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Investors punish Steinhoff over audit uncertainty

Dec 19 2017 17:01
Jan Cronje


Company Data

Steinhoff International Holdings NV [JSE:SNH]

Last traded 2
Change 0
% Change -3
Cumulative volume 2292310
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - Steinhoff International [JSE:SNH] is not yet in a position to give a date for the publication of either its delayed 2017 audited results or its restated 2016 audits. 

According to a 58-page briefing document that Steinhoff executives will present to bankers and lenders on Tuesday, the Stellenbosch-headquartered conglomerate can also not yet provide details on the “magnitude of the accounting irregularities that are under scrutiny”.

It can also not yet say whether "any additional years financial statements may require restatement”.

Steinhoff published the briefing documents on its website on Tuesday. The beleaguered furniture and household goods retailer is hoping the briefing will reassure lenders that the fundamentals of the firm remain strong.

“On a fundamental level, the group has a diverse pool of operating companies, with well-known brands and experienced, decentralised management teams,” the presentation reads.  

Under pressure 

Steinhoff shares plunged earlier this month when news broke that its CEO Markus Jooste was resigning "with immediate effect", and that PricewaterhouseCoopers (PwC) would conduct an independent investigation into "accounting irregularities requiring further investigation".

The company has delayed the publication of its 2017 financials, and said its 2016 audit could not be relied on. 

Earlier on Tuesday, Steinhoff shares firmed on the news that it had appointed a new acting CEO. 

But by 16:51 Steinhoff shares were down 20.28% at R6.76.

This was dangerously close to the price of just R6 at which the shares were trading at on Friday December 8, their lowest point so far following the resignation of Jooste.

On December 5, the day before Jooste quit, Steinhoff shares were changing hands at around R46.25.

In addition to having to reassure lenders, Steinhoff executives have to confront the fact that the retailer is also facing a number of different investigations, ranging from a probe by SA's Financial Service Board to a long-simmering criminal investigation in Germany.  

Tuesday’s presentation to lenders will give an overview of the global firm’s debt structure, an outline of actions taken since Jooste left, and a summary of its Australasian, South African, European and American businesses.  

Steinhoff leadership will point to the fact that it has nominated its COO Danie van der Merwe to the position of acting chief executive officer, and appointed Heather Sonn as its new chairperson. 

In addition, Steinhoff’s largest shareholder and former board chairperson Christo Wiese has stepped down – although the brief notes do not mention him by name. 

Debt

The document states that the group has a total debt of €10.7bn, or approximately R161bn at Tuesday’s exchange rates. 

This includes €8.5bn worth of debt in Europe, €1.986m (including redeemable preference shares) of debt in South Africa, and €169m worth of debt in the US. 

It is also working with US-based turnaround specialists AlixPartners, who are assisting it in cash flow analysis from all its operating companies. 

Steinhoff has postponed non-critical expenditure, and instituted central approval for discretionary cash flow spending while investigations take place. 

Lenders will want to hear about the status of the PwC investigation. The briefing states that PwC’s forensic work has commenced, although as previously noted due to the "ongoing forensic review" it could not say when the 2017 audit will be made public. 

It did however say that the full scope of the inquiries had been defined, initial data had been preserved, the auditor had begun visiting “relevant offices" and started meeting with key individuals.

It did not, however say what the scope of the inquiry was, or which Steinhoff staff it had met with. 

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