Detailed remediation plan to identify all the group’s shortcomings
STEINHOFF International has said that it had designed and implemented a remediation plan to address the cause of the various failures after reviewing the findings of both the PricewaterhouseCoopers (PwC) forensic report and its own internal investigations.
The plan would identify shortcomings in its governance and controls following the 2017 accounting scandal that wiped off 90 percent of its share price. The group said the plan would also help the new management board to stabilise it in order to ensure long-term stability.
“The remediation plan is detailed and attempts to cover all the potential weaknesses that have been identified to date and the regulatory consequences thereof. It also identifies what still requires to be done, who is responsible for the performance and the timeline for delivery.
The remediation plan is a live document which will be expanded upon as and when new issues arise and require change,” the company said in its 2018 annual report published yesterday.
Steinhoff said the remediation was the first step in the implementation of the turnaround strategy.
It said chief compliance and risk officer Louis Strydom would drive the plan and develop the implementation of a detailed enterprise risk management and regulatory compliance framework incorporating all types of risk.
Strydom, the former head of the PwC’s forensic investigation, will join Steinhoff next month.
Among the PwC’s damning findings in the report was that a “small group” of former executives had inflated the profit and asset values of the group for years.
Pretoria-based shareholder activist Theo Botha said it was good and well to have checks and balances, but without accountability the wrongs would be repeated.
“The exco, audit committee, and auditors should be held accountable,” Botha said, adding that before the board implemented the remedial plan, it should understand the wrongs.
“The board should also focus on leading a commercial case against people who are responsible for inflating numbers.”
Steinhoff, whose former chief executive Markus Jooste resigned in the wake of the accounting irregularities scandal in December 2017, is facing legal challenges worth billions. It said uncertainty related to outstanding litigation against the group was high, with potential liabilities arising from the combined legal actions resulting in material exposure.
“The fact that multiple actions, including class actions, have been filed by, and on behalf of, individual and institutional investors in various countries add additional complexity to this risk,” Steinhoff said. “The risk of litigation against current and past directors of group companies also poses a threat.”
The retailer said its litigation committee would monitor and defend any claims brought against it and identify recoveries against entities and individuals where appropriate.
It said the tax implications of the accounting irregularities also remained uncertain.
“This is exacerbated by the fact that these irregularities impact multiple jurisdictions, the finalisation of which will require substantial analysis and negotiation with various tax authorities in the respective jurisdictions. A key assumption is therefore that the tax assumptions built into the current cash forecast, for both the group and company, continue to apply and that no unexpected material assessments are received.”