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Abu Dhabi, UAEThursday 19 July 2018

Fallen furniture giant Steinhoff writes off €12bn assets value

Company appointed PwC to probe its finances after reporting financial irregularities in December

One of Steinhoff's Kika/Leiner furniture and household goods retail stores is seen in Vienna, Austria June 15, 2018. REUTERS/Leonhard Foeger
One of Steinhoff's Kika/Leiner furniture and household goods retail stores is seen in Vienna, Austria June 15, 2018. REUTERS/Leonhard Foeger

Steinhoff International has written off the value of assets by €12.4 billion (Dh53.22bn) and counting as the embattled retailer works out what it can salvage from the wreckage of an accounting scandal.

The owner of Conforama in France, Mattress Firm in the US and Kika/Leiner in Austria among others, is examining how much lost cash from inflated asset deals is recoverable and is identifying agreements made at what it calls “not arm’s length”. Any value lost on assets that can’t be recovered will be impaired, the Stellenbosch, South Africa-based company said.

“The task is substantial, complex and time-consuming,” chairwoman Heather Sonn said in a letter that accompanied unaudited earnings for the half-year through March. Steinhoff appointed PwC to probe its finances after reporting financial irregularities in December, with the final results expected to be published by the end of the year.

The net loss widened to €621 million in the six months through March, from a restated loss of €380m a year earlier. Steinhoff also published a detailed restatement of figures for fiscal 2017, while cautioning that the calculation process was still ongoing. That included a lowering of asset values to €22.3bn from €34.7bn in the now discredited accounts.

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“The results are as bad as one might have imagined them to be and the scale of the overstatements of profits last year is quite shocking,” said Charles Allen, an analyst with Bloomberg Intelligence.

The shares traded 7.6 per cent higher at 8.2 euro cents at the close in Frankfurt on Friday, where Steinhoff moved its primary listing from Johannesburg in 2015. The stock is down 97 per cent since the scandal broke, and the retailer is in round-the-clock talks with creditors about restructuring €9.4bn of debt to shore up its balance sheet.

Steinhoff is negotiating a two-year payment delay with bondholders and lenders that would include zero cash interest, people familiar with the matter said Friday, and has negotiated a standstill so talks can be completed. The retailer initially raised cash through the sale of real estate and shares in subsidiaries, but now says the strategy is unsustainable.

Former chief executive Markus Jooste quit when the accounting irregularities emerged and has been referred to a South African anti-corruption police unit, which is investigating three cases of fraud related to the company.

Conforama’s earnings excluding one time items fell 54 per cent to €35m in the six-month period as lower like-for-like sales in both Italy and Switzerland affected earnings as well as changes in management and significant store refurbishments in France.

Mattress Firm’s loss widened to €94m, from €33m a year earlier, as weaker sales and uneconomical discounts weighed. Steinhoff is addressing these issues and trading since March has improved significantly, the company said.