Steinhoff paints gloomy outlook; R65bn loss in 2017 shrinks asset pool

JOHANNESBURG — First they were delayed for a fourth time, but then when Steinhoff finally released a statement on its 2017 earnings it came with a pile of misery. The hole that Markus Jooste and his cronies dug for the former JSE darling grows wider with each drip of the retailer’s news feed. Comparing the restated financials over the previous ones given the change in time period doesn’t give the full picture, but a 15-month loss of €279m over a 12 month €4.03bn loss, paints a picture words can’t better describe. The stock is down around 96% since the accounting scandal broke out, and given the size of the losses, and more importantly the shrinking asset base, as debt mountain rises, needed to generate future incomes, it will take a brave investor to jump back in. The full 329 page report is below. – Stuart Lowman

By Janice Kew

(Bloomberg) – Steinhoff International Holdings NV expects more doom and gloom to follow the release of its long-awaited 2017 earnings in which the retailer saw the value of its assets shrink amid massive losses and restatements in the wake of an accounting scandal.

The South African owner of Conforama in France reported a net loss of €4.03bn ($4.5bn) in the 12 months through September 2017, compared with a loss of €279m in the prior 15-month period, Steinhoff said on Tuesday. Sales rose to €18.8bn from €16.1bn, boosted by the purchase of US bedding chain Mattress Firm and Poundland in the UK.

Steinhoff, Markus Jooste
Former Steinhoff CEO Markus Jooste – caught in London during one of his regular visits to the UK capital.

The release of the 2017 annual report comes after Deloitte LLP refused to sign-off the accounts in December of that year, a move that threw the company into crisis and led to the resignation of then-Chief Executive Officer Markus Jooste. Auditors at PwC then started a 15-month forensic probe, which found a small group of ex-executives – with the help of outsiders – allegedly structured deals that inflated profits and asset values.

Sales in the 2018 and 2019 fiscal years are expected to drop because of asset disposals, more competition and a weak-trading environment, Steinhoff said. Operating expenses will be “substantially” higher and financing costs will increase, the firm said, adding that it’s working on lowering administrative costs, while spending less to bolster cash flows.

Legal claims

Those seeking compensation may now have a better picture of the embattled global retailer’s assets as they prepare legal claims. Steinhoff last month called for potential claimants to come forward, seemingly opening the door for negotiated settlements with those who lost money.

But the pool is shrinking with total assets marked down to €17.5bn in fiscal 2017, compared with a restated €21bn in 2016, the report showed. That compares with claims highlighted in the annual report amounting to €6.2bn, more than half of which is from former Chairman Christo Wiese. In addition, various class-action suits are planned.

The claims haven’t been provided for as the company is still in the process of “assessing the quantum and validity of all claims received to date,” Steinhoff said.

Steinhoff shares rose 4.4% by the close in Frankfurt on Tuesday. The stock is down 96% since the announcement of the accounting irregularities.