Fresh blow for investors as Steinhoff auditors follow trail of dirt into 2015 and beyond

EDINBURGH — Steinhoff, the global retail giant built by South Africans, has been teetering on the brink of collapse ever since Markus Jooste stepped down late last year as CEO amid admissions of irregularities in the company’s books. The Steinhoff share price has plummeted by 90% and credit agency Moody’s has downgraded its bonds to junk status. Auditors called in to re-examine its books reiterated this week that Steinhoff financial statements are not to be trusted, cautioning that restatements are expected at least back to 2015. With Steinhoff a significant holding in many unit trust and retirement fund portfolios, South African investors have taken considerable pain. Some South Africans are baying for the blood of Jooste and retail tycoon Christo Wiese as it looks like Steinhoff bosses cooked the books in order fund a buying spree. Many investors have asked how it is possible that so many investment professionals failed to spot signs of trouble in Steinhoff’s accounts. In the UK, where Steinhoff owns discount retail chains Poundland, Bensons for Beds and Harveys, the media has reported extensively on fears of store closures. Steinhoff owns about 12,000 stores in 30 countries. It has about 130,000 employees. – Jackie Cameron

Steinhoff – Restatement of financial statements of subsidiary companies Steinhoff International Holdings N.V. (the “Company”)

The Company is providing the following update further to:

  • its announcement dated 5 December 2017 in which the Company announced that PwC had been approached to undertake an investigation into certain accounting irregularities resulting from the concerns raised by Deloitte; and
  • its announcement dated 13 December 2017 in which the Company confirmed that, in terms of section 2:362 (6) of the Dutch Civil Code, the 2016 consolidated financial statements of the Company will need to be restated and can no longer be relied upon. The update is made on the basis of the information that has been made available and analysed to date.
A Steinhoff International Holdings NV logo sits on display outside the company’s offices in Stellenbosch, South Africa. Photographer: Waldo Swiegers/Bloomberg

The internal review of the accounting irregularities by the management team and the PwC investigation are progressing and, whilst all involved are working as expeditiously as possible, the timeline for completion remains uncertain.

The group is mindful of its obligations to keep the market and other interested parties informed of any material developments arising out of and the results of the review when in a position to do so. In the meantime, the group continues to work with its external auditors to seek to conclude the audit of the Company’s 2017 consolidated financial statements as soon as reasonably practicable.

Also read: Five unanswered investor questions: Steinhoff silent as stares into the abyss

In addition, the Company continues to consider whether any other prior years’ financial statements will need to be restated. In this regard:

  • After careful consideration and taking into account the requirements of International Financial Reporting Standards (IFRS) guidelines and the advice of various advisors, the Company wishes to confirm that the audited 2017 consolidated financial statements of the Company will be accompanied by the restated 2016 consolidated financial statements. In addition, the consolidated statements of financial position will be accompanied by a restated comparative 2015 statement of financial position of Steinhoff International Holdings Proprietary Limited, the former listed holding company of the group (then called Steinhoff International Holdings Limited), that will provide additional insight into the cumulative and consolidated opening balances in the 2016 restated consolidated statement of financial position. Due to the restatements, the 2016 and 2015 financial statements of Steinhoff International Holdings Proprietary Limited can no longer be relied upon. Furthermore, whilst the internal review and investigation into the accounting irregularities have not yet concluded, the restatement of the financial statements of Steinhoff International Holdings Proprietary Limited for years prior to 2015 is likely to be required and investors in Steinhoff are advised to exercise caution in relation to such statements.
  • In addition, the Company wishes to confirm that the accounting irregularities which are the subject of the internal review and PwC investigation also affect the consolidated financial statements of Steinhoff Investment Holdings Limited by virtue of its ownership of certain European subsidiaries until 1 April 2016. Accordingly, the 2016 and 2015 financial statements of Steinhoff Investment Holdings Limited will need to be restated and can no longer be relied upon. Furthermore, whilst the internal review and investigation into the accounting irregularities have not yet concluded, the restatement of the financial statements of Steinhoff Investment Holdings Limited for years prior to 2015 is likely to be required and investors in Steinhoff are advised to exercise caution in relation to such statements.
  • On the contrary, given current information, the Company does not believe that the restatements will apply to Steinhoff Services Limited (issuer of listed bonds on the JSE). Shareholders and other investors in Steinhoff are advised to exercise caution when dealing in the securities of the Group.

Steinhoff gains as retailer plans to restate 2015 results

by Loni Prinsloo and Thembisile Dzonzi

(Bloomberg) – Shares of Steinhoff International Holdings NV rose after the South African retail giant said it will restate financial results going back as far as 2015 amid a probe into accounting irregularities.

The stock jumped 27 percent to R5.90 by 9:56 a.m. in Johannesburg, the most on an intraday basis since Dec. 12. Shares in Steinhoff, whose retail empire includes France’s Conforama furniture chain and Poundland in the U.K., have slumped 87 percent since the company announced an investigation into its finances and the resignation of its chief executive officer on Dec. 5.

The retailer’s 2017 results will be accompanied by a restatement of its 2016 financial statements as well as the 2015 earnings of Steinhoff International Holdings Pty Ltd., the former Johannesburg-listed entity for the group, the company said in a statement. Steinhoff moved its primary stock listing to Frankfurt in 2015. The restatements won’t impact its Steinhoff Services Ltd. business, which has bonds listed in Johannesburg.

“That the restatements will not apply to Steinhoff Services Ltd. should be seen as positive as it builds on the impression that the accounting difficulties are confined to some European operations,” Bloomberg Intelligence analyst Charles Allen said in an email.

The bedding giant appointed auditor PwC to probe accounting irregularities. Moody’s Investors Service cut Steinhoff’s rating deeper into junk last week, saying the company may struggle to refinance or repay some of its debt due this year. Steinhoff, which delayed publication of its 2017 results, previously said it would need to restate its 2016 numbers, without providing details on the extent of the problems.