Pepkor fine: we’ll take it on the chin, asserts CEO
Lourens says company needs to move on from Steinhoff scandal
● A penalty imposed on Pepkor by the JSE demonstrates the dark cloud still hanging over the group as it tries to sever ties with its embattled parent company, Steinhoff International.
Pepkor CEO Leon Lourens said in an interview with Business Times this week: “Our approach was, let’s just get it over and done with. If we did transgress … or break some of the rules of the JSE in listing, then we’ll take it on the chin. We just want to move on. It’s part of history but we have to move on.”
On Monday, the bourse fined Pepkor R5m — with R1m suspended for two years — after it found Pepkor was in breach of listing requirements. The group, which owns retail brands such as Ackermans, Pep and Russells, failed to disclose to shareholders historical financial information and that it held guarantees of Steinhoff debt amounting to R15bn.
“Although I wasn’t so directly involved at the time, I can tell you it was inadvertently done. It was disclosed, but it wasn’t adequately disclosed, as the JSE points out,” said Lourens.
The JSE said it became aware of the R15bn domestic medium-term note programme in a December 19 2017 Steinhoff International investor presentation, which Pepkor had not disclosed in its pre-listing statement in September of that year.
Guarantees and loans to directors issued under a management share scheme called Business Venture Investments “were disclosed by Pepkor for the first time in its trading statements dated 25 and 28 May 2018, which was also not previously disclosed as required in the listings requirements”, Andre Visser, general manager for Issuer Regulation at the JSE said.
Lourens said the company had been cooperating with the JSE over the irregularities and had been working closely with the bourse to ensure that they improve their transparency in disclosures.
Pepkor, which was previously known as Steinhoff Africa Retail and spun off from Steinhoff International Holdings in September 2017, has attempted to distance itself from the holding company. Besides changing its name, the retailer has also made new board appointments and terminated corporate services offered by Steinhoff.
But a dispute between it and Christo Wiese is still to be resolved.
Wiese, who was the brain behind Pepkor, building it up over five decades from five stores to thousands, sold the business in 2015 to Steinhoff (it was later incorporated into Steinhoff Africa Retail, now Pepkor) for Steinhoff shares worth more than R60bn, making him a major shareholder.
But after Steinhoff’s share price collapsed, Wiese, through his Titan Group, earlier this year launched a R59bn lawsuit against Steinhoff, claiming repayment for shares Titan subscribed for after the Pepkor sale and repayment of funds it injected into Steinhoff to help it meet its debt obligations when it was in the process of acquiring US-based Mattress Firm.
Wiese this week declined to comment on the details of the lawsuit but said it had not yet been concluded.
He said he did not have any plans to buy back the company. “That’s not something I’m prepared to discuss at this stage,” Wiese said. “At a later stage, depending on how life develops, but at the moment that’s not on the cards.’’
The Pepkor group now has a total store base of 5,236. Pep, which has posted doubledigit gains in operating profit growth for almost two decades, accounts for 2,231 stores. The group plans to open 300 new stores in the 2019 financial year.
In the midst of the challenges Pepkor faces it posted revenue growth of 10.9% for the year ended September 30 2018, its first full financial year since separating from Steinhoff.
Lourens said: “We’ve also spent some time disentangling ourselves from Steinhoff and the events that happened.
“The first and most important thing was that we refinanced our debt. That we did already in May. For us it was a very significant milestone to achieve.”
After grappling with the consequences of the Steinhoff accounting scandal that wiped more than 90% off the value of Steinhoff shares, the company now hopes to focus on retail as it tries to “get away from the noise”.
Lourens said although Steinhoff did not influence the operating companies “it will be a welcome relief to focus just on retail going forward. I think we’re fortunate — the fact that it was a very tough year for us and that we’ve dealt with most of the issues that we have control over.”
We’ve spent time disentangling ourselves from Steinhoff and events Leon Lourens
Pepkor CEO