Pepkor still deep in the stinky stuff coming out of Steinhoff


Pepkor still deep in the stinky stuff coming out of Steinhoff

Controlling shareholder Steinhoff holds 71% of Pepkor, but that’s not the only reason sellers punished the stock

Ann Crotty

Pepkor had a rough day on the market on Tuesday following clarification of a rather garbled trading statement that was released by the company last week.
It wasn’t entirely Pepkor’s fault that Friday’s statement revealed nothing about how it traded during the six months to end-March. The JSE has very specific regulations about what must be disclosed in a trading update. In an effort to stick within these regulations Pepkor ended up providing information that was more misleading than instructive.
Tuesday’s weakness – down by more than 7% at one stage – followed reports that the actual trading profit for the six months to end-March might have fallen by up to 4%, or increased by up to 6.7%.
This is at the low end of market expectations and means the share price was on a rather demanding rating. And that’s without considering the huge shadow cast by its controlling shareholder Steinhoff, which holds 71% of Pepkor (formerly known as Steinhoff Africa Retail).
The Pepkor stake is without doubt Steinhoff’s most valuable investment but is unlikely to be on the chopping block as analysts believe the Reserve Bank would be unlikely to allow proceeds from a sale to be sent to Europe where most of the claims against Steinhoff are.
One of those claims, for R450m and relating to a swap of Pepkor shares for Steinhoff shares, was lodged by “previous members of management at Pepkor” in March 2019, according to the Steinhoff 2017 annual report.
A second claim, for R2.16bn by an entity set up in 2011 for Pepkor executives, also related to a swap of Pepkor shares for Steinhoff shares and was also lodged in March. This claim seems connected to the R500m bailout that knocked earnings by 14.5c a share at the March 2018 interims.The non-repeat of the knock in this year’s interims will flatter the reported earnings figure but won’t camouflage Pepkor’s pedestrian trading performance.

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