BN reveal: Space Hellas targeted by Capital Market Commission over profit inflation via Singular

Restlessness prevails according to information at Space Hellas as a summons was issued by the Capital Market Commission for explanations following findings that point to an inflation of profitability through lower depreciation charges.

Singular's intangibles

The case traces back at least to the 2022 financial year and relates to the accounting treatments that occurred after the acquisition of Singular Logic in 2021. Specifically, for the consolidation purposes of the acquired company, Space Hellas commissioned Deloitte Business Solutions to identify the total intangible asset portfolio and determine its fair value, which was approximately €13.5 million, impacting corporate asset valuation.

Instead of 10 years, 30

However, while Deloitte had determined a depreciation timeframe of up to 10 years—namely amortizing the initial amount by 10% annually—Space increased this depreciation period to 30 years, amounting to roughly 3.3% annually. Yet both conditions cannot hold true. Thus either the Deloitte procedure upon which the initial consolidation was executed is erroneous, or the practice subsequently applied by the company is flawed, with the supervisory authority evidently considering that the 30-year depreciation lacks legal basis, reshaping corporate accounting standards.

Exposed by their own actions

This is further reinforced by the very practice of Space Hellas, which made no disclosure in its 2022 financial statements regarding estimated useful lives of intangible fixed assets as stipulated by IFRS. Simultaneously, in the 2022 financial statements of Singular Logic—which was already a subsidiary—it is explicitly noted that the useful life estimated for capitalized software development expenses ranged up to 10 years, defining IFRS financial compliance.

€2.3 million inflation

Given these facts, it is evident that 30 years of depreciation holds no standing whatsoever, but yields inflated results affecting key figures of consolidated financial statements. It is calculated that for the 2021 and 2022 financial years alone, lower depreciations approaching €2.3 million were executed, inflating net earnings. This case clearly raises issues of severe breaches of stock exchange legislation, as Space's financial figures remain affected to this day, increasing the overall inflation of net earnings. Under these circumstances, it remains unknown firstly what action the authorities will take and secondly whether and to what extent the company will proceed with a restatement or correction of published financial data, influencing Hellenic Capital Market Commission enforcement.

Acquisition history

It is recalled that in early 2021, Space Hellas and Epsilon Net jointly acquired control of Singular Logic shares. For this purpose, they jointly established Epsilon Singular Logic, holding initial stakes of 42% and 58% respectively. In July 2021, the partial demerger (spin-off) of Singular Logic was completed, transferring to Epsilon Singular Logic the sector of self-produced software, commercial and accounting applications for businesses, and ERP systems, with Space Hellas's equity stake in Epsilon Singular Logic forming at approximately 40%. Immediately thereafter, Space Hellas acquired an additional 18% of Singular Logic from Epsilon Net, bringing its stake in Singular Logic to 60%, shaping tech sector M&A.

Nikos Karoutzos
nkaroutzos@gmail.com
www.bankingnews.gr