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Abu Dhabi, UAEThursday 20 September 2018

Steinhoff warns PwC review likely to find profits overstated

Embattled multinational furniture maker trying to stay afloat after the emergence of accounting wrongdoing wiped almost 90 per cent off its share price

Rudolf Leiner is among retailers operated by Steinhoff. Akos Stiller/Bloomberg
Rudolf Leiner is among retailers operated by Steinhoff. Akos Stiller/Bloomberg

Steinhoff International said a review by auditors at PwC into its accounts is focused on certain off-balance-sheet structures and deals with related parties and is likely to find that some assets, revenue and profit figures have been overstated.

As a result, the owner of Mattress Firm in the United States, Conforama in France and Rudlof Leiner in Austria may need to take additional impairments to those related to €6 billion (Dh26.88bn) worth of assets already flagged, chairwoman Heather Sonn said on its website on Wednesday.

The PwC probe into accounting irregularities, which appear to be concentrated in the central European businesses, is ongoing and there’s no way of saying when it will be completed.

Steinhoff has been in constant talks with lenders to maintain liquidity and keep its outlets in operation after the emergence of accounting wrongdoing wiped almost 90 per cent off its share price. Former chief executive Markus Jooste has quit and been referred by the South African company to the country’s anti-corruption police unit. The retailer’s near-term liquidity needs have been met, Ms Sonn said, and the company is in the process of redeeming a domestic medium-term note programme.

The shares fell 4.8 per cent as of 9.26am on Thursday in Frankfurt, where the company moved its primary listing from Johannesburg two years ago. It’s still listed in South Africa and is registered in Amsterdam.

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A lawsuit by Dutch investor group VEB and investigations by regulators including South Africa’s Financial Services Board are at an early stage and it’s “impossible to estimate reliably” their impact on the company, Ms Sonn said.

Steinhoff also announced that it is nominating six new members to its supervisory board to improve corporate governance, while four board members resigned, including founder Bruno Steinhoff. The company has said it will have to restate accounts going back to 2015.

One of the new appointments is Peter Wakkie, 69, the chairman of satellite-navigation system maker TomTom. He was brought in by Royal Ahold as head of corporate governance after the Dutch retailer’s own accounting scandal in 2003.

Other proposed board members include Hugo Nelson, the former chief executive of South Africa’s Coronation Fund Managers and Clive Thomson, who until recently ran Johannesburg-based industrial firm Barloworld.

Steinhoff revenue fell 5 per cent to €4.9bn in the three months through December after the exclusion of the German unit Poco, which is related to a lawsuit brought by a former business partner. That included gains in Africa and at the Pepco and Poundland chains in Europe, although Mattress Firm’s US sales slumped 16 per cent.

“We are working hard to uncover the truth and to prosecute wrongdoing,” Ms Sonn said.

“We are co-operating fully with regulators and will continue to do so.”

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