JSE hits Steinhoff with its highest fine ever for faulty financials

Embattled retail group Steinhoff, shares of which have lost 99% of their value over the past five years, has been fined R13.5m by the JSE, the largest ever imposed by the bourse after an investigation into breaches of listing requirements.

In what was one of SA’s biggest accounting scandals, Steinhoff was forced to restate a series of prior year results in May 2019, with the effects including that the profit of €1.4bn (R27bn) it reported for its 2016 year decreased to a loss of €237m.

Steinhoff uncovered a €6.5bn (about R110bn) hole in its accounts in 2017, causing a share collapse and multiple lawsuits from former business partners and aggrieved shareholders, including former chair Christo Wiese.

The JSE announced on Tuesday that it has imposed the maximum R7.5m fine for incorrect, false and misleading statements. The bourse also imposed a R5m fine for failing to disclose the disposal of Steinhoff Global Investments in 2015, and a R1m fine for the sale of operational rights related to its then Austrian subsidiary Kika-Leiner.

The fine from the JSE follows a record R1.5bn fine from the Financial Sector Conduct Authority in September 2019 for misrepresenting its finances to the market, though Steinhoff only needed to pay R53m of this.

The JSE said this concludes the process in respect of Steinhoff as a company.

“The investigation into the conduct of individuals who presided at the company during the periods in question and who are bound by the listings requirements is ongoing,” the statement read.

Under JSE rules, the R7.5m fine is the maximum that can be imposed under the Financial Markets Act. The bourse can also impose penalties on directors, including barring them from serving on the board of a listed company for any length of time.

Chief investment officer at Opportune Investments, Chris Logan, said in terms of deterrence, ultimately there needed to be consequences for the directors involved, such as jail time.

“The fines imposed on the company are immaterial. It really only prejudices shareholders who have already been prejudiced by fraud,” he said.

CEO of technology group EOH, Stephen Van Coller, pointed out that the group’s lack of transparency was partly responsible for it being hit with a R7.5m fine for 2017 and 2018 results that understated losses. The JSE had suspended a third of the fine.

Steinhoff CEO Louis du Preez said in a statement the group is pleased the process has been concluded.

“Steinhoff notes the JSE’s decision, which relates to the period predating the discovery of accounting irregularities in December 2017,” Du Preez said.

Steinhoff’s survival is still in question as it faces the prospect of lengthy and expensive legal battles. The group unveiled a settlement plan in July, saying at the time that about 90 separate lawsuits had been filed, and while not all had quantified damages, those that had totalled R136bn.

In afternoon trade on Tuesday, Steinhoff’s share was down 1.16% to 86c, giving the group a market capitalisation of R3.66bn.

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