Legal claims cause Steinhoff Investment Holdings to rack up major loss

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Steinhoff Investment Holdings (SIHL) has racked up a loss of over R10 billion because of provisions to settle a raft of legal claims caused by one of the biggest accounting scandals in the country's history, which triggered the 2017 share collapse of its parent company Steinhoff International Holdings. 

The investment company, a wholly-owned subsidiary of Steinhoff which owns 68% of Pepkor, has a R9.37 billion provision to settle the claims.

In a trading update for the six months to end March, SIHL reported a revenue rise of  6.5% to R37.6 billion. The group was also hit by a foreign exchange loss of R4.8 billion due to the rand weakening against the euro.

"Settlement of the outstanding litigation is essential to securing a future for the group. The proposed settlement terms that were announced are the culmination of 12 months’ intensive effort and management believe they are firmly in the best interests of all stakeholders and claimants," stated the group in its trading update. 

The figure of R9.37 billion is the group's best estimate, at the moment, of what the total claims against it will amount to if settled.

In late 2017 Steinhoff was rocked by the abrupt resignation of its former CEO Markus Jooste at the start of a fraud scandal. Once one of the largest firms on the JSE, its share price plunged by over 95% since Jooste resigned. The group's leadership has had to deal with the triple threat of billions of euros in debt, legal claims against the company for losses and a complex and drawn-out restructuring process.

Speaking at Steinhoff's virtual Annual General Meeting in late August, its CEO Louis Du Preez said the settlement proposal would be "affordable and realistic in the current circumstances."

"We believe the settlement will remove uncertainty for all parties  - shareholders, financial creditors, litigants and management."

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