Christo Wiese. Picture: REUTERS
Christo Wiese. Picture: REUTERS

Steinhoff International chairman and largest shareholder, billionaire Christo Wiese, is stepping down from the supervisory board following the accounting scandal that has engulfed the retail giant.

The board accepted Wiese’s resignation to resolve questions of conflict of interest, the owner of furniture chains such as Mattress Firm in the US and Conforama in France said in a filing on Thursday.

Heather Sonn, a member of the board and its independent subcommittee, will take the role of acting chairwoman.

The resignation comes a day after Steinhoff said its accounting errors stretch back into 2016, highlighting the extent of wrongdoing at the retailer that has led to a more than 80% stock slump since the beginning of last week.

The retailer is due to meet with banks to try to navigate a way out of its crisis, which has wiped more than €10bn off the value of the company. At stake is the future of a retailer with about 130,000 employees and international brands that also include UK discounter Poundland.

Wiese stepped in to lead the company on an interim basis last week after Markus Jooste quit as CEO as Steinhoff postponed publishing its financial results. Auditor PwC was appointed to probe accounting irregularities.

Wiese’s son Jacob had also resigned, the company said.

“I don’t know how to interpret this — you don’t know whether it’s a matter of culpability or whether he would hinder any processes,” said Sasfin Securities’s David Shapiro.

“When he first got involved with Jooste it was a surprise… Wiese’s reputation was a lot more conservative and built up over a long period of time.”

The departures are the company’s latest efforts to restore order as it works with Moelis & Co to seek a lifeline from lenders and with AlixPartners to advise on “liquidity management and operational measures”.

Steinhoff shares, which have their primary listing in Frankfurt, fell 13% on Thursday before the resignations were disclosed.

Steinhoff said on Thursday, that on the advice of an independent committee of the supervisory board, it had formed a view “that the validity and recoverability of certain Steinhoff Europe balance sheet assets under scrutiny in the 2017
audit work, are also relevant
to the 2016 consolidated financial statements”.

The statement appears to vindicate the findings of Vicerory Research, a three-man US team that spent months prising open a series of opaque off-balance sheet deals to find that the furniture and household goods retailer’s 2016 results may have to be adjusted by up to €1.047bn lower.

Jason Forssman, a fund manager at Ashburton Investments said: “This is not a 2016-17 issue. I wouldn’t be surprised if prior year earnings need to be restated too.”

Such has been the razing of shareholder value — almost R160bn wiped off its market capitalisation after Jooste quit — that the finance ministry has now become involved.

Finance Minister Malusi Gigaba announced on Thursday that he would meet “various stakeholders” to discuss the Steinhoff “debacle” on Friday.

The stakeholders include the CEO Initiative, the Manufacturing Circle, the JSE, the Government Employees Pension Fund, the Public Investment Corporation, the South African Revenue Service, the Financial Services Board and the Independent Regulatory Board for Auditors.

The last unaudited results for its half-year ended March showed a 48% rise in revenue to €10.2bn, an operating profit of €903m and cash flow conversion of 101%.

However, analysts are sceptical that Steinhoff’s cash-flow conversion rate is anywhere near this figure and Viceroy said in its report that as much as 85% of Steinhoff’s earnings before interest and
tax did not translate into free-cash flows.

Bloomberg, with Giulietta Talevi

 

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