Founded in Germany, Steinhoff has become one of South Africa’s biggest international businesses. It bought Poundland in the UK in 2016 and owns Harvey’s Furniture and Bensons for Beds. It owns more than 40 local brands in more than 30 countries, according to its website.
German investigators launched a probe into Steinhoff for accounting fraud, which saw the company lose ZAR194bn (£10.6bn, $14.2bn, €12bn) of its value in just two days, reports South African news website Fin24.
German business publication Manager Magazin reported in August that a two-year investigation by German authorities found “that excessive revenues have been included in the balance sheets of companies belonging to the group”.
The chief executive of South African asset manager Sygnia, Madga Wierzycka, described it “as close to a corporate-structured Ponzi scheme as one can get”.
Small proportion
In a statement on the London Stock Exchange on Monday, Investec moved to reassure investors that its credit exposures to the group represents “a small proportion of the group’s balance sheet”.
The South African and UK-listed banking and asset management group added that it “manages credit exposures within strict risk parameters to avoid any specific concentrations in its credit portfolios”.
“Thus, any one particular exposure would represent a small portion of the group’s total credit and counterparty exposures, as is the case with the group’s exposure to Steinhoff,” it added.
“Investec Bank Limited (South Africa) does have certain derivative exposures linked to the Steinhoff share price, where a trading loss could materialise. The loss could be zero but the maximum potential loss could be approximately 3% of the Investec group’s post-tax operating profit.”
In addition, the South African banking arm “holds Steinhoff convertible bonds in its available for sale portfolio. The carrying value of these bonds represents less than 0.3% of the group’s consolidated tier one capital”, the statement said.
Stock exchange reacts
The global retailer is primarily listed on the Frankfurt Stock Exchange and has a secondary listing in Johannesburg (JSE), where it was one of the largest 15 companies.
On Monday, the JSE confirmed it has launched an investigation into the company about whether it had breached any of its listing requirements specifically relating to “previous financial disclosures made to the public by Steinhoff International”.
The stock exchange said it “recognises the serious impact the recent disclosures by Steinhoff International regarding accounting irregularities had has on investors”.
South Africa’s Financial Services Board (FSB) has also instituted an investigation into possible false and misleading reports by Steinhoff International.
Shares in the troubled retailer have not been suspended in either Frankfurt or Johannesburg.
