CAPE TOWN – Shareholders in Steinhoff International can breathe a sigh of relief after the embattled retailer was ordered to pay a reduced fine of R53 million by the Financial Sector Conduct Authority (FSCA) for accounting regularities at the company in December 2017.
By 1pm on the JSE, the share price was up by 1.89 percent to R1.08 on the JSE as the market welcomed the reprieve.
The company on Thursday was slapped with a record R1.5 billion fine, but due to mitigating factors and the "financial reality of the group" granted the company a reprieve from paying the full amount.
"Noting Steinhoff’s current financial position; to avoid penalising innocent Steinhoff shareholders further; in recognition of the fraud perpetrated on the Steinhoff Group by former employees and officers of the company; and in acknowledgement of the co-operation of management to date and Steinhoff’s commitment to continue co-operating fully with the FSCA in all future actions taken against any persons allegedly responsible for the wrongdoing, the FSCA has resolved, under Section 173 of the Financial Regulation Act No. 9 of 2017, to remit a portion of the administrative penalty resulting in Steinhoff paying a penalty of R53m," it said.
The FSCA said that events subsequent to December 2017 had highlighted the gap that existed between the Steinhoff Group’s prior public statements and the financial reality. The size of the headline penalty reflects the scale and severity of the regulatory breach. While, in light of Steinhoff’s current financial position, we have made the decision to remit a substantial proportion of the penalty, even after this reduction it remains the largest single fine ever imposed by the FSCA." The FSCA thanked the current Steinhoff management team for their co-operation and constructive engagement through "this difficult and complex process."
Louis du Preez, the group chief executive of Steinhoff, said: "This regulatory action relates to the activities of the Steinhoff Group in respect of the period prior to the discovery of the accounting irregularities in December 2017. We are pleased that the matter has now been brought to a conclusion and that the FSCA has recognised our full co-operation with the investigation. There is no further enforcement FSCA actions outstanding against the Steinhoff Group."
Steinhoff recently warned that the number of lawsuits against it continued to pose a challenge.
“Our strategic direction is clear: we will focus on rectifying, restructuring and rebuilding our operations; stabilising the group, realising value where appropriate and reducing our debt levels; protecting and enhancing value for all stakeholders through long-term growth in the underlying operations while exercising tight control of capital and expenses,” the group said.
Earlier this month Du Preez said the group had granted the Hawks and National Prosecuting Authority access to the PricewaterhouseCoopers ) report for potential criminal charges against t executives and directors implicated in the financial irregularities.
The group said that it had also engaged law enforcement agencies to bring those responsible to book.
The retailer last month secured a restructuring agreement on about €9 billion ($145bn) of debt. Last month is said it was the recovery path after consolidated net sales from continuing operations in the nine months to end-June rose 4 percent to R10.1bn.
Steinhoff said a mixed strategy of offloading non-core assets and securing operational funding in the majority of viable companies enabled it to capitalise on those that it has control over, which were beginning to turn the corner.