Embattled South African company Steinhoff International has admitted in its quarterly update that as a result of the accounting irregularities that were revealed in December last year, its working capital has dried up. The business is now “working hard to uncover the truth and to prosecute wrongdoing”, according to a statement from acting chairperson, Heather Sonn.
Sonn added that the resignation of former CEO Markus Jooste following the revelation of the financial issues “had a profound impact”on the company and “triggered both a liquidity crisis across the group and a significant decline in share price”.
“The group’s essential working capital, especially in its businesses outside of South Africa, largely dried up as the access of our operating businesses to their banking facilities and other credit lines were severely constrained,” she said.
“While the South African businesses could meet their ongoing obligations, many of the group’s international businesses…were at risk of failing to meet their day-to-day financial obligations.”
Meanwhile, the head of the audit committee has reported Jooste to the South African government’s Directorate for Priority Crime Investigation unit “under section 34 (1) (b) of the Prevention and Combatting of Corrupt Practices Act 2004, on the suspicion that he has committed offences thereunder”.
Steinhoff is also establishing a new governance and ethics committee, which will aim to improve corporate governance throughout the group and review its internal policies as well as the the group’s conformance to ethical and social standards.
Steinhoff Asia Pacific trading update
The update also revealed Steinhoff’s total retail revenue in Australasia in Q1 in 2018 is up 31 per cent compared to the same period last year.
Fantastic Furniture grew in constant currency of five per cent and like-for-like sales grew by two per cent. Harris Scarfe reported flat like-for-like sales, “despite a challenging department store sector in Australia, supported by a strong commerce performance”. Meanwhile, the Postie brand in New Zealand “achieved strong revenue growth driven by kids’ and baby wear”.
However, Steinhoff maintained that retail conditions in the Australasian region remain difficult, due to low wage growth and rising costs.
The South African company owns more than 40 brands around the world, including Fantastic Furniture, Freedom, OMF, Plush and Snooze.
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