JOHANNESBURG/CAPE TOWN – The net is closing on Steinhoff International directors implicated in the 2017 auditing scandal after the global retailer yesterday said it would help the state to fund forensic evidence to prosecute those implicated.
The group said in a trading guidance to shareholders that it would fund auditing firm PricewaterhouseCoopers’ (PwC) forensic probe for the state’s criminal investigation into fraud allegations at the retailer. The firm completed its forensic probe in March last year and handed it to Steinhoff.
The retailer, however, released only 10 pages of the report that is believed to be more than 3 000 pages long, citing confidentiality, as handing over the report would compromise civil and criminal proceedings against implicated persons.
Among those fingered were former Steinhoff chief executive Markus Jooste and seven others involved in the €6.5 billion (R123bn) accounting fraud that led to a 95 percent decline in the group’s share price. None has thus far been brought to book.
Yesterday, Steinhoff said it was co-operating with various prosecution authorities and regulators in South Africa and other jurisdictions.
“The South African authorities have approached PwC and engaged them to perform additional expert forensic work to assist in the criminal investigation,” Steinhoff said.
“Steinhoff supports this initiative and has agreed to contribute funds to cover a substantial portion of the costs of the PwC work, due to the size and complexity of the investigation required.”
The group said its role would be limited to co-operation and funding.
“The funding is to be provided on an arm’s-length basis, with Steinhoff having no involvement in the investigation, the extent thereof and the report-back process,” the group said.
Steinhoff was facing litigation in different jurisdictions.
The group said proceedings had been instituted. However, litigation remained a significant challenge.
“In parallel with these various court processes, the management board, assisted by the company’s Litigation Working Group and the group’s legal advisers, continue to work towards a resolution of the outstanding claims against the group,” Steinhoff said.
Steinhoff flagged that it had no interest payments until the end of next year. A spokesperson for the company said this would give it a small cash-flow advantage during the coronavirus pandemic.
The spokesperson said: “Each of the group’s large operating subsidiaries is independently funded and is not dependent on the group for financial support. Currently, all subsidiaries, excluding Conforama France, are producing stronger cash flows than originally anticipated and have sufficient liquidity arrangements to support their current management forecast.”
Steinhoff said trading had improved following the easing of the lockdown restrictions, but sustainability remained uncertain. However, the group said its main subsidiaries were well positioned to gain market share in the post-Covid-19 economy.
The group’s stores typically trade in the defensive discount and value end of the retail market. Its stores benefited from pent-up demand at reopening.
It said it was too early to determine the exact impact of the pandemic on the performance of the group for the 2020 financial year, but the impact on turnover and underlying business performance was expected to be “material,” they said.
The disposal of Conforama Iberia had been disrupted by the uncertainties of the Covid-19 pandemic, and the transaction subsequently lapsed.
Conforama had also been unable to secure a state-guaranteed loan, for which it was eligible, to support the business through this difficult period.
Steinhoff shares rose 2.5 percent on the JSE on Tuesday to close at R1.23.