk report. For the 2019/20 financial year, a small revenue growth of over 95 million was expected. At the time the consolidated financial statements were prepared, the long lead time in the programme planning (18-24 months) as well as the declining and below-budget investments in royalties meant that a higher risk of not reaching this revenue target was to be assumed.

The deficiencies described above constitute violations in accordance with Section 289 para. 1 sentence 4 German Commercial Code (HGB) and Section 315 para 1 sentence 4 HGB.

Furthermore, the development of remissions, including the development of the remission provision, is not adequately explained with regard to the net assets, financial position and results of operations.

This represents a violation of Section 289 para. 1 sentence 2 HGB and Section 315 para. 1 sentence 2 HGB.

2. Impairment test

The impairment test with regard to the Bastei Lübbe AG subsidiary involved in games development, which accounts for goodwill of € 4.9 million on the 51% stake held, is based on non-congruent assumptions. The planning is not based on scenario analyses and includes an increase in revenues of over 70% by 2020, assuming actual revenues of € 8.3 million in 2018 and a related turnaround in cash flow development. The planned cash flow, which is thus subject to above-average risk, is discounted using a capitalisation interest rate based on a peer group of internationally diversified companies of significant size in the industry. Due to the lack of risk equivalence of estimated future cash flows and the discount rate, the recoverability of goodwill has not been demonstrated.

This approach violates IAS 36.55 in conjunction with IAS 36.A16-A18.

Moreover, the underlying critical assumptions of the development of revenues or cash flow in the detailed planning period of this impairment test are not indicated.

This violates IAS 36. 134 (d) (i) and (ii).

Contact Bastei Lübbe AG:
Barbara Fischer
Head of Press and Public Relations
Tel.: +49 221 / 82 00 28 50
E-Mail: barbara.fischer@luebbe.de