‘Pattern of transactions’ led to overstating profit and asset values, Steinhoff says
Steinhoff International says a probe into its accounts has found that a "pattern of transactions" over several years led to an overstatement in both profit and asset values.
The owner of Conforama in France and Pep clothing shops throughout Africa is updating shareholders on its rebuilding effort, after reporting a hole in its accounts in December. The stock has plunged almost 95% since then, leading to urgent talks with creditors and a fire sale of assets.
An investigation by auditors at PwC is well under way and should be concluded by the end of 2018, Steinhoff said in a presentation on its website Friday. More than 320,000 documents have been studied and 4.4-million records gathered in an attempt to find out what happened and who is to blame, it said.
"We want to uncover the truth, show the world was has happened, prosecute any wrong-doing and reinstate trust in the company," chairperson Heather Sonn said at the retailer’s annual general meeting in Amsterdam, where the company is registered. She reiterated that Markus Jooste, the former CEO who quit when the financial irregularities were disclosed, has been referred to law authorities.
The shares reacted wildly, soaring as much as 23% before paring gains to trade 0.8% lower as of 2.05pm in Frankfurt, where it has a primary listing.
Steinhoff’s financial situation remains "very challenged" and the company has been "drained of working capital," it said in the presentation. That said, liquidity has been assured for now after €750m were raised, partly through asset sales.
The retailer has sold stakes in PSG, KAP Industrial and Steinhoff Africa Retail to shore up its balance sheet, though it said this strategy was not sustainable and that debt needed to be restructured.
Ahead of a vote to re-elect directors, Sonn said it was important to retain executives with knowledge of the company to ensure survival.
"There was a time in early December that it could be likened to finding oneself in a burning building," she said. "Typically, when in a burning building, you run out. Some stayed. We are happy some stayed in the burning building to help."