The directors of Steinhoff Africa Retail (Star) have wasted no time putting as much distance as possible between themselves and beleaguered parent, Steinhoff NV.
For a start they are considering changing the group’s name. “There is a proposal out, but we have made no decisions yet,” CEO Leon Lourens said at the group’s AGM in Cape Town on Thursday.
Other measures include adjusting the board composition to reduce the Steinhoff influence, securing independent financing and settling debt owed to Steinhoff.
This follows the implosion of Steinhoff, Star’s majority shareholder in December, following news of accounting irregularities and the subsequent resignation of CEO Markus Jooste. The companies were intimately entwined, despite the fact that Steinhoff had unbundled Star from its operations and listed it on the JSE in September.
“We are making strenuous efforts to create independence and put some distance between the group and Steinhoff NV, said chairman Jayendra Naidoo. The first step was to announce the departure of CEO Ben La Grange, who was once Steinhoff’s CFO. The next step was to dilute the Steinhoff influence at board level. “At listing [last September] six of our eleven directors were also Steinhoff NV directors. Star was very much the offspring,” said Naidoo. “Today three directors of Star are directors of Steinhoff and shortly there will be a bigger percentage of non-Steinhoff independent directors.”
There are processes underway to assess the qualifications, skills and experience of existing board members, as well as to recruit new independent non-executive board members. We have invited nominations to ensure candidates are not limited to the wine clubs of members and we now have a wide variety of short-listed candidates,” he says.
Crucially, within a matter of weeks Star will be financially independent of its erstwhile parent.
“We are two to three weeks away from fund-flow,” CFO Riaan Hanekom said. “We have applied for R18 billion in funding and have final irrevocable offers from the banks – in fact the offer was oversubscribed. The funds will be used to pay Steinhoff’s shareholder-loan funding of R16 million – well ahead of the due dates – and provide Star with stand-alone financing facilities.”
Once this process is complete Star’s executives believe emphatically that the company has extracted itself from any and all financial obligations its parent (and 77% shareholder) could place on it.
The directors are also confident that “no bugs will be found in the mattress,” as one pension fund manager put it. “Our results [for the year to September 2017] were audited by two sets of auditors: PWC, which audits Pepkor and Deloitte which audits Steinhoff and Star Corporation,” said Johann Cilliers, chair of the audit committee. “Steinhoff and the African business were run very separately, with different management teams. There is no reason to believe there will be any spillover [from Steinhoff].”
Aside from being thoroughly scrutinised by investment professionals and others ahead of its listing, Lourens pointed out that the financial results have been reviewed by auditors twice since they were published – just as an additional precaution. “We are also still waiting for the PWC forensic results. We have requested that they forward to us any information relating to Star.
“The last few months have been eventful and interesting to say the least. Challenging to be honest. And they have been dominated by events with little to do with retail.”
Effort has been made to keep the operating companies doing what they are doing and distance them from the ‘corporate noise’, he said. “While the first quarter performance was not great, it was okay and shows that the operating companies are functioning and were not overly distracted.
“We are a retail company with fantastic brands: Pep is 50 years old and Ackermans is 100 years. Now we need to show the market that we are a retail company that can be trusted,” Lourens said.