Steinhoff accounting scandal sinks shares, CEO exits

A Steinhoff International Holdings NV logo sits on display outside the company's offices in Stellenbosch South Africa on Wednesday Aug. 17 2016

In August, the Oldenburg prosecutor also said that it was investigating four current and former Steinhoff executives on suspicion of making "false representations in the balance sheet".

Steinhoff said it appointed Chairman Christo Wiese, one of South Africa's richest men, as executive chairman on an interim basis, and said he would conduct a detailed review of the business.

The Wednesday plunge of shares in the firm, which owns Conforama in France, Poundland in Britain, Poco in Germany and Pep in southern Africa, followed news that chief executive Markus Jooste had resigned. Steinhoff said it plans to issue audited 2017 consolidated financial statements "when it is in a position to do so" and will determine whether it needs to restate financial statements from past years.

Peter Brooke, portfolio manager at Old Mutual Investment Group - a top 20 shareholder in Steinhoff - said the resignation was a "red flag" signaling "something very serious".

Martin Jooste announced his resignation with immediate effect last night after the company announced that "new information has come to light" relating to "accounting irregularities requiring further investigation". According to the news agency Reuters, investors are now concerned that Wiese may be forced to sell shares he bought a year ago with borrowed money, which would depress Steinhoff's stock further.

Steinhoff's board said that, in consultation with its statutory auditors, it had appointed PwC to launch an independent investigation. The company has said that move related to whether revenues were booked properly, and whether taxable profit was correctly declared.

It is being reported Steinhoff did not tell investors about transactions amounting to almost $1 billion (R13,5-billion).

It is not clear if these are the accounting irregularities Steinhoff is referring to in its latest statement. A spokesman declined further comment and attempts by Reuters to contact Jooste were not successful.

Steinhoff is the owner of more than 40 brands in over 30 countries.

Kepler Cheuvreux said the pending tax and accounting investigations "could show severe irregularities".

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