Puma takes a €115m hit over 'Greek fraud'
Tuesday 26 October 2010
The German sportswear and footwear chain Puma is to write off up to €115m (£103m) after it unearthed what it believes to be "systematic" fraud at its joint venture in Greece.
The company is considering pursuing criminal charges against its partners in the Pumas Hellas venture, and will exercise an option to gain full control of its Greek operation by acquiring their 30 per cent stake by the end of the year.
According to the preliminary findings of a special audit conducted by the accountant Deloitte over the summer, Puma said it was "suspected that the Greek joint venture partner, along with members of the Greek local management, has committed a series of criminal acts".
Jochen Zeitz, the outgoing chief executive of Puma, claimed: "This is about systematic evasion and embezzlement." The allegations come just days after the French luxury goods and retail giant PPR (Pinault-Printemps-Redoute), which owns Puma as well as Gucci and Fnac, said Mr Zeitz was stepping aside after 18 years to spearhead PPR's expansion of its sport and lifestyle division.
Puma has instructed the law firm Noerr to work with the Greek authorities, who will decide whether to take action against the brothers, Georgious and Antonius Glou, of the clothing retailer Glou, who each have a 15 per cent share of Puma Hellas. The brothers could not be reached for comment yesterday.
Puma said it had already appointed a new management team in Greece and had put a halt to "further irregularities" at the joint venture, which was founded in 2005. The company said most of the "irregularities" at Puma Hellas occurred before this financial year. As a result, it will restate its 2009 comparatives figures in its 2010 results.
The company said the "maximum extraordinary write-off" should not be more than €115m at the pre-tax level and would not affect the amount of cash on its balance sheet.
Puma, which is owned by PPR, said it would take a hit of €30m in one-off charges in its fourth quarter. Of this, half had resulted from the "irregularities" at its Greek venture and the dire market conditions in that country. The other half related to restructuring costs there. Puma is to reduce the size of its Greek business to reflect the country's troubled economy, which has been pummelled by the debt-laden government's austerity measures. However, Mr Zeitz said: "In the long term, Greece is an important market for us."
PPR also said it would restate its financial statements, adjusting for the events at Puma Hellas, which will lead to its 2010 net profits coming in €20m lower. In the half-year to 30 June, Puma increased its pre-tax profit to €63.1m, from €61m last year.
Announcing Puma's results, Mr Zeitz added: "Given an overall improvement of the global economies, as well as our decisive measures taken in the past 18 months to adjust our organisation and processes to the new market realities, we feel ready to re-engage with our long-term expansion plan as of next year."
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