GIPF studies Steinhoff implications

Ogone Tlhage - The Government Institutions Pension Fund of Namibia will in due course provide a detailed assessment of the potential losses suffered as a result of its investment in Steinhoff, GIPF spokesperson Daylight Ekandjo told Market Watch.Steinhoff’s shares tumbled after US-based research house Viceroy released a report highlighting accounting irregularities committed at Steinhoff. The GIPF is Namibia’s largest pension fund by assets under management.Sharing its initial take on the Steinhoff saga, Ekandjo said that it was still too early for the GIPF to comment on the issue.“At this stage, we are unable to provide a detailed response to your query regarding our investment in Steinhoff as the investigations into the alleged accounting irregularities are still unfolding. We understand that the stock continues to trade on the Johannesburg Stock Exchange (JSE) and has not been suspended,” she said.According to Ekandjo, the GIPF’s investment advisor was putting together a report to establish its losses following its share tumble on the JSE and the Frankfurt Stock Exchange.“The GIPF is however analysing the situation and has instructed our investment consultant to follow the matter closely as it unravels and provide a comprehensive report upon the conclusion of the investigation into Steinhoff by the South African regulator [the Financial Services Board] and [various] asset managers,” Ekandjo said.ViceroyIn its report, Viceroy said Steinhoff had long been under scrutiny for seemingly inexplicable factors which included a long string of acquisitions of stagnating or deteriorating businesses whose performance seems to miraculously improve post-acquisition, even if only on paper.Viceroy also found that Steinhoff’s cash flow trends did not correspond to earnings before interests, tax, depreciation and amortisation.“We found their acquired businesses are struggling but net income has been artificially propped up by a massive web of undisclosed related party transactions. It is possible this is just the tip of the iceberg. Considering Steinhoff’s poor cash flow conversation it is impossible to determine from the outside what real profit is being generated at this highly leveraged conglomerate,” Viceroy said.The research house also found Steinhoff’s company structure to be questionable and felt that its management were not transparent while good corporate governance was lacking.“Steinhoff’s confusing roll-up structure likely holds numerous other secrets which are yet to uncover. Viceroy believes incestuous managerial transactions; lack of transparency and entirely non-independent governance make Steinhoff borderline uninvestable. Investors should demand more information from management on transaction background and demand independent proxies be appointed to the board,” it said in its report.Steinhoff’s shares fell as much as 62% on 6 December 2017 after its former CEO Markus Jooste resigned amid a probe of accounting irregularities. The market value of the furniture retailer, which is based in South Africa but listed in Germany, has dropped to €4.5 billion from about €20 billion in June, Bloomberg had earlier reported.Kassie:Board member resigns to focus on Africa unitSteinhoff International Holdings NV said yesterday that Jayendra Naidoo resigned as a member of its supervisory board to focus his efforts on the board of its unit, Steinhoff Africa Retail Ltd (STAR), which he chairs.STAR includes brands like Pep, Ackermans and HiFi Corp.Steinhoff International said Naidoo's post would be filled by a new independent director to be appointed in due course."The supervisory board continues to keep the governance of the group under review and a number of candidates are in the process of being approached to strengthen the independence of the supervisory board," the firm said in a statement.Steinhoff spun off its African chains last year to secure a higher rating for its developed market businesses and to give investors keen on exposure to Africa a chance to invest in STAR directly.In December, STAR reported a 25% rise in full-year operating profit, thanks mainly to cost cuts and a strong showing at discount clothing chains."STAR will continue to be a key part of the Steinhoff group and it is important to have a focused board and management team in place to maximise the potential of the business," Steinhoff's acting chair, Heather Sonn, said.By 0843 GMT, shares in STAR rose 5.3% to R19.06, while Johannesburg-listed shares of Steinhoff climbed 6.23% to R6.99. – Nampa/Reuters

GIPF studies Steinhoff implications

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GIPF studies Steinhoff implications

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