DGAP-News: Steinhoff International Holdings N.V. / Key word(s):
Miscellaneous
Steinhoff International Holdings N.V.: Media Release
2020-06-30 / 23:54
The issuer is solely responsible for the content of this announcement.
*Steinhoff International Holdings N.V. Media Release*
Steinhoff International Holdings N.V. (the "Company" or "Steinhoff") and
with its subsidiaries, the "Group")
The Company has today published its Annual Report, including the audited
Consolidated Financial Statements, for the year ended 30 September 2019.
This report is available on the Company's website
http://steinhoffinternational.com/ [1]. This Annual Report contains the
following Message from the Management Board.
*Message from the Management Board*
We are continuing our journey to address past deficiencies, and to bring
stability to the Group and its businesses.
While the road ahead remains difficult, the financial year ended 30
September 2019 was a pivotal period for the Group, during which we made
tangible progress, most significantly with the completion of our financial
restructuring following the implementation of the CVAs and the associated
changes to our group structure and governance arrangements. Furthermore, the
Group reclassified a number of businesses as discontinued operations or
held-for-sale assets and adopted a number of new IFRS statements.
The final months of the 2019 financial year marked the successful completion
of phase one of the three-phase recovery process, with the implementation of
the Group debt restructuring. In the period that followed we have been
concentrating on possible solutions to the litigation faced by entities
within the Group and debt reduction initiatives. However, these remain
demanding objectives.
Major milestones were achieved in May and June 2019 respectively when we
published the delayed 2017 and 2018 Annual Reports. Thereafter, in August
2019 we satisfied all the conditions necessary to successfully implement the
financial restructuring, the culmination of a major collective effort by
internal and external teams over the preceding twenty-month period. This
significant achievement secured a period of financial stability for the
Group up to the end of December 2021, during which we can restructure our
businesses, dispose of assets to reduce debt to more manageable levels
and/or restructure the debt as part of our recovery plan.
The scope of work necessary to complete the financial restructuring was wide
ranging, complex and highly technical, involving hundreds of creditors,
specialist legal and financial advice and parallel processes across multiple
jurisdictions. The sheer volume of announcements made by the Group in the
lead-up to August 2019, on both financial reporting and restructuring
activities, amply demonstrates the scale of these endeavours. However, after
August, the Group moved into a different, and by necessity less visible,
phase of the recovery process. Our determination to complete the job at hand
is undiminished and work continues on many challenging fronts.
As in the previous financial year, the costs of these processes were
substantial, and they had a significant impact on the reported results for
the year. Advisory fees for the Reporting Period amounted to EUR 158
million (2018: EUR 117 million). The total included EUR 16 million (2018:
EUR 24 million) relating to the forensic investigation and technical
accounting support, and EUR 67 million (2018: EUR 43 million) relating to
creditor advisor fees, which we are obligated to fund.
In addition, following the events uncovered during December 2017, the audits
for the 2017 and 2018 financial years were extremely complex and time
consuming, and required the restatement of prior year results. The audit
work for 2017 and 2018 was completed over multiple periods and was expensed
in both the 2018 and 2019 Reporting Periods. The majority of the 2018 audit
was performed in the 2019 Reporting Period and has been expensed in the 2019
Reporting Period. The majority of the 2019 audit work was performed in the
2020 Reporting Period and will be expensed in the 2020 Reporting Period when
billed.
Every effort is being made to limit advisor costs and, with implementation
of the financial restructuring now behind us, we expect the total to fall in
the 2020 financial year.
However, legal advisory fees are expected to remain significant in the
period ahead as we attempt to resolve and deal with outstanding litigation
and seek redress against former executives and related parties.
*Financial Performance *
During the period Steinhoff was refocused as a global holding company with a
broad range of interests in the retail sector. These businesses operate a
number of strong local brands and are well diversified by geography and
business line. Individual businesses, such as Pepkor Africa and Pepco Group
(formerly Pepkor Europe), continued to perform robustly, while others
remained in turnaround but reported more encouraging trade, such as Mattress
Firm, or, like Conforama, remained at an earlier stage of their recovery
journey.
Despite the many challenges we faced in the 2019 financial year, the Group
reported a resilient performance, with strong results from certain
businesses compensating for weaker outcomes from those still in turnaround.
Total revenue from continuing operations for the year ended 30 September
2019 increased by 5% to EUR 12.0 billion (2018: EUR 11.4 billion), with
strong contributions from Pepco Group (+12%) and Pepkor Africa (+4%).
Further information on the performance of the Group's individual operating
businesses is contained within the accompanying Operational Review.
*Achievements in the year *
The Group achieved a number of important milestones during the Reporting
Period:
- The demanding and complex task of finalising the 2017 and 2018 Annual
Reports was completed in May and June 2019 respectively. In the
circumstances in which we found ourselves after the disclosures of December
2017, the challenge this presented should not be underestimated and
finalisation of the accounts was a major achievement that allowed the Group
to restore near normal communications with the financial markets.
- Half-year and third-quarter financial reporting was maintained as
scheduled in the balance of 2019.
- PwC completed its forensic investigation and delivered its report to
Werksmans, the Group's lawyers. While the content of the PwC Report is
confidential, and subject to legal privilege and other restrictions, the
Group provided the market with an overview of its content in March 2019.
- Recognising the imperative to address past governance failings, new,
stronger structures for oversight and control were put in place. The
reconstituted Management and Supervisory Boards continue to work well
together.
- Key appointments were made to the Management Board with Louis du Preez
assuming the post of CEO with effect from 1 January 2019 and Theodore de
Klerk being appointed CFO with effect from 1 September 2019.
- Management teams within the various investment businesses remained stable
and focused on their specific responsibilities throughout the year. We thank
them once again for their loyalty, dedication and commitment.
- Mattress Firm emerged from Chapter 11 proceedings, having successfully
exited approximately 640 underperforming stores. Its recovery plan continued
to deliver a significantly improved performance.
- Conforama made further progress with a broad-based project to reduce its
losses and establish a pathway to profitability, reaching agreement with its
creditors to raise the new funds necessary to restructure its operations. A
plan to restore sustainable competitiveness in its core French operations
was announced in July 2019 before the businesses were impacted by the
COVID-19 related restrictions
- Our efforts to address the Group's liquidity issues through a financial
restructuring came to fruition in August 2019 when SEAG and SFHG, the two
subsidiaries where most of the Group's financial creditors are concentrated,
implemented a debt restructuring through an English Company Voluntary
Arrangement ('CVA') process.
- Pepkor Europe was renamed Pepco Group during September 2019 to more
directly link the business to PEPCO, its market leading Central European
retail operation.
Momentum has been maintained thereafter in the period subsequent to 30
September 2019, with a number of further announcements:
- In November 2019, the General Meeting appointed Mazars Netherlands as the
external auditor for the financial year ended 30 September 2019.
- In November 2019, the Group announced that it was evaluating a range of
strategic options for the Pepco Group, including a potential Initial Public
Offering (IPO). No definitive decision has been taken with respect to any
specific course of action or timing.
- The sale of the ABRA furniture business was finalised in September 2019.
- In line with its objective of streamlining the Group's portfolio and
deleveraging its balance sheet, Steinhoff announced the sale of The Blue
Group Hold Co Ltd, the owner of Bensons for Beds, Harveys Furniture and
upholstery & bedding manufacturers Relyon, Steinhoff UK Beds and Formation
Furniture, in November 2019.
- Also, in November 2019, Greenlit Brands announced the sale of its General
Merchandise division to enable it to concentrate on its core household goods
brands, which enjoy strong market positions in Australia and New Zealand.
- The disposal of Unitrans, the Group's automotive retail business, was
finalised in December 2019, including the 25.1% share sold to Kapela in a
Broad- Based Black Economic Empowerment transaction.
- In January 2020, the Group finalised the sale of its equity holding in US
manufacturer Sherwood Bedding, to Tempur Sealy.
- The Group also successfully completed the sale of various properties in
South Africa and Europe.
*Financial Restructuring *
The financial restructuring of the Group became effective on 13 August 2019
when the SEAG and SFHG CVAs were successfully implemented. Under the terms
of the CVAs, the existing debt instruments in SEAG and SFHG were reissued
with effect from 13 August 2019, with a common maturity date of 31 December
2021. No cash interest is payable by the Group in this period, as interest
will accrue and is only payable when the debt matures, providing Steinhoff
with a period in which it can concentrate on reducing debt and restoring
value.
*Remediation Plan *
During the previous Reporting Period, the Management Board developed a
Remediation Plan containing a wide range of measures to limit the possible
recurrence within the Group of irregularities and instances of
non-compliance with laws and regulations.
Significant further progress was made with the implementation of these
remedial actions during the Reporting Period, with work concentrated on the
completion of improvements to policies and procedures in respect of
financial accounting, conflict of interest and supplier and contract
management. Please refer to the Risk Management section of the Report of the
Management Board for more information.
The Remediation Plan will remain an area of focus throughout the 2020
Financial Year.
*Litigation *
Litigation remains a significant outstanding challenge for the Group. It has
been a major focus for management in the period since implementation of the
financial restructuring in August 2019.
In parallel with these various court processes, the Management Board,
assisted by a litigation committee and the Group's legal advisors, continues
to work towards a resolution of outstanding claims against the Group.
In parallel, we are also evaluating potential claims we may have against
third parties, and recoveries against implicated entities and individuals
have been, and will continue to be, initiated where appropriate.
*Governance *
On 18 May 2020, Heather Sonn resigned as chairperson of the Supervisory
Board. We thank her for her support throughout this difficult period for the
Group.
As announced on 22 May 2020, Moira Moses, who joined the Supervisory Board
in early 2018, has been designated as Chairperson.
*Outlook *
Looking back on 2019, we can be encouraged about the progress made but we
must also remain realistic about where we find ourselves at this point in
our journey. We take encouragement from the many achievements of the year,
most significantly the implementation of the financial restructuring in
August and the period of stability that this has enabled. However, real
uncertainties remain, and we still face a number of tough challenges. Our
view of our situation has not changed in the period subsequent to the
year-end.
Trading conditions reflect a tough global economy. Businesses such as Pepkor
Africa and Pepco Group grew strongly prior to the onset of the COVID-19
crisis. Conforama, Mattress Firm and Greenlit Brands retained strong market
positions but remained in recovery.
In common with businesses around the world, we saw a material impact from
the COVID-19 pandemic from mid-March 2020 when lockdowns were initiated in
Europe and South Africa. Steinhoff's retail business investments remain
geographically well diversified and their focus on providing everyday
products at affordable prices, through a stable of strong local brands,
gives some resilience in this environment, but the breadth of measures
adopted worldwide to combat COVID-19 have inevitably impacted on our trading
performance.
In mid-March management acted swiftly to implement a definitive COVID-19
response strategy. Initially, this focused on ensuring employee and customer
safety, securing liquidity and preserving and maximising the Group's cash
position. Cash positions were maximised through the immediate draw down of
committed facilities, working collaboratively with key suppliers to defer or
cancel stock commitments, appropriate use of government support and funding
schemes in territories where criteria were met and reducing discretionary
expenditure. Thereafter, attention turned to the actions necessary to return
to a more normal trading position, particularly with regard to enhanced
online trading, securing seasonal inventory, and to positioning the
businesses to take advantage of the longer term opportunities resulting from
the changed competitive environment. As we have faced the COVID-19
challenge, the health and safety of our colleagues and customers has been
our top priority and we are continuing to adopt comprehensive public health
protocols. Significant operational changes have been made in our stores and
offices including PPE provision where relevant for colleagues and customers,
the installation of Perspex screens at till points, introduction of
sanitisation stations, adoption of rigorous social distancing practices and
encouraging payment by card. All of this has been achieved while adhering
strictly to country specific government regulations.
We are proud of the way the businesses have responded to the crisis and
thank all colleagues for their unwavering support.
More recently, we have begun to see a progressive relaxation of lock-down
measures in most of the countries in which we do business, although the pace
of moderation varies significantly, depending on local circumstances and
government guidance.
Poundland stores in the United Kingdom and selected Pepkor offerings in
southern Africa were designated as 'essential retail' and were able to
continue trading throughout the lockdown period. Our apparel and general
merchandise, and household goods, stores were mainly closed during April but
began to re-open on a selective basis thereafter. Across May 2020, as
restrictions were lifted, stores reopened progressively, to the point where
over 95% of the estate was trading by the end of the month. Encouragingly,
since re-opening revenue has trended back towards pre-lockdown levels. While
initial trading has been better than expected, with clear evidence of stores
benefiting from pent-up demand, the sustainability of this demand is
uncertain in the context of weak overall economic conditions and the
potential for further COVID-19 outbreaks. The Group's main trading
subsidiaries, with their more resilient and defensive discount and value
offering, are, however, confident that they are well positioned to gain
market share in the post-COVID-19 'new economy'.
It remains too early to determine the exact impact of the pandemic on the
performance of the Group for the 2020 financial year.
However, we expect COVID-19 to have a material negative impact on overall
turnover and underlying business performance during this period.
As certain countries have eased lockdown measures earlier than the Group's
forecasts anticipated, and with post lockdown sales performance materially
better than our forecast assumptions, the Group's cash position as of early
June was significantly stronger than anticipated at the outbreak of the
pandemic. The Group's cash forecast and requirements are being kept under
active review, and structures enabling quick decision making are in place to
ensure that if any further initiatives are required to protect the Group's
position they can be implemented swiftly.
While the Group is confident that the actions it is taking to address the
impacts of COVID-19 are appropriate and timely, the situation remains fast
moving and uncertain and is being kept under constant review.
We have previously summarised the Group's future pathway as a three-phase
process:
1. Creditors arrangement (CVAs implemented on 13 August 2019)
2. Manage litigation risk (investigate possible solutions and implement)
3. Restructure Group with a view to reduce debt and financing costs
With Step One complete, we are now fully engaged on a solution to the
Group's litigation issues (Step Two). The asset realisations and
restructures are in support of Step Three. As we look ahead, we are clear
that the best way for us to protect and enhance value for all stakeholders
is to resolve the litigation and reduce our debt and financing costs. This
will be our clear focus in the period ahead.
*Appreciation *
In what has been another demanding year, we are sincerely grateful for the
continuing support of our financial creditors, shareholders, almost 110 000
staff and management, and the Supervisory Board. We thank them all.
*Louis du Preez Theodore de Klerk *
_Chief executive officer Chief financial officer _
Stellenbosch, 30 June 2020
2020-06-30 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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Language: English
Company: Steinhoff International Holdings N.V.
cnr Adam Tas and Devon Valley Road
7600 Stellenbosch
South Africa
Phone: +27218080700
Fax: +27218080800
E-mail: investors@steinhoffinternational.com
Internet: www.steinhoffinternational.com
ISIN: NL0011375019
WKN: A14XB9
Indices: SDAX
Listed: Regulated Market in Frankfurt (Prime Standard); Regulated
Unofficial Market in Berlin, Dusseldorf, Hamburg, Hanover,
Munich, Stuttgart, Tradegate Exchange
EQS News ID: 1083107
End of News DGAP News Service
1083107 2020-06-30
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(END) Dow Jones Newswires
June 30, 2020 17:54 ET (21:54 GMT)
