Steinhoff brushes off probe and keeps to reporting schedule
Share price slumps as much as 10% as a lack of clarity on criminal and tax probe in Germany concerns investors
The Steinhoff share price slumped as much as 10% on Monday fafter news that the 2017 financial results would be released on Wednesday although the supervisory board and auditors have not yet finalised their review of issues raised by the criminal and tax investigation in Germany.
The Steinhoff share, which is listed on the JSE and in Frankfurt, opened in Johannesburg on Monday at about R56 but dropped to R50.25 by the close of trade.
Analysts said the JSE retail sector was marginally weaker on Monday but this did not explain the extent of the fall in Steinhoff’s share price. The share has been under considerable pressure during the past 15 months, part of which has been attributed to a legal battle with former European partners.
In Monday’s announcement, Steinhoff said that during the review of the matters raised by the German investigation, "No additional information came to light to change the previous views expressed regarding the investigation."
Steinhoff’s external auditors and lawyers in Germany have said there is no evidence that any of the transactions raised by the investigation contravene any provision of German commercial law.
The weakness in Steinhoff’s share price may have affected sentiment towards Steinhoff Africa Retail (Star), which enjoyed a brief surge in early morning trade on Monday following the release of annual results but reversed course to close marginally weaker.
Sasfin’s Alec Abraham said the results for the year to end-September — which largely reflected the performance of Pep and Ackermans — were marginally ahead of expectations and the 100 basis point increase in margin to 10.4% was commendable in the current tough trading environment.
Group CEO Ben la Grange said he was very pleased with the results, which were a little ahead of the profit forecasts he had made to investors during the group’s listing process.
Analysis of the first set of results since Star’s listing on the JSE in September is complicated by the change in year end and a spate of acquisitions.
La Grange pointed out that on a pro forma basis revenue was up 13.2% to R58.6bn and pro forma operating profit was up 25.2% to R6.1bn. Pep and Ackermans accounted for R44.1bn of group revenue. The comparatively strong performance was achieved despite downbeat consumer confidence and low economic growth.
Trading densities continued to rise above cost inflation and the group increased its footprint 5%.
"Star group opened 272 stores on a net basis and the acquisition of Tekkie Town added 308 stores to the group’s footprint," the board said.
At end-September, the group had 4,953 retail outlets spread across Africa.
Another 350 stores would be opened in financial 2018 and while real market growth was expected to be subdued, La Grange said the group’s more affordable offering would resonate with consumers.
The group is planning to develop two distribution centres in SA and establish a new distribution centre in Angola.
Last week the board announced that Star had exercised call options to acquire about 23.1% of Shoprite.
The transaction has to be approved by the competition authorities in SA and in various other African countries.
La Grange, who is excited about the potential for joint initiatives between Star and Shoprite, is hoping to secure the necessary approval before the middle of calendar 2018.