Broke Hess ‘can’t afford’ shareholders’ meeting

Humiliated German light fitting maker Hess won't be holding an extraordinary shareholders’ meeting to discuss the financial situation at the company – because it can’t afford to.

In an embarrassing admission, the company – which filed for insolvency last month -  said the reported profit for 2012 of US$12 million (€9 million) was, in fact, a loss of ‘at least’ US$20 million (€15 million). The results for 2011 were also similarly overstated by US$8 million (€6 million). The overstatements in both years were due to ‘fictitious invoices’.Hess has sacked its CEO and CFO over suspicions that balance sheets were manipulated.

CEO Christoph Hess (pictured), who is the grandson of the company's founder Willy Hess, and CFO Peter Ziegler were fired in January when an internal investigation revealed that the company ‘has probably been, with the knowledge of the management board, in continuous breach of accounting rules for a remarkable period of time’.

The company, which was floated on the Frankfurt Stock Exchange in October last year, suspects it has been accounting for non-existent revenue and income ‘at least since the year 2011’.

 As a result, it says that the sales figures it reported in 2011 and 2012 were probably not achieved and that its financial situation is likely to have been presented 'too positively'.

Hess reported revenue of US$88 million (€68 million) in 2011 and US$75 million (€58 million) in the first nine months of 2012. The company is one of Germany's biggest and best known lighting brands.

In the UK it has supplied lighting to the BBC's White City, Surrey University and Croydon's Centrale shopping centre.

Till Becker was appointed as executive director to steer the company to 'smoother waters', and its supervisory board called for an external audit to assess possible damages and legal claims.

But Hess found itself unable to pay its debts when financial backers froze its credit in February, and said there was now 'no positive prognosis of the continuation of the enterprise’.

The company, together with its subsidiary Hess Lichttechnik, has filed for insolvency at the local court in Villingen-Schwenningen, with Martin Mucha of Grub Brugger & Partner, Stuttgart, appointed as administrator.

Hess's supervisory board added that one of the main reasons for its illiquidity was that its major shareholder, an organisation administered on behalf of the Hess family, had not fulfilled 'due obligations' and was not willing to make 'sufficient contributions' to restructure the company.

Hess employs 360 people. As well as its headquarters near Freiburg in southern Germany, it has a manufacturing facility near Dresden and a subsidiary in the United States. Its products are distributed in the UK and Ireland by Thorn.

Picture: Stoph Meinschaefer

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