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Steinhoff write-offs pass R198 billion as accounts crisis deepens

Jun 30 2018 13:06
Janice Kew and John Bowker, Bloomberg, with Fin24

Steinhoff International Holdings has written off the value of assets by €12.4bn (about R198bn) and counting as the embattled retailer works out what it can salvage from the wreckage of an accounting scandal.

The owner of Conforama in France and Mattress Firm in the US is examining how much lost cash from inflated asset deals is recoverable and is identifying agreements made at what it calls “not arm’s length”. Any value lost on assets that can’t be recovered will be impaired, the Stellenbosch-based company said in a statement Friday.

“The task is substantial, complex and time-consuming,” chairperson Heather Sonn said in a letter that accompanied unaudited earnings for the half-year through March. Steinhoff appointed PwC to probe its finances after reporting financial irregularities in December, with the final results expected to be published by the end of the year.

The net loss widened to €621m in the six months through March, from a restated loss of €380m euros a year earlier. Steinhoff also published a detailed restatement of figures for fiscal 2017, while cautioning that the calculation process was still ongoing. That included a lowering of asset values to  €22.3bn from  €34.7bn in the now discredited accounts.

The group's operating loss, meanwhile, for the first half of the current financial year was €152m.

The reports use euros as Steinhoff is domiciled in the Netherlands, and has its primary listing on the Frankfurt stock exchange.

“The results are as bad as one might have imagined them to be and the scale of the overstatements of profits last year is quite shocking,” Charles Allen, an analyst with Bloomberg Intelligence, said by phone.

Debt extension

Steinhoff shares traded 7.6% higher at 8.2 euro cents at the close in Frankfurt, where Steinhoff moved its primary listing from Johannesburg in 2015. Shares closed at R1.28 on the JSE.

The stock is down 97% since the scandal broke, and the retailer is in round-the-clock talks with creditors about restructuring  €9.4bn of debt to shore up its balance sheet.

Steinhoff is negotiating a two-year payment delay with bondholders and lenders that would include zero cash interest, people familiar with the matter said Friday, and has negotiated a standstill so talks can be completed. The retailer initially raised cash through the sale of real estate and shares in subsidiaries, but now says the strategy is unsustainable.

Former Chief Executive Officer Markus Jooste quit when the accounting irregularities emerged and has been referred to the Hawks, which is investigating three cases of fraud related to the company.

Conforama’s earnings excluding one time items fell 54% to €35m in the six-month period as lower like-for-like sales in both Italy and Switzerland affected earnings as well as changes in management and significant store refurbishments in France.

Mattress Firm’s loss widened to €94m, from €33m a year earlier, as weaker sales and uneconomical discounts weighed. Steinhoff is addressing these issues and trading since March has improved significantly, the company said.

* Fin24 used a EUR/ZAR exchange rate of 16.03 for this article. 

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