Steinhoff Africa Retail defends performance as headline earnings halve

Cape Town - Steinhoff Africa Retail [JSE:SRR] on Tuesday announced a decrease in its statutory headline earnings per share from 71c for first half of the 2017 financial year to 36.2c for the six months ended March 2018. 

According to its statutory results, the group's revenue increased by 15.9% from R28.4bn in the first half of 2017, to R33bn in the first half of 2018. Profit before taxation decreased 12.7% from R2.4bn to R2.1bn. 

But the retailer, which listed on the JSE in mid-September 2017 and incorporates Steinhoff's Africa-focused retail firms, said the comparability of its statutory results was "limited by the timing of its internal restructure in July 2017, prior to its listing". 

"The issue of 750 million shares - 21.47% of issued share capital - upon listing on 20 September 2017 and acquisitions in both the comparative and current period materially impact the comparability of the results." 

It said that when "comparable" results were used, the firm achieved a 12.2% increase in headline earnings per share between the first half of 2017 and the first half of 2018. 

"STAR had a satisfactory performance for the period under review," it stated.  

STAR does business in 12 sub-Saharan African countries, including South Africa,  Namibia, Botswana, Angola and Nigeria, and owns retail brands such as Pep, Ackermans, Tekkie Town and Timbercity.

It noted that the comparable results were included in the "illustrative purposes only", however, it said it was "understandably difficult" for the investors to gauge what the impact accounting irregularities on Steinhoff International Holdings had been on the retailer. 

While shares in Steinhoff's parent company have fallen by more than 95% since its CEO Markus Jooste abruptly resigned in December last year amid an accounting scandal, shares in STAR have proven to be more resilient. 

STAR shares, which were trading at around R24.60 the day before Jooste resigned, were trading at R15.85 on Tuesday at 11:35, down 6.21% on the day. 

Shares in Steinhoff International, which is listed on the Frankfurt stock exchange, fell by 9% by 11.15 on Tuesday, to reach an all time low of just R1.30 per share.

R500m 

The company said it would also make provision to pay a total of R500m to settle "third-party debt related to a Pepkor management investment company". 

STAR CEO Leon Lourens told Fin24 on Tuesday morning that the retailer had to make provision to pay back bank loans that Pepkor guaranteed when Pepkor management bought shares in the company in 2011 before it was taken over by Steinhoff. 

When the company was taken over by Steinhoff in 2015, the shares were converted into Steinhoff shares. But given the massive fall in Steinhoff's share price, this third party debt may now have to be paid back.  

"We haven't paid it back yet. We have just made provision for it ... if the bank calls that loan today," he said. 

Steinhoff's share price on the JSE closed at a record low of R1.30 at 17:00, falling 9.9% on the day.

Despite the volatility in the international retailer's stock, the JSE has shied away from suspending the share as Steinhoff continues to trade in its primary listing in Frankfurt, Germany.

Steinhoff is in breach of the JSE’s listing requirement, having  failed to publish its 2016/2017 financial statements. However, the Frankfurt Stock Exchange doesn’t suspend companies for late publication of results.

JSE director of market regulation Shaun Davies said on Tuesday via email that there were media reports in the morning that may have caused the negative impact on Steinhoff and STAR share prices .

STAR's share price slipped 0.3% to close off the day's trade at R16.85. 

*Update: This article was updated to include comments by STAR CEO Leon Lourens about third party debt. 

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