Steinhoff Caught Out In Accounting Scandal
Rival bidder to JB Hi-Fi in its acquisition of The Good Guys, Steinhoff Asia Pacific, has become embroiled in an accounting scandal, which has caused the resignation of long-time Chief Executive Markus Jooste.
Following over a decade’s tenure, recent reports reveal Jooste stepped down on Wednesday, following revelations the company hired PwC to look into “accounting irregularities”.
Whilst Steinhoff International has provided no explicit details about the accounting irregularities, the company has reportedly been under investigation by German authorities since 2015.
Steinhoff reportedly affirmed that the German investigation was a tax case, concerning whether revenues were correctly booked, and taxable profit accurately declared.
Mr Jooste was also a Director of Steinhoff’s Australian arm – Steinhoff Asia Pacific Holdings – which owned retailers such as Freedom, Fantastic, POCO, Snooze and Best & Less.
The news comes after former The Good Guys CEO, Michael Ford, was appointed to lead Steinhoff Asia Pacific Group Holdings. Mr Ford resigned in April after 13 years of tenure with The Good Guys, with former JB Hi-Fi CEO, Terry Smart, appointed as his successor.
On Wednesday, prosecutors in Saxony – home of Steinhoff’s European subsidiary – revealed there was “suspicion that inflated revenue numbers had made their way into accounts. This may have led to an inflated book value of the group.”
Investigators are reportedly analysing whether Steinhoff boosted its figures by selling intangible assets and partnership shares, without revealing it had close connections to buyers.
In June last year, Steinhoff Asia Pacific Holdings Pty Ltd was acquired by Steinhoff Asia Pacific Group Holdings for an undisclosed figure. However, reports reveal that Steinhoff Asia Pacific Group Holdings – established just days before the transaction with a paid-up capital of $375 million – issued $165 million shares on June 24th to parent company Steinhoff UK Holdings.
Steinhoff Asia Pacific reportedly earned a net profit of $15.9 million in 2016, with sales of $663.3 million, following net profit of $5.5 million, and sales of $453.9 million the previous year.
Steinhoff’s Australian accounts are reportedly audited by PwC, with Deloitte its European auditors.
Following Steinhoff’s announcement of the investigation, and the delayed release of its 2017 accounts, shares in the African Frankfurt-listed company fell more than 60% to €1.10 ($1.72).
ASIC has informed The Financial Review it will consider any request from a foreign regulator about a parent company’s accounting matters, and its impact on local companies, however, declined to comment on whether it was investigating Steinhoff.