Steinhoff share price up 2.6%

Ratings agency Moody’s ‘satisfied with talks’ after accusations in magazine of dishonesty and accounting fraud

Steinhoff’s shares had one of their best days since the retail group transferred its primary listing to Frankfurt in December 2016. The share price moved up 2.6%, to close at R62.86 on Thursday following the release of a quarterly update for the nine months to June.

Retail group Steinhoff’s shares had one of its best days on Thursday since transferring its primary listing to Frankfurt in December 2016.

The share price moved up 2.6% to close at R62.86 following the release of a quarterly update for the nine months to end-June.

It remains about 27% below the levels it was trading ahead of the Frankfurt listing.

In response to questions during a teleconference with analysts, CEO Markus Jooste described a German business magazine article published last week as “an unfortunate event”.

Steinhoff was accused of dishonesty and what was alleged to be accounting fraud. The company rejected the allegations.

Jooste said on Thursday the management had held discussions with their credit ratings agency, Moody’s, after the article appeared. “Moody’s is 100% satisfied following our discussions,” Jooste said. The group had made adequate provision for any monetary claims by the former joint venture partner, who was believed to be a source of the magazine article, he said.

“It would be totally inappropriate to disclose the provision amount, but it is well in line with the advice of our lawyers and other experts.”

The dispute with the former partner is now the subject of a court case Jooste said he would not like to speculate on when the case would be settled.

The listing of Steinhoff Africa Retail (Star) was on track for the end of September. The prelisting statement, which would contain all the details of shareholders’ rights, was due to be released next week, Jooste said.

It was also expected to contain details of any fees payable to Steinhoff by Star.

Jooste described the separation of the African assets into Star as “a natural progression, given its distinct geographic focus…. Africa can be independently valued.”

The solid nine-month performance, which was marginally ahead of analysts’ expectations, included an 8% increase in likefor-like revenue. Reported revenue was up 48% due to a number of substantial acquisitions across the globe, including Mattress Firm in the US, Poundland in the UK and Fantastic Furniture in Australia.

The group’s European and African businesses were the star performers. Europe now accounts for 52% of group revenue, equivalent to €7.7bn, and Africa contributes 27%, €4bn.

Major acquisitions in the US have bumped up contributions from that region to 15%. Australia accounts for the remaining 6%.

Jooste said the global trading environment during the update period had been volatile.

He also reminded analysts of the extensive acquisition activity during the past 18 months as well as the rebranding and restructuring of the newly acquired US business.

Full-year results were expected to be boosted by traditionally strong sales in July and August, Steinhoff said.