Steinhoff Africa Retail investors to pay R500m to bail out executives
Steinhoff Africa Retail (Star) investors, still reeling from Steinhoff’s accounting scandal, are set to fork out R500m to bail out executives who face multi-million rand liabilities linked to the parent company’s share price.
Steinhoff’s share price went into free fall in the first week of December when it admitted to "accounting irregularities". The news resulted in Markus Jooste’s immediate resignation as CEO.
Steinhoff’s share price closed at R1.43 on Monday. Prior to the news in December, it traded at about R56, after having reached a record high of R97 in early 2016.
The executives are due the payments as a result of an incentive scheme set up before September 2017, when Star was listed separately from Steinhoff.
The details of the size of the bail-out were provided by Star in a Sens announcement issued after the close of trade on Monday. The Star share price dropped 5.6% to close at R16.90.
Star said late on Friday its interim earnings, due out on Tuesday, would be up to 52% lower than for the matching period in 2017. The drop was attributed largely to the provisions for management’s losses on the Steinhoff-linked incentive scheme. Star was wholly owned by Steinhoff until the September listing. The bulk of the group’s profit comes from what was formerly known as Pepkor, which includes Pep and Ackermans.
Jean-Pierre Verster, portfolio manager at Fairtree Capital, said he looked forward to getting more details when the results were released, but said the scheme may have been set up before Pepkor was sold into Steinhoff. He said that it was strange there had not been any disclosure of this at the time of the Star listing.
Shareholder activist Theo Botha asked why Star shareholders had to bail out the executives and why this liability had not been disclosed in the integrated report or at the annual general meeting in March. Botha said that Star shareholders were now faced not only with bailing out the former Pepkor executives but might also have to pay out unexpected bonuses to Tekkie Town executives.
According to media reports, Jooste agreed to a bonus scheme for Tekkie Town executives based on the performance of Tekkie Town.
In Monday’s Sens announcement, the Star board informed shareholders that Star was party to a guarantee of third-party debt, which is underpinned by the Steinhoff share price. It said exposure to the company pertaining to the Steinhoff share price, equating to R440m, and the provision for an impairment of loans associated to the third party, amounting to R60m, had been recognised in these results.
In addition, Star has acknowledged a R90m hit related to its long-term cash retention scheme.