After 95% Stock Plunge, Steinhoff Finally Faces Angry Investors

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(Bloomberg) -- When Steinhoff International Holdings NV held its annual general meeting a year ago, the company had a market value of about 20 billion euros ($25 billion). Now it’s less than 1 billion euros.

More than four months after the retailer found a hole in its accounts and Markus Jooste quit as chief executive officer, shareholders still have little information about the scope of the wrongdoing or the state of the company’s finances. They’ll get their first public opportunity to demand answers at Friday’s AGM. Whether management will provide any is unclear.

“They can’t fob off shareholders and pretend that anything is normal,” Mark Hodgson, a Cape Town-based analyst at Avior Capital Markets, said by phone. “They need to convince shareholders that when it comes to the group’s future there is a plan and sufficient urgency and focus on preserving some value.”

Jooste led an acquisition spree that turned the Stellenbosch, South Africa-based retailer into a global giant. Shareholders bought into the expansion, fueling a tripling in the stock price between late 2012 and early 2016. In December, the company disclosed that it found accounting irregularities and the stock began a dizzying plunge of as much as 95 percent.

Since then, Steinhoff has been offloading assets to raise cash and negotiating with creditors to keep the company afloat. It’s raised about $1.7 billion selling everything from a company jet and a Vienna department store to shares in a South African household goods retailer. So far, it’s held onto its main international subsidiaries, which include Conforama in France, Poundland in the U.K. and Mattress Firm in the U.S.

Steinhoff needs to show it has “a clear turnaround plan, rather than selling dribs and drabs,” said Theo Botha, a shareholder activist. “For a turnaround, you have to act with speed.”

Steinhoff has been unwilling to disclose much about the accounting issues while PwC carries out a forensic audit that could drag on until the end of the year. The company did reveal in February that the review is focused on certain off-balance-sheet structures and deals with related parties and that additional impairments may be required beyond those already flagged. Most of the irregularities appear to relate to the group’s business in central Europe, it said.

With that statement, Steinhoff “lifted its skirts a little bit more,” said Charles Allen, a London-based analyst at Bloomberg Intelligence. He expects the company to give some fresh details Friday.

For a second year, Steinhoff will hold its AGM at a hotel near Schiphol airport after moving its official head office to Amsterdam and its main stock-market listing to Frankfurt from Johannesburg. The company is still managed from its South African headquarters in Stellenbosch, a wealthy town surrounded by vineyards about 45 minutes by car from Cape Town. Shareholders will also be able to view a live broadcast of the meeting and ask questions from a conference center in Cape Town.

South African labor groups, which say they represent workers whose pension funds lost billions of rand when Steinhoff’s shares crashed, said they planned to protest outside the building in Cape Town before the event. 

The company will give an update on the actions taken since December to stabilize its cash position and strengthen corporate governance, according to the agenda. There will also be a review of Steinhoff’s business and strategy, followed by a Q&A session.

To pacify shareholders, Steinhoff has scrapped the AGM’s most controversial proposal—a vote on additional payouts to supervisory board members, including interim Chairman Heather Sonn, as a reward for extra work to avert a collapse.

Steinhoff has nominated five new members to its supervisory board, including Peter Wakkie, who was brought in by Royal Ahold NV as head of corporate governance after the Dutch retailer’s own accounting scandal in 2003. It’s also proposing to reappoint Sonn, audit committee head Steve Booysen, and the founder’s daughter, Angela Kruger-Steinhoff, citing a need for continuity and knowledge of the company.

“Arguably, they should have found more people from the outside,” Allen said. “But it may be more difficult to attract an external appointment, at least before it’s clear whether the company is a going concern.”

©2018 Bloomberg L.P.

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