DURBAN – Steinhoff International surged more than 36 percent on the JSE after its former chief financial officer, Ben la Grange, and the group’s board appeared in Parliament to give evidence on the accounting irregularities that came to light in December last year.
The share price surged to R3, up from Tuesday’s closing price of R2.20, despite La Grange revealing the extent of the scandal in the troubled retailer. However, it closed 25 percent higher at R2.75 on the JSE yesterday.
La Grange and the Steinhoff board yesterday appeared before Parliament’s portfolio committee on trade and industry, the standing committee on finance, the standing committee on public accounts and the portfolio committee on public service and administration.
La Grange told the committees that he was not aware of irregularities at Steinhoff and only found out about the mess three days before it exploded into the public domain.
“I was given the audit committee report on December 2 to sign the results and I was shocked by what I saw. The audit firm Deloitte also flagged the board about the financial statements for 2017.
"I suggested then that we wait for chief executive Markus Jooste and when he did not show up I knew there was something wrong. Jooste then resigned on December 5,” La Grange recalled.
Jooste was also absent from Parliament but he indicated that he would appear before MPs next week.
Steinhoff’s supervisory board chairperson Heather Sonn also said at the time Deloitte was in the process of reviewing statements when allegations came forward from various sources raising questions about the financials.
“The audit committee worked with Deloitte on the matter and asked for audit evidence to address concerns. The audits could not be produced, which led Deloitte to decide not to sign off on the statements,” Sonn said.
False profits
The board then appointed PwC to conduct an independent investigation on December 5.
Sonn said that Steinhoff would not stop trying to recover returns for individuals affected by the fallout of the share price, which has declined more than 95 percent and wiped out R200 billion in market capitalisation.
She added that leadership would continue to try to save the company. “The financial statements for 2017 will be released in December 2018, the financial results for 2018 will be released in January 2019,” Sonn said.
La Grange said the practice of stating false profits went back a long way. “It started so long ago, each year it increased a little bit. It is not just a huge jump in profits.”
He also revealed that he was only questioned by the Financial Services Board and not by the Hawks over the saga.
He said he was also doubtful that the share price would climb back to its previous levels.
He said the group might have to restructure its debt again because it needed to be repaid. “The debt is still there. The losses to pension funds are permanent losses, they are not temporary,” said La Grange.
In a move to save the company, the supervisory board has approved a standstill agreement with creditors for a period of three years through a lock-up agreement (LUA).
La Grange said he was saddened by the impact the fallout on investors and pension fund holders. “I do not think I did anything deliberately wrong,” he said.
Steinhoff would co-operate with regulators and authorities such as the Hawks and PwC, which was conducting a probe. “Steinhoff will continue to maintain co-operation,” Sonn said.
Steinhoff employs 120 000 people, down from 130 000 following the disposal of some subsidiaries. The group had managed to secure the jobs of staff in South Africa, Sonn said.