Steinhoff’s claim process inches along
But it’ll take more than settling the bill to earn market’s forgiveness
● Steinhoff International is making progress, albeit slowly, in settling legal claims against it after its near collapse in December 2017 — and this week had good news for long-suffering claimants.
But it may not be enough to restore confidence, given the ongoing civil claim and a criminal investigation.
FNB portfolio manager Wayne McCurrie said: “Unfortunately, once you have shocked the market like Steinhoff has, the market is very unforgiving for a sustained time period.
“I know the share price has bounced off the bottom, but it’s still down 97% from the peak.”
Steinhoff’s near collapse was sparked by auditor De- loitte refusing to sign off the financial results, which led to its share price plummeting more than 90% and prompted the resignation of Markus Jooste as CEO.
McCurrie said Steinhoff will have to show a “number of years of sustainable profit growth and freedom from all of these claims against them before the market will start really taking a look at the shares again”.
Cannon Asset Managers’ Adrian Saville said even when “the problems were unearthed at Steinhoff”, there was no doubt it had viable operating entities.
The company holds a 68% interest in separately listed Pepkor, which owns retail brands Ackermans and Pep in SA. It also owns retail brands in the US, Europe and Australia.
Saville said: “The more they can move off the table, the more they can focus without distraction on the problem at hand, which is running these businesses in a very difficult environment.”
But the group will also have a “reputation and legacy to deal with”, he said.
“The saying in investment markets is that the market has a very long memory and it will remember this for a long, long time.” The criminal investigation is likely to be a long hangover for Steinhoff.
Sipho Ngwema, national spokesperson for the National Prosecuting Authority (NPA), said this week: “It’s a very big and complex investigation spanning no less than five countries. One cannot say what are the charges and who are the suspects when an investigation is still under way. It can only be at the end of that process that those issues can be clear.”
On the time frame for the investigation, Ngwema said there is “no microwave approach to a complex investigation like this” and that the focus is on a “credible prosecution with successful conviction. We will make announcements with regards to outcomes at the appropriate time.”
Asked whether the NPA has the skilled financial forensic investigators for cases like Steinhoff, he said there is “no doubt that we need more capacity and resources in order to be adequately equipped to deal with the amount of work that confronts us with regards to corruption”.
The NPA also has to make use of private sector resources, confirming that Steinhoff is offering it financial support for its investigation. Ngwema did not give the amount offered.
“In the Steinhoff matter we have to accept financial support from the complainant, the company itself, to assist with the investigation. So indeed we tap into those resources when they are available.”
McCurrie said: “They haven’t opened any criminal cases against anyone yet. Then there’s the whole court case and all the possible appeals. We will still be discussing this in 10 years’ time, if not longer.”
McCurrie said corporate cases take “forever through the legal system”, which is a “global problem”.
Saville said that in a multi-jurisdictional and multiparty case “you can safely anticipate that this will run on for years”.
“It has been the antithesis of the classic open-and-shut case. It might have the appearance of being open and shut, but it’s got all of the makeup of being incredibly complex and it will take many years to get to any type of outcome or resolution. The wheels of justice will turn very, very slowly in this case,” Saville said.
Steinhoff is also pursuing civil claims against Jooste and former CFO Ben la Grange to recover salaries and bonuses.
The company declined this week to provide an update on the civil claim, but it did update the market on its efforts to resolve claims against it.
Steinhoff said Deloitte had agreed to contribute up to à70.3m (about R1.2bn) to help compensate shareholders, but it said in a SENS statement that the auditing firm “does not in any way admit liability for the losses incurred by Steinhoff and its stakeholders as a result of the accounting irregularities at Steinhoff”.
Deloitte had been the company’s auditor for about two decades.
In response to an inquiry from Business Times, Deloitte said during the course of its 2017 audit it “uncovered accounting irregularities” and in “response to this discovery” it pushed Steinhoff to “conduct the independent investigation that uncovered the complex management fraud which is the subject of the web of litigation and potential litigation”.
Separately, Steinhoff is closer to getting claimants to accept its à943m settlement proposal, with the group saying that Conservatorium has withdrawn its opposition to the settlement process.
Conservatorium holds claims against Steinhoff that were ceded to it by seven of the eight banks that lent former Steinhoff chair Christo Wiese money to buy Steinhoff shares in 2016.
Conservatorium last year launched legal action in SA and the Netherlands against Wiese and Steinhoff. Its à1bn claim overlapped with Wiese’s original R59bn claim against Steinhoff.
So far others supporting the settlement proposal, which was announced in July last year, include Dutch investors VEB and Wiese, whose claim is the biggest against Steinhoff.
Asked to comment on the latest developments regarding the settlement proposal, Wiese said his “answer remains the same as it was last year in July when Steinhoff first tabled their plan for a global settlement. I said it was a step in the right direction. This is a further step in the right direction to bring this horrific saga to an end. Like all the victims I would like to see the people responsible brought to book.”
Steinhoff said if the settlement proposal is accepted by claimants, it could take between six and 12 months to implement.
Urging claimants to accept the proposal, Steinhoff Group CEO Louis du Preez said in a SENS statement this week that the “settlement of legacy litigation is a critical priority” for the group and that the “implementation of these processes is an important step forward, giving participating claimants the opportunity to approve the proposals and open the pathway to realise some value from their claims”.