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Steinhoff set to release 2017 results, shares rise

Steinhoff had to put off the publication of its results after a $7.17 billion accounting fraud that stunned investors in the group.

FILE: Steinhoff logoPicture: Supplied.

JOHANNESBURG - Steinhoff on Tuesday is due to reveal the impact of South Africa’s biggest corporate scandal on its finances when it publishes 2017 earnings after repeated delays caused by the lengthy process of sorting out the retailer’s accounts.

Steinhoff had to put off the publication of its results after a €6.4 billion ($7.17 billion) accounting fraud that stunned investors in the group which had been expanding into discount furniture retailing in Europe.

The company first disclosed the hole in its accounts in December 2017, shocking investors who had backed its transformation from a small South African company to a multinational retailer.

An investigation by auditor PricewaterhouseCoopers (PwC) released in March revealed some of the scales of the fraud, but shareholders still want more information and an indication of how much Steinhoff’s remaining assets are worth.

Eight people, including former Steinhoff executives, were named in the PwC investigation, which found a complex scheme where intercompany transactions worth €6.4 billion were fraudulently recorded as external income to prop up profits and hide costs in underperforming subsidiaries.

Shares in Johannesburg-listed Steinhoff opened more than eight percent higher on Tuesday before paring gains to stand 4.02% up at R2.07 at 09:14 GMT.

“Most of the bad news has already been priced in. They’ve already done most of the impairments,” said BP Bernstein equity trader Vasili Girasis.

“The market is kind of in a ‘buy the bad news’ type of scenario because most of it is now out and hoping that from here onwards things will be a lot more stable and clearer.”

The company has already written down the value of its assets by more than $12 billion after PwC provided its initial findings in June last year.

The 2017 audited and the 2016 restated results will feature a further impairment of €1.8 billion of the group’s goodwill and intangible assets as at 30 September 2017, with the value now expected to be €7.2 billion, the retailer said on 30 April.

The reduction followed a reassessment of the value of the goodwill and intangible assets of Mattress Firm, a US bedding retailer for which Steinhoff paid a 115 percent premium to acquire the company in a $4.8 billion deal in 2016.

Mattress Firm filed for voluntary bankruptcy protection in October 2018 and exited the process less than two months later.

The retailer has delayed releasing results several times as it waited for the findings of the PwC investigation and audit process of its external auditor Deloitte.

The 2018 results are now due on 18 June.

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