• Steinhoff overstated its revenue from retail operations in the first half of 2017 by €389 million, new numbers show.
  • Its real profit margin was also "materially lower" than previously stated. 
  • The company expects to suffer a loss for the first half of 2017.

Almost a year ago, before its CEO’s sudden resignation and a cataclysmic loss of confidence in the company, Steinhoff reported that it earned revenue of €9.689 billion from its retail operations for the first half year of 2017.

The real number is now estimated to be €9.3 billion – €389 million (almost R6 billion, at today's rates) lower than previously stated.

In a presentation released to its European creditors on Friday, management also restated its profit margins for that period. Its Ebitda margin (earnings before interest, taxes, depreciation, and amortisation, as a percentage of its total revenue) has provisionally been downgraded to 5% - 6%.  

Steinhoff management says the new margin number incorporate “accounting issues” identified to date – and that it would be “materially lower” than the numbers that were previously reported.

Last year, Steinhoff said its organic margin (excluding acquisitions) was 11.5%. Steinhoff said yesterday that its margin for first half of 2018 is expected to be between 4% - 5%.

The group now expects to post an after-tax loss for the first half of 2018. (In the first half of 2017, it reported a €711 million after-tax profit.) The new numbers reflect management's current best estimates and remain subject to review, Steinhoff said. Steinhoff will report its results on 29 June

PricewaterhouseCoopers is currently sifting through four million documents to determine what went wrong at the company. So far it has confirmed “a pattern of transactions undertaken over a number of years across a variety of assets classes that led to the material overstatement of income and asset values of the group”.

The more immediate crisis is that €10.4 billion of its debt becomes payable in August, and it doesn’t have the money. Steinhoff execs met with banks in London on Friday to try to persuade them to agree to a new debt restructuring plan.

This involves a number of proposals, including postponing repayment by three years. 

Slide from a presentation to Steinhoff's European creditors, released on Friday.

While no agreement has yet been reached, Steinhoff's share price rallied on Friday. It ended the day more than 12% stronger on 178c, after reaching a record low of 152c earlier this week.

Steinhoff now looks undervalued, depending on exactly how much money was lost to fraud,  Herenya Capital Advisors founder Petri Redelinghuys said on Friday.

“Companies such as Mattress Firm in the US and Kika/Leiner in Austria and Conframa in Europe are the three big things dragging down Steinhoff’s potential value,” Redelinghuys told Business Insider South Africa. “The rest of the business seems pretty stable and surprisingly profitable.”

Steinhoff said on Friday it expects revenue of €9.4 billion in the first half of the 2018, compared to €9.3 billion a year ago.

The reality is that creditors don’t want to lend Steinhoff money anymore, says Redelinghuys. “[But] the company is showing all the correct signs… appealing to creditors to restructure its credit to give it liquidity (money) so that it can continue doing business.”

Steinhoff is currently facing lawsuits from prominent banker GT Ferreira for R1.5 billion (€100 million) and by the vendors who sold it Tekkie Town for R1.8 billion (€120m). It is also facing a roughly R59 billion claim from former chairperson Christo Wiese, and it now expects a court hearing in Amsterdam before the end of September on a claim by Dutch investors association VEB.

But Redelinghuys believes it is unlikely any of Wiese’s lawsuits would be successful. “I don’t see him getting back that money.”

Redelinghuys, who bought Steinhoff shares himself on Friday after the presentation, said the only big surprise awaiting shareholders is the amount of money missing from the retailers' books.

“We’ll only find out that out when we receive the backdated audited reports in December - so there’s still a long way to go.”

 

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