Embattled Steinhoff continues its free fall
SA subsidiary launches bid to forge its own identity
STEINHOFF International continued its free fall this week, shedding more than 23 percent in five days as its local subsidiary, Steinhoff Africa Retail (STAR), struggled to find its feet after announcing it was reverting its name back to Pepkor in a bid to forge a separate identity.
Steinhoff slumped to a low of R1.13 a share on Thursday, down 36 cents compared to R1.49 on Monday as the international group’s long-awaited release of its audited results continued.
STAR also extended its losses despite saying it would seek approval from its shareholders to change its name back to Pepkor Holdings.
Steinhoff has a 71.01 percent stake in STAR.
On Tuesday STAR reported a 9 percent increase in operating profits to R3.3 billion for the six months to end March, as a result of strong growth in Ackermans, regarded as the number one brand for children’s wear in South Africa, and the turnaround and stabilisation of the JD Group.
The speciality fashion and footwear division, which includes Tekkie Town, Dunns, John Craig, Refinery and Shoe City achieved sales growth of 17.3 percent overall and 10.1 percent on a like-for-like basis.
Headline earnings per share (heps) increased 12.2 percent to 52.6 cents.
STAR said it would not pay a half-year dividend and announced charges related to its scandal-hit parent company.
STAR is the owner of iconic South African retail brands such as Pep, Ackermans and HiFi Corporation and has more than 5 100 stores in 12 African countries.
Steinhoff, however, is still holding on to its biggest acquisitions, Conforama in France, Mattress Firm in the US and Poundland in Britain.
Ron Klipin, a senior analyst at Cratos Capital, said it would have made more sense if Steinhoff had sold or reduced its stakes in these companies to raise more liquidity.
Klipin said the group remained very complex because of a lot of things happening behind closed doors. “It is difficult to point out the reason for the decline but one of the reasons could that former Tekkie Town chairperson Braam van Huyssteen is suing both Steinhoff and STAR,” Klipin said.
“Again, it is difficult to understand why Van Huyssteen will include STAR because he entered the deal with Steinhoff.”
Van Huyssteen resigned from his role as chairperson of Steinhoff Africa Retail’s (Star’s) property division with immediate effect last week.
However, he will remain chairperson of the Speciality Fashion and Footwear division under which the business he founded and sold to Steinhoff still remains. But his resignation means he will no longer be a member of Star’s executive committee.
Steinhoff admitted to financial irregularities in December leading to the abrupt resignation of former chief executive Markus Jooste, who has been summoned to appear before Parliament over the scandal.
The troubled retailer has since tried to reassure investors to no avail in the last seven months that it would be in a position to do so once PwC had completed its investigation.
In the last seven months the share price has dropped about 98 percent.
Industry analysts have pointed to the lack of publishing the audited results as one of the reasons that the company finds itself in more trouble.
Steinhoff supervisory board has reported that the company was faced with serious liquidity challenges, including a huge 10.4bn (R154.02bn) debt, with an amount of 8.7bn attributable to Europe, and 1.4bn to South Africa and 0.25bn to its US operations before meeting its lenders in London last month.
The supervisory board said the group expected the unaudited first half 2018 results to be released on June 29, which would include six months 2018 income statements and six months 2017 restated income statement as well as the balance sheet and cash flow statements, with 2017 half-year results restated.
“The group aims to release full year audited results for 2017 at the end of December 2018 and full year audited results for 2018 by the end January 2019,” it said.