Steinhoff Write-Offs Pass $14 Billion as Accounts Crisis Deepens

(Bloomberg) -- Steinhoff International Holdings NV has written off the value of assets by 12.4 billion euros ($14.5 billion) and counting as the embattled retailer works out what it can salvage from the wreckage of an accounting scandal.

The owner of Conforama in France and Mattress Firm in the U.S. is examining how much lost cash from inflated asset deals is recoverable and is identifying agreements made at what it calls “not arm’s length”. Any value lost on assets that can’t be recovered will be impaired, the Stellenbosch, South Africa-based company said in a statement Friday.

“The task is substantial, complex and time-consuming,” Chairwoman Heather Sonn said in a letter that accompanied unaudited earnings for the half-year through March. Steinhoff appointed PwC to probe its finances after reporting financial irregularities in December, with the final results expected to be published by the end of the year.

The net loss widened to 621 million euros in the six months through March, from a restated loss of 380 million euros a year earlier. Steinhoff also published a detailed restatement of figures for fiscal 2017, while cautioning that the calculation process was still ongoing. That included a lowering of asset values to 22.3 billion euros from 34.7 billion euros in the now discredited accounts.

“The results are as bad as one might have imagined them to be and the scale of the overstatements of profits last year is quite shocking,” Charles Allen, an analyst with Bloomberg Intelligence, said by phone.

Debt Extension

The shares traded 7.6 percent higher at 8.2 euro cents at the close in Frankfurt, where Steinhoff moved its primary listing from Johannesburg in 2015. The stock is down 97 percent since the scandal broke, and the retailer is in round-the-clock talks with creditors about restructuring 9.4 billion euros ($11 billion) of debt to shore up its balance sheet.

Steinhoff is negotiating a two-year payment delay with bondholders and lenders that would include zero cash interest, people familiar with the matter said Friday, and has negotiated a standstill so talks can be completed. The retailer initially raised cash through the sale of real estate and shares in subsidiaries, but now says the strategy is unsustainable.

Former Chief Executive Officer Markus Jooste quit when the accounting irregularities emerged and has been referred to a South African anti-corruption police unit, which is investigating three cases of fraud related to the company.

Conforama’s earnings excluding one time items fell 54 percent to 35 million euros in the six-month period as lower like-for-like sales in both Italy and Switzerland affected earnings as well as changes in management and significant store refurbishments in France.

Mattress Firm’s loss widened to 94 million euros, from 33 million euros a year earlier, as weaker sales and uneconomical discounts weighed. Steinhoff is addressing these issues and trading since March has improved significantly, the company said.

©2018 Bloomberg L.P.