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Steinhoff fights to survive after share plunge reaches 80%

Dec 07 2017 17:50
Janice Kew, Bloomberg News

Share in South Africa-based German listed retail giant Steinhoff, which owns Conforama in France, Poundland in Britain, Poco in Germany and Pep in southern Africa extended their losses to 80% in a 2-day rout after the company announced the resignation of its CEO in the wake of alleged accounting irregularities. (Eric Piermont, AFP)

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Johannesburg - Steinhoff International Holdings extended a record rout as concerns over an accounting scandal at the global furniture and clothing retailer outweighed its efforts to stay afloat by selling assets.

The company, which owns home-furnishings chains like Conforama in France and Mattress Firm in the US as well as discounter Poundland in the UK, said it was considering boosting liquidity by selling assets worth at least €1bn (R16bn). It confirmed that Chief Financial Officer Ben La Grange remains in his position, saying there’s no evidence he was involved in matters being investigated internally and by authorities in Germany, where the company has its primary stock listing.

The share plunge follows the departure of Chief Executive Officer Markus Jooste on Tuesday. La Grange resigned from his other job as head of Steinhoff Africa Retail, which was spun off from the parent in September, to focus on his role at Steinhoff International. 

“They are walking a tightrope at the moment,” said Jean Pierre Verster, a fund manager at Cape Town-based Fairtree Capital. The share decline “implies the market is giving them less and less benefit of the doubt that they will address the situation. So they can save their company, but time is of the essence”.

The stock fell 33% to €0.74 as of 14:28 in Frankfurt, extending this week’s drop to more than 80%. In Johannesburg the stock closed down 43.21% at R10.00. Steinhoff, which employs about 130 000 people worldwide, announced on Wednesday that it was indefinitely delaying the release of its results as new information had come to light on a criminal and tax investigation in Germany that dates to 2015.

African unit

The retailer, which also has a base in Amsterdam and is run from South Africa, said in a statement on Thursday that it had received expressions of interest in “certain noncore assets”. Steinhoff also said its African unit will formally commit to refinancing its long-term liabilities owed to the company, boosting liquidity further.

Steinhoff, whose largest shareholder is South African billionaire Christo Wiese, is also considering the “validity and recoverability” of certain non-South African assets, which amount to about 6 billion euros, it said, without giving further detail.

“The speed with which Steinhoff is able to release its annual accounts will be key to whether management can restore investor confidence,” London-based Bloomberg Intelligence analysts Shan Liu and Charles Allen wrote in a note.

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