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Steinhoff to restate 2016 financial results as financial scandal grows

Says the 2016 consolidated financial statements ‘can no longer be relied upon’.
Picture: Moneyweb

Steinhoff International Holdings revealed that its accounting errors stretch back into 2016, highlighting the extent of wrongdoing at the clothing and furniture retailer that’s led to an unprecedented stock slump over the last week.

Earnings for this year and last will have to be restated, the South African retail giant said in a statement late Wednesday, prompting the shares to slide anew. The issues relate to the viability of assets on the balance sheet of operations in Europe, it said. Steinhoff has expanded aggressively outside Africa in the past three years, adding the UK’s Poundland to European brands such as France’s Conforama.

“Steinhoff has not done any major European acquisitions in the 2017 fiscal year so any asset adjustment would almost certainly have had to apply to 2016 as well,” Charles Allen, an analyst at Bloomberg Intelligence, said in emailed comments.

The announcement comes days before Steinhoff is due to meet with banks to navigate a way out of its crisis, which has wiped more than 10 billion euros ($11.8 billion) off the value of the company. At stake is the future of a retailer with 130 000 employees and international brands including Mattress Firm in the US, Poundland in the UK and France’s Conforama. Markus Jooste has quit as chief executive officer, and Steinhoff appointed auditor PricewaterhouseCoopers to probe accounting irregularities.

Stock plunge

The shares declined 10% to R5.97 as of 2:19pm in Frankfurt, where Steinhoff moved its primary listing from Johannesburg two years ago. The stock has slumped more than 80% in the South African city since the accounting crisis emerged on December 5.

 

Steinhoff share performance

 

Steinhoff said last week it was reviewing the validity and recoverability of assets amounting to about 6 billion euros, implying there may be a hole in the company’s balance sheet. The crisis follows a Manager-Magazin report in August that Jooste is among employees being investigated by German prosecutors in a 2015 case linked to possible accounting fraud, allegations that Steinhoff said at the time were wrong or misleading.

“The most recent statement narrows the area of concern to Steinhoff Europe, suggesting that both the US and Australian assets are not affected by this particular issue,” Allen said.

South Africa’s Public Investment Corporation, the second-largest shareholder with a 10% stake, on Wednesday questioned the independence of the board and said billionaire chairman Christo Wiese may have a conflict of interest. Wiese, who has seen his wealth more than halve in a little more than a week, is running the company on an interim basis. The PIC manages government-worker pension funds.

Steinhoff has said it will try and sell 1 billion euros of non-core assets to shore up the balance sheet.

© 2017 Bloomberg

COMMENTS   12

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This is now the same financial statements (2016) that was unanimously adopted ((without raising any concerns whatsoever) by all external asset manager groups through their proxy or direct voting during the 2016 AGM on behalf of the investors they represent. Can it be? This smells like gross negligence by the asset manager groups.

You failed to mention the auditors that signed off the financials.

The only remedy is jail time for auditing partner, members of the board and also the culprits at Steinhof. All of these fat cats will have lawyers that receive 7 digit salaries.

All of these culprits receive income for their work with no consequences.

Poor me that shoplifts get 6 months. Something does not tally.

Muks,

It is interesting that when shareholders earn massive returns on the market they are unconcerned with the auditors. When their blind greed hits a speed bump they look for other people to blame.

Auditors can deal with the transactions and facts presented to them. If jooste and wiese and the rest of the exec signed the relevant representations about which counterparties are related parties and which not, then the auditors, absent obvious indicators, did their job.

shareholders can not afford the kind of audit fees that would be required for a waterproof idiotproof set of financial results.

@Johan_Buys
That’s a wild assumption. Which shareholder is unconcerned with the auditors or with the authenticity of a company’s reported results? As shareholders, you expect that the auditors will do what they are hired to do. If its been published then all shareholders would expect that its been done properly. If we are talking greed, explain the greed of the auditors who are more concerned with retaining the account than doing their jobs properly. Explain also how they were fine signing off on previous financials and now all of a sudden refused to sign off on the last one. They could see the noose tightening, and realised that they would hang as well if they didn’t distance themselves. The auditing profession unfortunately is littered with greed and a lack of ethics at the moment. Deloitte…. KPMG ………….

And what will the asset managers suffer as a result of this gross negligence? Considering that the JSE overall is still up around 13% for the year (even after the Steinhoff collapse), and inflation is down to 4.6%, I’d guess there are several fund managers that are in line for performance-based bonuses.

It must be a humbling experience for South Africans to find that the private sector is as corrupt as the public sector. It would thus be not too farfetched to proclaim that South Africa is a failed state. However, we are not beyond redemption, but the avarice and greed ruling the country by the upper class spells, read in conjunction with the worst GINI factor in the world, is a certain formula for a modern French revolution. The only saving grace is the absolute loving nature of the majority of our people, despite the history of forced separation, we are one in our love for our land. But we don’t love those that exploit us, but we hope they get the message clear and certain now. We have had enough. Enough is enough. Not only Zuma must go, but all those people who are rich because of the poverty of the masses. Geert de Boon, Cape Town

If, possible and permissible by law; PSG management ought to consider and take steps to limit further damage caused to us shareholders by continued association with Steinhof. We have already seen the share gibr up over R50 worth of value for no good reason except possibly erreneous attribution. We need to help Steinhof to do a quick bookbuikd and to exit its 25.5% stake. Failure to do so will continue to undermine and or outright destroy shareholder value as we wear it like an albatross around our neck.It will be like a hoof-stain (Stainhof) if we don’t.

Wow! I think this admission is all investors need to succeed in a case for damages against directors (exec and non-exec) auditors and advisors.

Good luck guys!! Happy hunting! Go bag yourself a big amount of money!!

PIC should lead the way!

Hope this stops the ridiculous discussion about buying this share at these low levels. Rather buy a bit coin – st least may have a chance of getting yr money back!

Buy bit-coin, you suggest. Isn’t this bit of non-coin, so-called crypto currency hypes, the current biggest pyramid scheme? What exactly do you buy or receive in return for your hard cash fiat money? Say again, nothing?

Personally, I feel 1 year financial restatement is a good thing. This could have been dragged back 10 year or so in the worst case. 1 or 2 years is a blessing.

It is actually not only one year. 2016 is being restated line by line because only one year of comparatives are shown. Any effects on previous years will be adjusted straight to retained earnings.

End of comments.

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