Mystery about double-entry bookkeeping in Pandora leading up to Kasi-earn-out

The mystery is now spreading in the dispute between Pandora and the former part-owner of the European subsidiary, Jesper Nielsen alias Kasi-Jesper. Apparently Pandora has kept double-entry bookkeeping for the European company, where the official operating profit in 2014 was approximately 150 million kroner, while the real profit was approximately half a billion kroner, according to internal documents from Pandora.

Äkonomisk Ugebrev has dug into how the difference arose between the two profit amounts, where Kasi-Jesper was paid an earn-out after the low operating profit, which triggered an extra zero kroner. Had it been paid after the much larger operating profit in the internal accounts, Kasi-Jesper would have been paid an extra earn-out of several hundred million kroner.

The big question

Økonomisk Ugebrev has asked Pandora how the difference between the two accounting figures arises. The explanation is that there are consolidated financial figures for the European company, and there are so-called distributor financial statements.

In a description of the differences between the two accounts, which Pandora has sent to Økonomisk Ugebrev, it is stated that a so-called markup, i.e. a kind of profit for Pandora itself, of approximately DKK 400 million has been deducted from the distributor accounts. Pandora's PDF presentation of the differences can be seen here .

The big question now is whether Pandora was entitled to deduct this markup in the European company before calculating an earn-out for Kasi-Jesper.

When presented with the new information about a markup, Jesper Nielsen says that he has never been presented with information that a deduction would be made from the actual operating profit in Pandora CWE before his earn-out was calculated.

"We have never been informed about this mark up before, and we don't know what it is about. We would have liked to have had an explanation for that years ago. It seems like a Pandora's box explanation at the last minute," he says today to Økonomisk Ugebrev.

The case is no less mysterious because Pandora formally bought Kasi-Jesper's ownership stake in the European company in 2011, three financial years before final settlement was due after the financial results in 2014. Throughout 2014, the subsidiary was fully owned by Pandora, and this also means that Pandora was free to set internal settlement prices with its wholly owned German subsidiary.

The Economic Weekly has previously presented internal documents , with Pandora's company stamp, showing that the EBITDA operating profit in 2014 was over half a billion kroner. The matter becomes even more mysterious because Pandora paid large bonuses to senior managers in Pandora's European subsidiaries for 2014. But why did this happen if the European subsidiary was largely not making a profit?

A significant bonus

According to the official annual accounts of Pandora Jewelry Central Western Europa A/S, the operating profit (EBITDA) in 2014 was only DKK 48 million based on a turnover of DKK 873 million. The operating profit was significantly lower than the previous year, but still senior executives in the European subsidiaries were paid a high annual bonus.

The 2014 financial statements were special in that they were the financial year used to calculate the earn-out (i.e. sales price) of Jesper Nielsen's ownership stake in the European company. As is known, he was not paid more than the previously paid DKK 400 million due to a formally low operating profit.

As Äkonomisk Ugebrev has previously written, internal accounts for the operating profit of the European subsidiary show completely different positive operating profits, namely 73 million euros, or over half a billion kroner. And this profit is probably also the reason why several of the European managers were paid a significant bonus for the results in 2014.

There is much evidence that the managers of the subsidiary received bonuses based on the internal operating profit in 2014, which were paid in the spring of 2015. Økonomisk Ugebrev is in possession of a “Bonus agreement between Pandora and Massimo Basel 2014” signed by the CEO, Allan Leigton, March 18, 2014.

The agreement shows that he, who was then the country manager in the highly profitable Italian market, had to achieve an EBITDA of 39.96 percent to secure a 100 percent bonus. And he did that and more. It ended up at 48.9 percent. At the time, there were 749 stores selling Pandora jewelry in Italy. They had a turnover of 108.2 million euros and an operating profit of 52.9 million euros.

Higher sales

The Danish Economic Weekly has seen documentation that Massimo Basel and others also received bonuses. Pandora has not commented on this.

In March 2024, Massimo Basel rose to the top of the group. A press release states that “Pandora promotes Massimo Basel to Chief Commercial Officer” and “Massimo Basel is an Italian national who joined Pandora as country manager for Italy in 2010.”

The 2014 accounts for the European subsidiary may be decisive in the appeal case, which will now be conducted in the Eastern High Court, and which concerns reopening the estate of the company Kasia ps, with a view to renewed arbitration.

Jesper Nielsen does not believe that he has been settled for the sale of his ownership interest in the European subsidiary in accordance with the agreement that existed and based on the actual accounting results.

In a “Personal – confidential” registered letter to the company regarding the “earn-out statement”, dated 27 March 2015 and sent from the law firm Kromann Reumert, it appears that no money was to be paid out from Pandora. The reason given was the low result in the external accounts for Pandora CWE.

It is noteworthy that the official financial results of the European subsidiary were significantly worse in 2014 than in 2013: Although revenue increased from DKK 690 million to DKK 873 million, operating profit deteriorated significantly. In 2014, Pandora was getting its business back on track after some extremely negative years. From the beginning of 2014 and the following year and a half, Pandora's share price more than doubled.

The very positive development is in direct contrast to the results of the European subsidiary: In 2014, EBITDA operating profit was almost halved, from DKK 74 million in 2013 to DKK 48 million in 2014, despite a significant increase in sales.

The EBITDA margin was halved from 11 percent to 5.5 percent on higher sales. There is no explanation for this in the negative development in official accounts. However, there is an explanation of a lot about transactions between the parent company Pandora itself and the European subsidiary.

A double-digit million amount

Internal documents from Pandora show that the EBITDA operating margin in the European subsidiary was over 30 percent in 2014, based on an EBITDA profit of 76 million euros and revenue of 217 million euros. But that was before Pandora had deducted the so-called markup, which Kasi-Jesper now casts serious doubts about.

After the Maritime and Commercial Court refused to reopen the bankruptcy estate, the case has been appealed to the Eastern High Court. And several creditors are now supporting the case, including the listed football club, Brøndby, which is one of the largest creditors with a receivable in the double-digit million range, and the former state-authorized accountants.

The decisive factor in any new arbitration case may be the question of whether Pandora was entitled to deduct a markup of DKK 400 million before calculating the earn-out to Jesper Nielsen. It should not be a big deal to clarify this, as documents must be available that clarify how the operating profit should be calculated when calculating the earn-out to Kasi-Jesper.