DURBAN - Steinhoff International share price declined by more than 13 percent on the JSE yesterday morning, with the industry analyst pointing almost to an admission of financial fraud during the annual general meeting held last Friday as a result of the decline.
The share price reversed the gains it made on Friday before the start of the AGM, where at some stage it was up to R3.20 a share, a five-day high.
However, it opened lower yesterday at R2.49 a share after the group reported the resolutions adopted in the AGM. It continued to drop even further during the day to trade just above R2.20 a share.
The independent investigations by PwC revealed that it studied more than 320 000 documents and gathered 4.4 million records on Steinhoff in the last four months since the accounting irregularities were first reported in December. Steinhoff said the PwC investigation uncovered the overstatement of income and assets in the group.
“The investigation confirmed a pattern of transactions undertaken over a number of years across a variety of assetsclasses that led to the material overstatement of income and asset values of the group,” Steinhoff said.
Steinhoff shares have dropped more than 95 percent since the scandal emerged and the group lost more than R200 billion in market capitalisation.
PwC is yet to publish its final reports about the scandal-hit retailers. Heather Sonn, the chairperson, said the results for the year to end September 2017 were put on hold while PwC was conducting the investigation, now expected to be published by the end of 2018. Cannon Asset Management chief executive Dr Adrian Saville said the Friday meeting came close to admitting to financial fraud that had taken place within Steinhoff.
Saville said while the outcome was couched in caution, the near admission had a direct result on how investors viewed the company.
“The investigation confirmed a pattern of transactions undertaken over a number of years across a variety of assets classes that led to the material overstatement of income and asset values,” he said.
Steinhoff said it wanted to publish its audited 2017 results by the end of the year.
“The second important point to be cognisant of is that the further the release of the financials is pushed out, the harder it becomes to escape the conclusion that not only is the situation highly complex but, by extension, it is also going to prolong the length of the time needed to resolve the company’s financial situation,” he said.
“While Steinhoff ’s board has committed to publishing the company’s audited financial results at the end of 2018, unravelling its web of irregularities will still take many years. In essence, Friday’s AGM probably added a few years to any present value calculation.”
He said Steinhoff issues were complex and the multiple court actions were likely to take place in various jurisdictions for many years to come.
“From Cannon Asset Managers’ perspective, the value of Steinhoff ’s ordinary equity is therefore probably zero in a best case scenario,” he said.