Investors whack Steinhoff but real pain comes with accounts
Share price falls 20% on Thursday after a quarter of a trillion rand in ‘accounting irregularities’ are revealed
Steinhoff’s “accounting irregularities” while Markus Jooste was at the helm amounted to almost a quarter of a trillion rand, we were told on Tuesday. While establishing just how that happened over a period of possibly as long as 20 years is important, that is not Steinhoff’s top priority at the moment.
Instead, and for the sake of the livelihoods of its over 100,000 employees, it must bring closure to the whole sordid affair by publishing its 2018 financial accounts. They are expected in the next few weeks.
One analyst expects that the accounts will reveal a further deterioration in the financial performance and strength of the company given that the liquidity issues only became evident three months into the 2018 financial year.
These liquidity issues also forced Steinhoff into selling stakes in some sound businesses, including PSG, KAP, and Steinhoff Africa Retail (now Pepkor). The loss of the cash flows from these investments will be evident in the 2018 accounts.
But the publication of the results, however bad, is a necessary precursor to implementing the restructuring plan for the group. It is only when the financial reporting is up to speed that creditors can assess the true condition of the enterprise. The Steinhoff share price fell more than 20% on Thursday.
Agreements with creditors to date are encouraging. The lock-up agreements – which are already in effect – will give the company enough time to negotiate with creditors on which assets to sell and for what price, in order to pay down the €8.5bn owed to lenders via Steinhoff’s two finance companies.Recovering funds and instituting damages against the perpetrators of the alleged fraud is expected in due course. Steinhoff has tasked PwC with a further investigation of the role of certain individuals in the malfeasance.