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Steinhoff rejects 'allegations of dishonesty' amid share plunge

Aug 24 2017 19:32
Alexander Kell, Janice Kew and Karin Matussek, Bloomberg News

Johannesburg - Steinhoff International Holdings [JSE:SNV] rejected “allegations of dishonesty” made in a Manager-Magazin report that Chief Executive Officer Markus Jooste is among employees being investigated by German prosecutors in a 2015 case linked to possible accounting fraud.

Substantial information in the article is “wrong or misleading,” the South African clothing and food retailer said in a statement on Thursday. Referring to the start of the 2015 probe, Steinhoff said it appointed legal and external audit firms in Germany to investigate the matter and they concluded that “no evidence exists” that the company broke the country’s commercial laws, it said.

The stock pared record losses after the statement, trading 10% lower at €3.80 at the close in Frankfurt, the lowest since January 2016. It earlier fell as much as 17%. About 68.5 million shares traded, almost 18 times the three-month daily average. 

The report in Manager-Magazin relates to a case that began just before Steinhoff moved its primary listing to Frankfurt from Johannesburg in December 2015.

In November of that year, German authorities searched Steinhoff offices in the town of Westerstede and visited private homes as part of an investigation by prosecutors in the German town of Oldenburg into four current and former managers. 

Steinhoff said at the time it was “fully committed” to support the probe and on Thursday reiterated it has “engaged constructively” with the authorities.

“No further investigations have been initiated nor any searches conducted as alleged in the article,” the company said.

The company is involved in ongoing civil litigation - including with a former joint-venture partner - and the outcome “should result in monetary remedy to be paid by the group,” Steinhoff said. However, “the payment of any such monetary remedy would not have a material adverse effect on the trading and/or financial condition.”

Prosecutors suspect inflated revenue was reported on the balance sheets of units owned by the discount retailer, according to Manager-Magazin, which attributed the information to unidentified people at the prosecutor’s office.

The sums involved are in the three-digit-million euro range, the magazine said.

Steinhoff has expanded aggressively over the past three years and has completed acquisitions in South Africa, the UK and the US.

The company’s brands include low-cost sub-Saharan Africa chain Pep, Conforama in France and The Mattress Firm in the US. The company will announce third-quarter earnings on August 31.

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