Pepkor name is back as Star tries to shed Steinhoff stain

Steinhoff Africa Retail (Star) is planning to distance itself from its scandal-ridden parent by changing its name back to the original Pepkor.

Star also said on Tuesday it was considering joining the long list of claimants suing Steinhoff Holdings as it sought to recoup costs associated with the R500m provision it had made to pay executives who were set to lose bonuses that were tied to the Steinhoff share price, which plunged more than 90% after it admitted “accounting irregularities” in December.

CEO Leon Lourens said the incentive scheme, which was set up in 2011 when the company was known as Pepkor, was forced to exchange its Pepkor shares for Steinhoff shares in 2015.

“We weren’t offered the opportunity to stick with Pepkor, we had to convert,” Lourens said.

He said the conversion was decided by the major shareholder [Christo Wiese] and that Steinhoff had also wanted management to be invested in Steinhoff rather than Pepkor.

In an interview with Business Day on Tuesday, Lourens dismissed suggestions that Star should have disclosed the potential liability much earlier. The first disclosure was made last Friday after an audit committee meeting.

“It was always included as part of our total guarantees, but it wasn’t individually disclosed because the relative risk was almost zero.

“No one expected the Steinhoff share price to fall by 98%,” Lourens said.

He said that in 2015 the value of the Pepkor shares in the scheme, called the Business Venture Incentive Scheme, was R2.5bn against debt of R500m.

Lourens said that even at the time of the annual general meeting in March, Steinhoff shares were trading at R5, which meant the debt was covered and no disclosure was necessary.

Lourens also dismissed suggestions that the R500m provision was a bail-out for the Star executives.

He said the debt used to buy the Pepkor shares for the executives in 2011 had been guaranteed by Pepkor, which was why Star was now obliged to provide for it.

News of the name change, high-profile appointments to the board and a reasonably upbeat results presentation provided some comfort for investors on Tuesday.

The Star share price recovered from an early afternoon low of R15.26 to close at R16.53, just 2.19% down on the day.

Headline earnings in the six months to March — which were hit by the R500m provision — were down 49% to 36.2c a share.

“It’s evident that the trading conditions were very tough,” said Alec Abraham, senior analyst at Sasfin Bank.

The name change will have to be approved by shareholders.

“The historic Pepkor brands represent the vast majority of Star’s current business and the corporate brand has enormous brand equity and a long legacy. The name change reaffirms the listed company’s independence,” Lourens said.

Star also announced the appointment of Johan Cilliers as lead independent nonexecutive director with immediate effect.

Pieter Erasmus, former CEO of Pepkor, has been appointed as a nonexecutive director with effect from October 1 2018.

HEADLINE EARNINGS IN THE SIX MONTHS TO MARCH — WHICH WERE HIT BY THE R500M PROVISION — WERE DOWN 49% TO 36.2C A SHARE