Steinhoff bleeds billions — and more pain lies ahead
Professional fees mount as retail group fights fires
● Scandal-ridden Steinhoff is racking up legal fees as it fends off a slew of challenges that show no sign of abating. But this is perhaps the least of its problems as results released on Friday reveal that the group’s financial position is as murky as ever while its local subsidiary faces problems of its own.
In its financial results for the six months to March, the group said it had incurred professional fees of ¤39-million (about R626million). It has had to fend off a number of legal actions after accounting irregularities surfaced in December last year.
The professional fees, of which ¤28-million were related to group service companies, were paid to various advisers such as Moelis, AlixPartners, PwC and Deloitte.
Steinhoff said “professional fees are expected to increase substantially until the restructure plan has been finalised and all the relevant agreements have been concluded”.
The group said it had received support from the requisite majority of creditor groups to amend the support letters and extend the support period up to and including July 20.
It has also reached agreement on key commercial terms for the restructuring plan and is in further discussions to finalise the terms of its debt restructuring.
The results, which were unaudited, show that the group’s attributable loss to shareholders had widened to ¤621-million from a restated loss of ¤380-million a year earlier.
But the group warned that the results should be treated with caution.
“It must be stressed that management has not completed its review of all transactions, as such there is a risk that further information could come to light, which could result in certain restatements having to be revised,” it said.
Steinhoff added that a comprehensive tax review and one of property valuations being undertaken were not yet complete.
PwC’s independent forensic investigation into accounting irregularities is expected to be finalised at the end of this year.
Steinhoff chairperson Heather Sonn said: “The task is substantial, complex and timeconsuming and involves interaction with Deloitte, third parties, regulators, Steinhoff entities and employees (current and former).”
In the past few months, Steinhoff has had seven resignations, four of which were of members of the supervisory board and two of management members.
Since December, the group has been embroiled in a number of court cases in which shareholders have lined up to call for heads to roll after they had incurred significant losses.
Steinhoff’s share price has crashed more than 90%. On Friday, the stock closed 6.61% higher at R1.29.
In January, the chair of the audit and risk committee, Steve Booysen, reported former CEO Markus Jooste to the Hawks in terms of the Prevention and Combating of Corrupt Activities Act.
The task is substantial, complex and time-consuming Heather Sonn
Steinhoff chairperson
Charles Allen, a senior retail analyst at London-based Bloomberg Intelligence, said while the real value of Steinhoff remains difficult to gauge, “if people can see enough value in it” then it may be good for creditors.
Steinhoff declined to comment on its results on Friday beyond what was published on its website.
Commenting on Steinhoff’s operational performance, Graeme Korner, an asset manager at Korner Perspective, said while there were a couple of good pockets in Europe, and Australia was also a bright spot, the rest of it was “pretty awful”.
“Operationally, it did not look great, and that was before you even talk of asset writedowns.”
What was “really sad”, Korner said, was that the sinking ship effect had spread to Steinhoff Africa Retail (STAR), as shown by the big bun fight between the former and current managements of Tekkie Town.
Steinhoff has a 71% shareholding in STAR, which owns brands such as Pep, Ackermans and Tekkie Town.
This week, the management team of Tekkie Town walked out in the wake of a dispute between STAR management and former Tekkie Town owner Braam van Huyssteen.
Korner said: “I don’t think that STAR is going to fail in any way, but I think it’s just going to mark down the asset value. They restated the equity at about ¤9-billion. We still have no clarity on how big the hole is in the balance sheet. It’s like a wildebeest carcass on the savanna and we are fighting over the last
It’s like a wildebeest carcass and we are fighting over the last pieces of hair
Graeme Korner
Asset manager at Korner Perspective
pieces of hair.
“The creditors will probably be relatively OK, but it’s just such a tragedy.”
While Steinhoff fights for its survival, it also needs to ensure the survival of STAR, because it has real value.
But STAR has other problems.
Former Tekkie Town chief operating officer Bernard Mostert told Business Times this week that STAR had four businesses, including John Craig, Refinery and Dunns, that were not profitable. The walkout was not a matter of loyalty, he said.
“We understood that our business was so heavily undermined and interfered with that we could no longer do our jobs. It was impossible for us to do the best as we take over the business because the leadership of STAR did not support us.”
Mostert said Tekkie Town needed people who were supported and who understood how to run the business and did not experience any political interference.
STAR management has since appointed a new interim management team for Tekkie Town.