“Destabilised” Steinhoff exposes its warts and the market is worried

After going AWOL for a fortnight, Steinhoff’s communications team was back on its game yesterday, publicly distributing the powerpoint ahead of the make-or-break presentation to international bankers in London.

The good news is Steinhoff owes only half the widely quoted debt figure of R316bn. But that’s a small glimmer in a dark picture. Leading the exposed warts is a structure where all the cash flowed to the centre, making it easily accessible to a powerful person with fraudulent intentions.

I saw something similar happen at my old company where a reshuffle of responsibilities handed a supposedly trustworthy financial manager unfettered access. Only after his fictitious invoices had diverted a couple million rand was that mistake exposed. Unfortunately for Steinhoff shareholders, their hit is exponentially larger.

Forensic auditors PWC cannot quantify the scale of the “accounting irregularities” which go back to at least the 2016 financial year, maybe further. Turnaround specialists AlixPartners warn that creditors of operating companies are calling in debt and cancelling facilities. And Steinhoff executives admit their group is “destabilised”.

Steinhoff’s share price dropped 21% from late afternoon Monday. The market was right on Ramaphosa. It’s probably right on this one too.

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