The Steinhoff effect: Pepkor gets stung by R5m JSE fine after 2017 spin off

By Janice Kew

(Bloomberg) – Pepkor Holdings Ltd.’s efforts to distance itself from majority owner Steinhoff International Holdings NV received a blow as Johannesburg’s stock exchange fined the South African retailer for breaking listing rules when it was spun off in 2017.

The headquarters of Steinhoff International Holdings NV.
Key insights

Part of the censure related to a R500 million ($36 million) writedown Pepkor took in May, related to a controversial management-incentive plan that pre-dated the listing. The R5 million fine imposed by the JSE on Monday may make investors nervous about the potential of other, as-yet-unknown problems related to Steinhoff, which almost collapsed amid an accounting scandal a year ago. The operator of clothing chains including Pep and Ackermans is also embroiled in a court battle against former executives of shoe retailer Tekkie Town, which Steinhoff bought in 2016.

Market reaction

Pepkor shares have slumped 25 percent since Steinhoff’s announcement almost a year ago that it had uncovered accounting irregularities and its CEO had resigned.

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Pepkor said it’s working “intensively to improve its disclosure where necessary and appropriate.” The extent that Steinhoff-related issues distracts management from running the business should not be underestimated, said Syd Vianello, an independent retail analyst in Johannesburg.