Steinhoff accounting scandal dates further back

Cape Town - The accounting scandal rocking embattled Stellenbosch-based furniture and household goods retailer Steinhoff is still growing. 

Steinhoff International Holdings [JSE:SNH], the group’s Amsterdam-registered parent company, on Tuesday announced in an investor update that more of its already-published financial results would need to be restated and could not be relied on. 

Steinhoff last month said that its 2017 audited results had been put on hold while PwC conducts an independent investigation into “accounting irregularities”. It has also previously warned investors to not rely on the figures contained in its 2016 results.

On Tuesday morning, it added the 2015 financial results of Steinhoff International Holdings Propriety Limited, the conglomerate’s former listed umbrella holding company, could not be relied on. 

“Furthermore, whilst the internal review and  investigation into the accounting irregularities have not yet concluded, the restatement of the financial statements of Steinhoff International Holdings Proprietary Limited for years prior to 2015 is likely to be required and investors in Steinhoff are advised to exercise caution in relation to such statements,” it said in a statement. 

Steinhoff also said that the financial statements of Steinhoff Investment Holdings -  the umbrella company that houses Steinhoff’s African companies and assets - for the years 2015 and 2016 would need to be restated and could no longer be relied on. 

A restatement of the financial statements for Steinhoff Investment Holdings for years prior to 2015 would also “likely be required”. 

Financial troubles

Steinhoff first put its 2017 audited results on hold in early December, after its CEO Markus Jooste abruptly resigned and it announced that PwC was investigating “accounting irregularities requiring further investigation” in its books. 

Its share price has dropped over 90% since December 5 2017, erasing about R180bn in market capitalisation. 

At 11:07 on Tuesday, Steinhoff shares were changing hands at R5.35, 15.05% firmer than its previous close.  

Steinhoff said the restatements would likely not apply to Steinhoff Services, the issuer of the group's listed bonds on the JSE. 

Bloomberg Intelligence analyst Charles Allen told Bloomberg News in an email that the fact that "the restatements will not apply to Steinhoff Services should be seen as positive as it builds on the impression that the accounting difficulties are confined to some European operations".

Steinhoff is now facing at least seven different probes in Europe and South Africa, as well as a number of possible investor lawsuits.

The furniture conglomerate said it could not yet say when its internal review and PwC’s independent investigation would be completed. 

Investors are eagerly waiting to see what, exactly, caused Jooste to resign with immediate effect.

Ratings agency Moody’s referenced the “opacity” around the firm’s complicated structure (it houses 40-odd brands in 30 countries) and the "uncertainty" around what its accounting irregularities entail, in its decision to further downgrade Steinhoff late last month. 

Steinhoff, meanwhile, said it was working with its auditors to publish its 2017 financial results, which should have been made public in early December, “as soon as reasonably practicable”.

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