Steinhoff shares dive on irregularities
Major shareholder Wiese takes charge after chief executive quits
STEINHOFF International shares crashed yesterday after it revealed accounting irregularities and its chief executive quit, shocking investors who had backed the rapid reinvention of a South African furniture chain into an international retail empire.
The company said late on Tuesday that “new information has come to light today which relates to accounting irregularities requiring further investigation” and that billionaire Christo Wiese, its largest shareholder and chairperson, would take charge.
Steinhoff said that chief executive Markus Jooste, who had been at the helm for nearly 20 years and oversaw its expansion to one of the world’s largest household goods retailers, had resigned with immediate effect and consultants PwC would undertake an “independent investigation”.
Steinhoff has been aggressively expanding in developed markets since moving its primary share listing from Johannesburg to Frankfurt in 2015, snapping up Britain’s Poundland, US-based Mattress Firm and Australia’s Fantastic.
Steinhoff said Wiese would “embark on a detailed review of all aspects of the company’s business with a view to maximising shareholder value”.
Its South African shares slumped 65% to an eight-year low of R15.87 by 11.20am. Its stock was down in Frankfurt by 66% following the news.
Steinhoff has been under investigation for suspected accounting irregularities by the state prosecutor in Oldenburg, Germany, since 2015. Steinhoff has said that was a tax case relating to whether revenues were booked correctly and taxable profit correctly declared.
Reuters reported last month that Steinhoff did not tell investors about almost $1 billion (R13.56bn) in transactions with a related company, despite laws that some experts believe require it to do so.
It is unclear what accounting irregularities the company was referring to in its statement yesterday.
A spokesperson declined further comment and attempts by Reuters to contact Jooste were unsuccessful.
The development had wider repurcussions, with the chief executive of Steinhoff African Retail (STAR), part of Steinhoff which includes the control of Shoprite, also resigning yesterday and its shares falling 21.5% to R19.30 by 8.55am.
“In light of these developments at Steinhoff, STAR’s existing chief executive, Ben la Grange, has decided to step down as chief executive of STAR,” the company said.
Analysts have long questioned how Steinhoff managed to achieve such a low tax rate. Its tax rate has averaged 12% over the past five years – half the headline corporate tax rate in its main markets and less than half the rates paid by listed competitors, including France’s Casino, Germany’s Metro and South Africa’s Woolworths.
Experts say such low tax rates can be the result of complex corporate structures that stretch accounting rules, and such