Steinhoff disputes disclosure claim
The allegations relate to a $810m loan Steinhoff made to Swiss-based company GT Brand Holding in 2015
Steinhoff International has been forced to defend itself against damaging European media reports for the third time in as many months.
On Wednesday, the share price slumped more than 4% to close at R59.40 after Reuters reported that — apparently contrary to European disclosure rules — it had not disclosed details of a substantial transaction with a related company.
The allegations relate to a $810m loan Steinhoff made to Swiss-based company GT Brand Holding in 2015, shortly after it acquired a 45% stake in the company.
Reuters quoted a European-based professor of international banking law and finance who said the loan was potentially market-sensitive information and should have been flagged.
However, a second academic told Reuters that the relevant accounting rules were not clear-cut. "The rules don’t say exactly what size transactions need to be disclosed, so there is some judgment involved."
The law describes a material transaction as one big enough to influence investors’ view of the firm’s financial health. However, it does not define the details of a material transaction.
On Wednesday afternoon Steinhoff issued a Sens statement declaring that its reporting and investor information relating to transactions between Steinhoff and GT Global Branding (a subsidiary of GT Brand Holding) were in line with all International Financial Reporting Standard requirements.
It described the transactions as not material in a qualitative and quantitative way.
Steinhoff CEO Markus Jooste said "all reporting requirements have been met. This has been confirmed by our internal legal team and external experts."
Steinhoff said it had invested in GT Global Branding so it could develop manufacturing furniture brands worldwide. The objective is to earn brand-related royalties from "a host of customers in the future", it said.
Steinhoff acknowledged the loans and royalty payments were related-party transactions but said they did not need to be disclosed as they amounted to zero when netted off.
One leading South African retail analyst said the latest development had to be seen in the context of a series of high-profile legal disputes that have caused considerable damage to the company’s reputation.
"It is not directly related to the battle with Steinhoff’s former joint-venture partner, Andreas Siefert, but until that battle is resolved it seems Steinhoff could be susceptible to erratic media attacks based on its accounting practices," said the analyst, who did not want to be named.
He said the Steinhoff share price would not recover until the dispute was settled.
"If the arbitration goes against Steinhoff, there will be further weakness; if it’s in Steinhoff’s favour, the share will begin to recover," said the analyst.
In late August, the Steinhoff share price plummeted 13% in one day after damaging reports in a leading German business magazine.
The magazine alleged that a public prosecutor in Germany was investigating Jooste on suspicion of accounting fraud.
Steinhoff issued a statement rejecting allegations of dishonesty and also said none of its subsidiaries had received qualified audit reports, as alleged in the magazine.
In late September, there were more damaging media reports when a Dutch court heard an application for an order for an investigation into Steinhoff’s 2016 annual accounts. The application, brought by Siefert, related to the accounting treatment of the joint venture. Steinhoff again issued a statement dismissing the allegations.