Steinhoff hits new low as investigation shows mess is bigger than thought.
- Frederik Herholdt
- May 11, 2018
- 2 min read
Steinhoff International Holdings NV's shares plummeted to a new record low following warnings from the retailer of impairments beyond the initial 6 billion euros reported in December. The company also said that it is facing at least five lawsuits.
Steinhoff said in a statement on Thursday that Auditors at PwC have told the owner of Conforma in France and Mattress Firm in the US that the overstatements of profits and the handling of off-balance-sheet entities will result in "material additional" asset writedowns. The full extent is to be presented alongside first-half financials next month. Steinhoff is also investigating the roles played by previous members of the firm, with former Chief Executive Officer Markus Jooste likely to be top of the list.
Will Steinhof survive?
Charles Allen, a retail analyst at Bloomberg Intelligence, said, “If they can’t agree on the restructuring plan, then it probably means no more Steinhoff,”.
He added, “If they can show they have businesses with decent cash flows and balanced sheets, then they may well be able to get banks backing.”.
Steinhoff is battling to keep its 12,000 stores in 30 countries in operation, while they are facing two class-action lawsuits in the Netherlands and Germany.
To top it off, Steinhoff is being sued by its former chairman and biggest shareholder Christo Wiese. It is said that Wiese is suing for 59 billion rand. GT Ferreira is also suing, but for 100 million euros. It gets worse - Parties related to Tekkie Town, a South African shoe retailer bought by Steinhoff in 2016, are seeking 120 million euros.
Steinhoff’s latest update on the situation is the first time that it acknowledged that more than one executive may have been involved/responsible for the accounting malpractice. It’s seeking legal advice on what action it can take against those involved. Steinhoff said that it will consider trying to reclaim bonuses.
Shares:
Steinhoff's shares dropped by 8.2% in Frankfurt to a new low of 0.115 euros before paring losses to trade 4.3% down at 0.1199 euros as of 16h00 in the city. The stock has crashed more than 96% since Steinhoff first reported financial irregularities on December 5th, this wiped almost 12.5 billion euros off its market value.
Steinhoff is facing a meeting with lenders next week about how it plans to restructure at least 10.4 billion euros of debt. To date the company has relied on asset sales to balance their sheets so far, but has warned at its annual general meeting last month that the policy is unsustainable.
Steinhoff Africa Retail Ltd., left its parent in December, is busy repaying debt and should complete the process shortly.
Posted 11 May 2018 | Frederik Herholdt.
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