Accounting scandal at Dealz owner sinks share price

Steinhoff has lost $12bn of its value since revealing ‘accounting irregularities’

Dealz is ultimately owned by South African-based Steinhoff. Photograph: Eric Luke

Dealz is ultimately owned by South African-based Steinhoff. Photograph: Eric Luke

 

Dealz parent Steinhoff has lost more than $12 billion (€10.2bn) off its value since it revealed “accounting irregularities” and parted ways with its chief executive in a dramatic fall from grace for the South African retailer.

Once a must-have for investors, who backed its reinvention as a retail empire including brands such as Mattress Firm and Dealz/Poundland under veteran CEO Markus Jooste, Steinhoff shares fell by 43 per cent on Thursday, compounding the previous day’s more than 60 per cent fall.

This collapse leaves South African tycoon Christo Wiese, Steinhoff biggest shareholder and chairman, seriously out of pocket, eroding $2.8 billion of his net worth.

It also prompted an urgent call by South Africa’s finance minister Malusi Gigaba for pension fund managers to report back on their exposures to the sudden sell-off, saying the accounting issue was a “grave concern”.

South Africa’s Public Investment Corporation (PIC), the retailer’s second largest shareholder, said the allegations against Steinhoff were “serious concerns”.

The PIC, which manages civil servants’ pension funds, said in a statement it holds around 10 per cent of Steinhoff’s stock.

The shares closed down 43 per cent at 10 rand in Johannesburg, and were down more than 40 per cent in Frankfurt, where it has had its primary listing since 2015.

Steinhoff has responded by putting 76-year-old Mr Wiese, one of the most respected business leaders in South Africa, in charge for now, and calling in PwC to investigate the accounting problems. It has also sought to reassure investors by saying it has enough liquidity to fund its existing operations.

Market share

Mr Wiese and Mr Jooste were instrumental in reinventing Steinhoff, turning it from a modest distributor of furniture made in communist era eastern Europe to a global household goods retailer, vying for market share with the likes of Ikea.

Steinhoff has been on a shopping spree since 2011, when it took over French furniture retailer Conforama. Last year’s string of acquisitions included Mattress Firm and Poundland – the UK parent of the Dealz retail chain in Ireland – thrusting it firmly onto investors’ radar screens.

Steinhoff has been under investigation for suspected accounting irregularities by the state prosecutor in Germany since 2015. Four current and former managers are under suspicion of having overstated revenues at subsidiaries, German prosecutors said this week.

Steinhoff has previously said that move related to whether revenues were booked properly, and whether taxable profit was correctly declared. – Reuters