Steinhoff investors in the dark
Lack of hard financial details from AGM frustrates shareholders
● Shareholders in debt-laden Steinhoff International, the retail giant felled by accounting irregularities late last year, emerged from Friday’s AGM none the wiser about the status of their investments.
Indications are that it will be at least two months before they see any information that reveals Steinhoff’s fiscal condition.
The company — which has seen its market value plunge from around R300-billion a year ago to less than R12-billion — provided shareholders with some insight into efforts to restructure its debt and reiterated commitments to investigate irregular activities by executives. Former CEO and major shareholder Markus Jooste has been at the centre of allegations regarding the inflating of profits and asset values by dubious means.
But the much-needed financial data, which would help worried shareholders determine if there is meaningful value to salvage in Steinhoff, was in short supply.
What was disclosed was that debt is sitting uncomfortably at à10.4-billion (about R154-billion), with directors conceding that gearing is way too high and admitting that Steinhoff’s position is challenging.
The AGM, hosted in Cape Town and Amsterdam, was convened despite the company not having published audited financial statements for the year to end-September.
Interestingly, the AGM was not as well attended as expected, with 2.169 billion shares represented at the meeting, which is only 50.33% of the group’s issued shares.
Indications are that the soonest shareholders will be able to assess the financial standing of the company will be June, when unaudited interim results for end-March are scheduled for publication.
But it will be a long wait for any audited numbers to be published. Acting CEO Danie van der Merwe told the AGM that Steinhoff hoped to release audited full-year results to end-March 2017 by the end of this year and audited results for the financial year ended September 2018 at the end of January 2019.
The release of audited results, though, is dependent on PwC concluding its forensic investigation into Steinhoff. The group’s auditors, Deloitte, have asked to see the forensic report before signing off audited results.
Shareholders, particularly those in Amsterdam, seemed frustrated about Steinhoff executives not being forthcoming on certain key issues. Steinhoff chair Heather Sonn emphasised that the group’s executives were constrained in what they could communicate with shareholders while the investigation by PwC was ongoing.
“I wish I could say what I think, but we’ve handed the matter over to a third party (PwC). It’s frustrating for us as well as there is so much we would like to communicate. But it’s in the best interest of shareholders not to fall foul of what we are legally obliged to do. The process has to run its course.”
Van der Merwe said the key aims of PwC’s forensic investigation was to “determine as expeditiously as possible” what happened, the financial impact of any irregular activities, and who was responsible.
He said the scale of PwC’s investigation was unrestricted and unhindered. “This is critical to uncover the truth and leave no stone unturned,” he said.
Van der Merwe warned, however, that the scale of the investigation was significant as well as complex — spanning a number of financial years. He said that so far 4.4 million records had been accumulated and over 320 000 documents scanned in hard copy in various executive offices.
He said PwC had already confirmed “a pattern of transactions over a number of years across a variety of asset classes that led to the material overstatement of income and asset values in the group”.
About efforts to reduce its dangerous debt load, he said Steinhoff had been engaging with its creditors to create a window of stability and develop a restructuring plan.
He said the group was now operating under an informal standstill with creditors.
“Debt rollovers and lender requests are being managed on an ongoing basis. The general waiver process is on hold pending presentation to creditors of the restructuring plan, which will show a sustainable capital
I wish I could say what I think. It’s frustrating for us. Heather Sonn Steinhoff chair
structure going forward.”
A representative from Dutch shareholder group VEB queried the informal debt standstill arrangement. “What is informal, and what will this ‘informality’ cost us as shareholders?” the representative asked.
Steinhoff CFO Philip Dieperink said the group was in a tough situation with its creditors and indicated that Steinhoff would be meeting with them in May, when a restructuring plan would be tabled.
Steinhoff has already sold off or sold down certain listed investments, notably PSG Group and shareholdings in KAP Industrial and STAR, to raise capital.
Vunani Securities analyst Anthony Clark said it was disappointing that more tangible financial details were not given. “The Steinhoff executives are as clear as to the whereabouts of the group’s financial statements as they are about the whereabouts of (former CEO) Markus Jooste,” he said.