The un­known un­knowns

Claims by in­vestors are likely to ex­pand, which will add to scru­tiny on the di­rec­tors whose man­date has just been ex­tended

Financial Mail - - BETWEEN THE CHAINS - Rob Rose & Ann Crotty

The grim peek in­side Stein­hoff’s raided kitchen dur­ing the AGM of the em­bat­tled fur­ni­ture re­tailer last week ap­pears to have spooked in­vestors.

In the af­ter­math of the meet­ing at the Sher­a­ton in Am­s­ter­dam’s Schiphol air­port, Stein­hoff’s stock tum­bled 15% to R2.21 on Mon­day — leav­ing the com­pany, which has huge debt of R156bn, with a mar­ket value of just R9.5bn.

The steep fall ap­pears to have been a re­ac­tion to CEO Danie van der Merwe’s ad­mis­sion of just how frail the busi­ness had be­come in the months since De­cem­ber 5 when it ad­mit­ted to “ac­count­ing ir­reg­u­lar­i­ties” that ex­posed a €6bn hole in its ac­counts.

At the AGM, Van der Merwe ex­plained that af­ter that, Stein­hoff lost “vir­tu­ally all avail­able fund­ing un­der our ex­ist­ing fa­cil­i­ties, in­clud­ing credit in­sur­ance — the group was drained of all work­ing cap­i­tal”.

Though Stein­hoff has since raised some money — €750m in fund­ing, R3.7bn by sell­ing 6% of Stein­hoff Africa Re­tail and R3.75bn by sell­ing 17% of KAP — this is hardly enough to keep up with its debt pay­ments. And, as Van der Merwe pointed out, sell­ing as­sets just to pro­vide Stein­hoff with work­ing cap­i­tal “isn’t sus­tain­able”.

One in­vestor who spoke to the Fi­nan­cial Mail af­ter the AGM said that he had been alarmed to hear how bad it re­ally was: “When a com­pany is sell­ing as­sets the whole time so that they can use the money to keep go­ing, that’s a very bad sign.”

Nor did the im­pres­sion brighten much when CFO Philip Dieperink was asked to clar­ify just how pre­car­i­ous Stein­hoff’s fi­nan­cial po­si­tion re­ally was.

His re­ply: “If you look at the amount of in­ter­ac­tion we’re hav­ing with our lenders on a daily ba­sis, to en­sure all our oper­a­tions have suf­fi­cient cash, it is both del­i­cate and chal­leng­ing.”

This frailty left share­hold­ers in an awk­ward sit­u­a­tion: whether to vote against the di­rec­tors and res­o­lu­tions and risk sink­ing the com­pany, or sup­port the board un­der whose watch the huge fraud took place.

In the end, all the res­o­lu­tions were passed, though there were sig­nif­i­cant dis­senters in the vote to re-elect au­dit com­mit­tee chair Steve Booy­sen (56% in favour), and nonex­ec­u­tive di­rec­tor An­gela Kruger-stein­hoff (59% in favour) and to reap­point au­di­tors Deloitte (72% in favour).

Booy­sen, for one, had been so un­sure if he’d get the chop that he pre­pared two state­ments — one for his re-elec­tion, an­other if he was axed.

Speak­ing af­ter the AGM, as he pre­pared to catch a flight back to SA, Van der Merwe seemed op­ti­mistic that the vote gave Stein­hoff a man­date to re­struc­ture the busi­ness.

“I have to say, that wasn’t the eas-

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