Steinhoff’s six months’ loss deepens to double and hits more than 1.5 billion
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CAPE TOWN - Embattled global retailer Steinhoff yesterday flagged that its losses had widened more than initially projected in the six months to March, doubling to 1.5 billion (R29.08bn) as Covid-19 disrupted supply chains and halted its operations.
The retailer, which made a R16.5bn proposal to settle legal claims against it this week, said the losses widened from 571 million from the corresponding period last year despite a marginal uptick in sales. It said sales improved by 1 percent to 6.24bn off strong contributions from subsidiary Pepco Group (which lifted sales 10percent), Pepkor Africa (3percent), Mattress Firm (15percent) and Fantastic Furniture (6percent).
Earnings before interest and tax from continuing operations fell by 10percent to 250m, on a pro forma basis.
On the same basis, earnings before interest, tax, depreciation and amortisation fell 7percent to 365m.
Office, store and warehousing facilities were closed from mid-March to the end of the half-year, due to lockdowns in most of the countries where the group operates.
With the exception of a few stores trading as “essential retail”, most of the group stores were closed in April, and as restrictions began to ease in May, re-openings commenced, with almost all stores open by the end of June.
Steinhoff said that initial trade was better than expected, with revenue trending towards pre-lockdown levels, and the cash position as of early July was significantly stronger than was anticipated at the outbreak of the pandemic.
It said work to secure the financial restructuring of the group in 2019 brought the stability necessary for the group to be able to concentrate fully on addressing the Covid-19 challenges.
“Our strategic objectives for the period ahead are clear: we will focus on our operations, work to secure the litigation settlement proposal and realise value where appropriate in order to reduce our debt levels,” Steinhoff said.
The costs of the restructuring process “continue to be substantial”.
Advisory fees, to assist in the legal and financial restructuring, amounted to 58m, a reduction on the prior period’s 82m.
However, these fees were expected to be a feature of Steinhoff results for some time, they said.
During the reporting period, South African authorities approached accounting firm PricewaterhouseCoopers (PwC), which completed the independent forensic report commissioned by the Steinhoff Group, and engaged them to perform additional expert forensic work to assist in the criminal investigation, an initiative supported by Steinhoff, which had agreed to contribute funds towards the costs of the PwC work.
Each of the group’s large operating subsidiaries was independently funded and were not dependent on the group for financial support.
All subsidiaries, excluding Conforama France, were producing stronger cash flows than originally anticipated and had sufficient liquidity to support their current management forecast, management said.
They said while it was too early to determine the full impact of the Covid-19 pandemic on the performance of the group for the 2020 financial year, turnover and business performance would be impacted.
The Pepco Group reported a first half pro forma operating profit of 111m, 5percent lower than in 2019.
On the same basis, Pepkor Africa’s operating profit was static at 210m, Conforama’s operation loss widened to 40m from 9m, while the Greenlit Brands household products business reported a 40m operating loss versus a 3m operating profit previously.
Steinhoff shares declined 2percent on the JSE to close at R0.98.