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STEINHOFF AGM WRAP: PwC probe confirms retailer overstated income and assets

2018-04-20 12:51

Four months after its share price plunged and its CEO Markus Jooste resigned, Steinhoff faced shareholders at its AGM on Friday. And in the end all its proposed motions were adopted.

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Last Updated at 01:58
20 Apr 17:10

There was no shareholder revolt on Friday, when Steinhoff held its Annual General Meeting in the Netherlands. 

All candidates proposed for appointment or reappointment to its management and supervisory boards were selected, Deloitte was reappointed as its external auditors for the 2018 financial year, and the remuneration plan for the supervisory board was easily passed. 

Steinhoff's chairperson did liken the retailer to a burning building when the accounting scandal broke four months ago, appealing for shareholder support for an ongoing investigation into the smoldering wreckage.

The owner of Conforama in France and Pep clothing stores throughout Africa said an investigation by auditors at PwC is well underway and had already uncovered the inflation of income and asset values over several years.

More than 320 000 documents have been studied and 4.4 million records gathered in an attempt to find out what happened and who’s to blame, Steinhoff said.“

There was a time in early December that it could be likened to finding oneself in a burning building,” Heather Sonn said at the retailer’s annual general meeting in Amsterdam, where the Stellenbosch, South Africa-based company is registered.

“Typically when in a burning building you run out. Some stayed. We are happy some stayed in the burning building to help.”

When the AGM started its shares reacted wildly, soaring as much as 23% before paring gains to trade 2.5% higher as of 15:47 in Frankfurt, where Steinhoff moved its primary listing from Johannesburg in 2015.

By 16:28 on the JSE the shares were trading up 4.69% at R2.68 after reaching an intraday high of R3.23.

“The market is telling you it’s turmoil, that there is so much rot there,” Bobby Snodgrass, who holds about 100 000 shares, said in Cape Town, where Steinhoff hosted a live broadcast of the event.

Investors “were misled by a charismatic leader and everyone listened to him. Those that saw red flags were at the trough and didn’t want to upset the apple cart.”


20 Apr 16:45

"I hereby declare the meeting closed," says Sonn. 

In the end there was no shareholder revolt, and every candidate put forward by Steinhoff was elected to its management and supervisory boards. 


20 Apr 16:34

Shareholders will now vote on whether Deloitte will continue as auditors for Steinhoff for the 2018 financial year.

"Steinhoff is not opposed to the rotation of auditors, but believes the continuation of Deloitte as auditor until the completion of the current financial year of September 2018 is essential," states the AGM presentation. 

Some shareholders and commentators have argued that the auditors should he changed, given the financial irregularities that caused Steinhoff's share price to collapse in December 2017. 

The results 

FOR: 72.8%

AGAINST: 27.8%

This means that Deloitte has been reappointed as Steinhoff's auditors until the end of September this year. 


20 Apr 16:22

The votes for nomination to management and supervisory boards has now been completed.

All candidates made the grade, although it was a tight vote for the reappointment of Stefanus Booysen to the board. 43.2% of shareholders voted against him. 


20 Apr 16:19

Vote for Heather Sonn to be reappointed to the supervisory board. 

Results

FOR: 80%

AGAINST: 20%


20 Apr 16:17

Vote for Angela Krueger-Steinhoff to be reappointed to the supervisory board. 

Results

FOR: 59%

AGAINST: 41%


20 Apr 16:15

Vote for Stefanus Booysen to be reappointed to the supervisory board. 

Results

FOR: 56.8%

AGAINST: 43.2%


20 Apr 16:13

Vote for Prof. Alexandra Watson to join the supervisory board. 

Results

FOR: 99%

AGAINST: 1%


20 Apr 16:06

Vote for Peter Wakkie to join the supervisory board. 

Results

FOR: 96.7%

AGAINST: 3.3%


20 Apr 16:04

Vote for Dr Hugo Nelson to join the supervisory board. 

Results

FOR: 96.7%

AGAINST: 3.3%


20 Apr 16:02

Vote for Moira Moses to join the supervisory board. 

Results

FOR: 99%

AGAINST: 1%


20 Apr 16:01

Vote for Khanyisile Kweyama to join the supervisory board. 

FOR: 99%

AGAINST: 1%


20 Apr 16:00
In effect all Steinhoff's proposed candidates for its management board to be voted on at the AGM have received a "yes' vote. No candidate received less than 80% of the vote, meaning all have been appointed. 

20 Apr 15:57

Vote for Louis du Preez to join management board. 

Results: 

FOR: 97.6%

AGAINST: 2.4%


20 Apr 15:53

Vote for Alexandre Nodale to join management board. 

Results: 

FOR: 82.2

AGAINST: 17.8


20 Apr 15:52

Vote for Theodore de Klerk to join management board. 

Results: 

FOR: 80.1%

AGAINST: 19.9%


20 Apr 15:50

It's the first vote of the afternoon, for Philip Dieperink to join Steinhoff'S management board. 

Results: 

FOR: 81.8%

AGAINST: 18.2%


20 Apr 15:45

“If you think of all the things you could be doing, this is not something you would automatically chose,” says Steinhoff’s acting chair Heather Sonn, of serving on the group's board.

She was speaking about the composition of Steinhoff's supervisory and management boards. She says that, according to PwC's investigation to date, none of the proposed board members have been found to be involved in alleged accounting irregularities. 

The meeting is now set to move on from shareholder questions. Later the shareholders will get to vote on board members and other matters.


20 Apr 15:29

Five takeaways from the AGM so far:

1. Probe confirms Steinhoff overstated income and assets

An independent and "unrestricted" investigation by PwC has uncovered the overstatement of income and assets at Steinhoff, its Annual General Meeting in the Netherlands. "[The investigation] confirmed a pattern of transactions undertaken over a number of years across avariety of assets classes that led to the material overstatement of income and asset values of the group," Steinhoff said in its AGM presentation on Friday. 

2. Steinhoff is facing a number of proposed lawsuits from shareholders and vendors

The group spent the most time talking about proceedings initiated against it by VEB, the Dutch Investors’ Association.

"[VEB] initiated proceedings against the company on 2 February 2018 in Amsterdam, bringing a collective action on behalf of the shareholders that the VEB claims to represent," said Steinhoff. 

According to Steinhoff, the VEB submitted several claims for declaratory relief in relation to alleged damage suffered by shareholders due to investing in Steinhoff.

"Steinhoff has filed a number of preliminary motions, contesting the jurisdiction of the Amsterdam district court and requesting the court to authorise third party contribution proceedings to be instituted against the former CEO." 

3. Liquidity is still tight

Shareholders asked numerous questions about the group's liquidity. Steinhoff said it has sufficient near term liquidity, but the situation is still "challenging". It will hold a lenders meeting in May to discuss a restructuring plan. 

4. It wants to publish its audited 2017 results by the end of the year

The results were put on hold while PwC conducts its investigation. 

5. PwC report will be made public 

Steinhoff says in aims to publish the full PwC forensic report once it has been completed, except for parts that may except for parts that may influence prosecutions or civil claims. 


20 Apr 15:10

As the AGM continues, Steinhoff's share price has remained fairly stable.

After opening at R2.56, the share price is at R2.67 at 15:10, up 4.3% on the day. 


20 Apr 15:03

A shareholder from the Eskom pension fund now asks about the independence of Steinhoff boards, saying some directors have been in position for too long. 

Acting chair Heather Sonn answers be speaking about the importance of an independent committee on the supervisory board, which was instituted after Markus Jooste stepped down to form a kernel of stability within the company. 

"Dr Booysen has the full support of the board to continue," says Sonn. Booysen has been the longtime chair of Steinhoff's audit committee.




20 Apr 14:52

Steinhoff says it is constantly monitoring its liquidity to make sure that it has cash in hand.

It adds it will hold formal lenders meeting in May to discuss a restructuring plan. 


20 Apr 14:46

"I wish I could say what I think. But I don't think that is appropriate right now'.

That is how Steinhoff's acting chair Heather Sonn reacted to a questions about who had lied to whom around Steinhoff's financials. 

She says that it would not be appropriate for her to give her personal views, given that PwC is conducting an independent forensic investigation into the firm. 


20 Apr 14:39

Steinhoff again clarifies that its auditor Deloitte has asked that it gets the final copy of the PwC forensic report before it publishes its audited results for 2017. 


20 Apr 14:28
A screengrab from Steinhoff's presentation. 

20 Apr 14:24
Sonn, Steinhoff's acting chair, says that if any of the members of the supervisory or management boards are found to have been involved in wrongdoing they will immediately step down. 

20 Apr 14:21

Steinhoff's legal head has said it intends to publish the full PwC, except for parts that may influence prosecutions or civil claims. 

No date has been provided for its publication yet. 

Sonn is now responding to a separate question around whether Philip Dieperink is a suitable candidate to serve as a director. 

"As far as Mr Dieperink goes , and as far as all members of committees goes, questions were asked about whether they were implicated in wrongdoing," she says. 

She adds that PwC has informed the board that none of the members being put forward as directors, have, to date, been found to be implicated in wrongdoing. 


20 Apr 14:15

"I am limited to just one question too, but that is sadly worrying when you look at the amount of questions I would have," says a shareholder. 

"Where was the governance in Steinhoff?" he asks. Other questions so far related to whether the full PwC report will be made public. 


20 Apr 14:12

It looks like shareholders, and legal representatives of shareholders, have come prepared. 

While each can only pose one question (at a time), shareholders are saying that they have six or seven separate questions, or questions with sub-questions. 

In any case, they are at the moment posing single questions to the board. 


20 Apr 14:07
The meeting has moved on to shareholder questions. "I now open the floor up for questions," says the acting CEO Heather Sonn. 

20 Apr 14:06
A screengrab from Steinhoff's presentation. 

20 Apr 14:03
Van der Merwe has ended his overview of the group. He ends by saying that Steinhoff is still looking to prosecute wrongdoing to rebuild trust in the company. 

20 Apr 14:01

20 Apr 13:55

Steinhoff is now giving an overview of litigation against the firm. 

"VEB, the Dutch Investors’ Association, initiated proceedings against the company on 2 February 2018 in Amsterdam, bringing a collective action on behalf of the shareholders that the VEB claims to represent."

According to Steinhoff, the VEB submitted several claims for declaratory relief in relation to alleged damage suffered by shareholders due to investing in Steinhoff.

"Steinhoff has filed a number of preliminary motions, contesting the jurisdiction of the Amsterdam district court and requesting the court to authorise third party contribution proceedings to be instituted against the former CEO." 

"VEB is opposing the preliminary motions, except for the contribution proceedings sought against the former CEO."

Steinhoff said that similar shareholder litigation proceedings had been initiated in Germany on 19 December 2017.However, the company has not been served with any legal documents yet,' its legal head has said. "Several other entities are threatening Steinhoff with claims, as yet no litigation has been instituted."

The global conglomerate is facing a number of further claims from vendors, as well as a claim Seifert Entities, which is seeking forfeiture of Steinhoff’s 50% shareholding in furniture retailer POCO. 


20 Apr 13:44

An independent and "unrestricted" investigation by PwC has uncovered the overstatement of income and assets at Steinhoff, its Annual General Meeting in the Netherlands has heard.  

"[The investigation] confirmed a pattern of transactions undertaken over a number of years across avariety of assets classes that led to the material overstatement of income and asset values of the group," Steinhoff said in its AGM presentation on Friday. 

"To date 4.4 million records have been accumulated and over 320 000 documents scanned in hard copy in various executive offices."

The PwC investigation started in early December shortly after Steinhoff's former CEO Markus Jooste resigned amid an accounting scandal.

Steinhoff has been tight-lipped so far about what the probe has uncovered.

The group previously said that the forensic probe must be completed before it can restate its 2017 financial results. The results of the probe are also expected to inform whether Steinhoff will refer any employees to authorities for possible prosecution.

The group says it aims to release its audited 2017 results by the end of December 2018.  


20 Apr 13:27
Steinhoff's acting CEO Danie van der Merwe has started his presentation. 

20 Apr 13:26

 STEINHOFF TIMELINE: From 'Ikea of Africa' to near collapse in just four months  - 

Steinhoff, once referred to as “the Ikea of Africa” and its former CEO Markus Jooste as the African Warren Buffet has seen a spectacular fall from grace since December when it revealed accounting irregularities in its books.

More than 95% of its market capitalisation has been wiped out and the international retailer faces angry investors, from public servant pension funds to Wall Street’s biggest banks.Four months later, and there’s still no official word on what the accounting irregularities were, the former CEO Markus Jooste is yet to answer burning questions and the share price remains volatile.


20 Apr 13:22

Steinhoff acting chair Heather Sonn has said the group would provide an update on a restructuring plan at the meeting.

She said the restructuring would take place in a "feasible and implementable" manner. She has not yet provided any information about what it would entail. 

She has said the leadership would be “more open” about communicating the latest developments, but would not give "unfettered" access to information, as Steinhoff is still the subject of a number of investigations. 

"What we hope to do today and at this AGM is put certain of the government structures in place [to enable us to move into] the next order of business,” she said.

The group will also provide an update on the restatement of its 2017 financial results. 

Steinhoff's share price rose by more than 7% to trade at R2.75 a share at the start of the AGM. A year ago the stock was changing hands at R74 a piece.


20 Apr 13:02

The Annual General Meeting has started. It is being held at the Sheraton Amsterdam Airport Hotel and Conference Centre in the Netherlands, and will be live-streamed at a venue in Cape Town.

Five questions shareholders and investors will want answers to are:

1. What can management say about the reasons behind the accounting scandal that has caused its share price to plunge by 95%?

2. What is the status of a German criminal probe into people linked to Steinhoff? How does this probe - which is ongoing - link to the accounting scandal?

3. What is Steinhoff's liquidity position? Are banks still giving it loans?

4. What is the status of a number of class action lawsuits against Steinhoff?

5. When will the company's 2017 financial statement be made public?


20 Apr 12:56

Trade union federation Fedusa wants to see Steinhoff appoint a new board at its Annual General Meeting on Friday, saying new directors are needed to take the embattled retailer forward. 

Meanwhile, German media reported on Friday that German authorities were expanding their investigation in the firm. As Fin24 previously reported, the public prosecutor's office of Oldenburg is investigating possible accounting irregularities and fraud at Steinhoff.

The investigation is difficult as most of the documents the authorities are investigating are in English, reported the financial site Handelsblatt. 

Labour groups Fedusa, Cosas and the Public Servants Association were on Friday picketing at the Cape Town International Convention Centre, where the meeting will be  live-streamed. 

The federation's general secretary Dennis George said on Friday morning that the directors who oversaw Steinhoff over the past few years cannot be expected to extricate themselves from the accounting scandal that has caused its share price to plunge by over 95% in four months.


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