The unknown unknowns
Claims by investors are likely to expand, which will add to scrutiny on the directors whose mandate has just been extended
The grim peek inside Steinhoff’s raided kitchen during the AGM of the embattled furniture retailer last week appears to have spooked investors.
In the aftermath of the meeting at the Sheraton in Amsterdam’s Schiphol airport, Steinhoff’s stock tumbled 15% to R2.21 on Monday — leaving the company, which has huge debt of R156bn, with a market value of just R9.5bn.
The steep fall appears to have been a reaction to CEO Danie van der Merwe’s admission of just how frail the business had become in the months since December 5 when it admitted to “accounting irregularities” that exposed a €6bn hole in its accounts.
At the AGM, Van der Merwe explained that after that, Steinhoff lost “virtually all available funding under our existing facilities, including credit insurance — the group was drained of all working capital”.
Though Steinhoff has since raised some money — €750m in funding, R3.7bn by selling 6% of Steinhoff Africa Retail and R3.75bn by selling 17% of KAP — this is hardly enough to keep up with its debt payments. And, as Van der Merwe pointed out, selling assets just to provide Steinhoff with working capital “isn’t sustainable”.
One investor who spoke to the Financial Mail after the AGM said that he had been alarmed to hear how bad it really was: “When a company is selling assets the whole time so that they can use the money to keep going, that’s a very bad sign.”
Nor did the impression brighten much when CFO Philip Dieperink was asked to clarify just how precarious Steinhoff’s financial position really was.
His reply: “If you look at the amount of interaction we’re having with our lenders on a daily basis, to ensure all our operations have sufficient cash, it is both delicate and challenging.”
This frailty left shareholders in an awkward situation: whether to vote against the directors and resolutions and risk sinking the company, or support the board under whose watch the huge fraud took place.
In the end, all the resolutions were passed, though there were significant dissenters in the vote to re-elect audit committee chair Steve Booysen (56% in favour), and nonexecutive director Angela Kruger-steinhoff (59% in favour) and to reappoint auditors Deloitte (72% in favour).
Booysen, for one, had been so unsure if he’d get the chop that he prepared two statements — one for his re-election, another if he was axed.
Speaking after the AGM, as he prepared to catch a flight back to SA, Van der Merwe seemed optimistic that the vote gave Steinhoff a mandate to restructure the business.
“I have to say, that wasn’t the eas-