Dealz owner Steinhoff says accounting issues stretch back to 2015

Dealz owner Steinhoff will have to restate its 2015 accounts and maybe earlier figures, the South African retailer said, having already warned on its 2016 numbers.

The firm, which owns more than 40 retail brands including Dealz, Conforama, Mattress Firm and Poundland, is fighting for survival after flagging accounting irregularities last month and parting ways with its veteran chief executive Markus Jooste.

A review being carried out by accounting firm PwC now suggests that “accounting irregularities” may stretch beyond 2015, it said.

“Whilst the internal review and investigation into the accounting irregularities have not yet concluded, the restatement of the financial statements ... for years prior to 2015 is likely to be required,” Steinhoff said in a statement.

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The company last month postponed its 2017 results until the investigation is over. Steinhoff said the timeline for the completion of the investigation remained uncertain.

The company had reported a €1.4 billion net profit in 2016 while its 2015 accounts showed earnings of €959 million, according to Steinhoff’s annual reports.

“The latest information confirms what we’ve suspected all along (about the reliability of the results for 2015 and beyond),” one hedge fund manager said, declining to be named. “What we’re eagerly waiting for is the outcome of the PwC investigation.”

Fall from grace

The accounting scandal marks a fall from grace for the retailer, which has grown rapidly via an international mergers and acquisitions spree that began in 2011 with the acquisition of Conforama, Europe’s second-biggest furniture retailer.

It has also tainted the reputation of Steinhoff’s chairman and biggest shareholder, Christo Wiese, considered one of South Africa’s most respected stewards of shareholder capital.

Shares in Steinhoff, once dubbed Africa's Ikea, have fallen about 90 per cent since news of the accounting irregularities broke in early December, wiping 185 billion rand (€12.4 billion) off its market value.

It warned then that there was a €2 billion hole in its balance sheet and has since said that some credit facilities have been suspended or withdrawn as it grapples with more than €10 billion in outstanding debt.

Separately, the company has been under investigation for suspected accounting fraud in Germany since 2015. It moved its primary share listing from Johannesburg to Frankfurt late that year.

Four current and former managers are under suspicion of having overstated revenue at subsidiaries, prosecutors said.

Steinhoff has said the German investigation relates to whether revenue was booked properly, and whether taxable profits were correctly declared. – Reuters