Steinhoff status update: snafu

The company’s half-year report is full of blood and guts

It was a dark and stormy weekend in Cape Town. Perhaps if it had stopped raining for more than 10 minutes I would have found something better to do — something more uplifting. But that wasn’t to be.

And so, last weekend, I spent more hours than I care to admit reading Steinhoff’s half-year report. Occasionally, during those hours, I was studying the figures intently, but for much of the time I was staring at them in shocked disbelief, much as one does when one comes across an accident scene: afraid to look too closely because of all the blood and gore.

There’s little doubt that Steinhoff has followed its mould-breaking AGM with a half-year report that is unlikely ever to be matched.

As with the AGM, the key parties behind the half-year report made the best of an appallingly difficult situation. At the AGM in April, chair Heather Sonn and commercial director Louis du Preez helped to give shareholders the sense that the sinking ship was in good hands and, better, that if they couldn’t stop it from sinking they would salvage the most valuable bits.

The half-year report continues with the no-punches-pulled, matter-of-fact style of engagement that was evident at the AGM, though Sonn’s introductory sentence about it having been a “challenging seven months” may rank as the corporate world’s greatest understatement.

Other than that, it was a no-holdsbarred account of a really bad situation that could get worse.

It’s difficult to know what to make of the management board’s statement that the report had not been audited or reviewed by the company’s external auditor, Deloitte.

Was this an attempt to create a sense of comfort, perhaps?

Similarly, though Pwc’s investigation is continuing, it has “neither audited, reviewed, examined, compiled, nor applied agreed-upon procedures with respect to any of the information contained” in the report.

So a seemingly thorough, detailed and accurate set of financial statements is untouched by highly paid external bean counters.

Of course, we will only know later just how thorough and accurate the information is — but could it be that Steinhoff is hinting at a post-auditor world?

The tension builds steadily through the 90-page report, with note 17 representing the highest point of the drama. This is the “restatements” note that casts some light on where the €12.8bn has gone; it deserves all 10 of the pages dedicated to it.

The board did well to provide as much detail as it did. The nature of the transactions behind the €12.8bn that had to be written off Steinhoff’s balance sheet is pretty much in line with expectations, though the extent is probably heftier.

Is it possible that Steinhoff has written off liberally so as to be able to give a little back at the year-end? Or will things turn out to be even worse in six months?

But even before the wet weekend was over you could sense that shareholders’ focus had already turned. It’s no longer about the front-running that generated countless millions of euros of profits for related parties. It’s now become about the identities of those related parties.

Sonn’s point about it having been a ‘challenging seven months’ may rank as the corporate world’s greatest understatement