Steinhoff hit by bad news of latest forecast
Shares drop by 8.67 percent on the JSE
STEINHOFF International fell a further 8.67 percent on the JSE yesterday after the troubled retailer indicated it experienced headwinds in its attempts to turn the company from the ruins of the 2017 accounting scandal, charging that even its current forecast for returning to profitability by 2021 might not be feasible.
The group, which closed the day at R1.37, said it could not give investors and shareholders a definite picture of its financials as it could not verify certain information contained in its financials.
It said the 2018 financials continued to show a gaping hole that threatened its existence going forward.
Steinhoff said the delayed 2017 and 2018 financial statements revealed further losses amounting to a combined e5.18 billion (R85bn) for two years.
However, the loss for 2018 financial year declined to e1.19bn compared to the e3.99bn reported for the year to the end of September 2017.
Steinhoff, which owns Conforama and Mattress Firm among others, published its financials after the close of market on Tuesday evening.
The group admitted the preparation of the consolidated statements had been extremely complex, especially determining the correct International Financial Reporting Standards implications of accounting irregularities that cover an extended period and involve a substantial number of entities in various jurisdictions, both within and outside the group.
“This position has been further exacerbated by the fact that certain key individuals, with the requisite knowledge to help unravel these complex transactions and the consequential effects thereof, have not made themselves available for questioning,” Steinhoff said.
“This has resulted in an extended investigation, detailed analysis and the need for substantial judgments to be made by the management board.”
Steinhoff said it would prioritise the payment of its debt until 2021 and may withhold dividends to shareholders.
It said while the majority of its South African debt had been repaid, it still owed creditors billions abroad.
“In view of what has transpired since December 2017, it is unlikely that the group will engage in investment activities in the near future,” the group said. “Instead, it is expected tthe group will initiate further divestments to help stabilise the group and repay financial creditors.”
Steinhoff fell from a powerful international retailer in 2017 following an accounting scandal that saw $12bn wiped off its value and saw the abrupt resignation of former chief executive Markus Jooste.
The group said it had spent
e117 million in advisory fees that included forensics and credit restructuring.
Ron Klipin, a senior analyst at Cratos Asset Management, said although the loss from continuing operations and impairments had narrowed, the value of assets had declined further.
“The reality is that after an exhaustive forensic audit, the auditors in question can go no further than stating there is insufficient evidence to give an audit opinion. So the solvency and liquidity issues remain unresolved, with no clarity as to whether the company can continue trading as a going concern,” Klipin said.
Klipin said maybe Steinhoff should be restructured going forward, and those entities that are viable could be sold or listed as stand alone entities, if possible.
Steinhoff said the company’s cash flow forecast indicated that based on certain critical assumptions, the group would continue in operational existence for 12 months after the date of authorisation.
It said its survival was further threatened by the ongoing shareholder and vendor claims, but remained hopeful the financial restructuring plan could provide a lifeline.