- Steinhoff's interim results shows a 7% increase in profit.
- But the company is still struggling with a massive debt burden.
- Its board believes the business may collapse if a settlement with claimants does not take effect before December.
Steinhoff’s share price rose 2% on Friday after the company delivered its latest set of results for the six months to end-March.
The company – which owns two-thirds of Pepkor (Pep and Ackermans), a stake in the listed Eastern European cut-price retailer Pepco, the US mattress group Mattress Firm, along with other assets - saw its total revenue from continuing operations increased by 4% to €4 497 million, while its EBITDA (a profit indicator) rose by 7% to €686 million.
Pepco, which owns Poundland in the UK as well as the Dealz chain in Eastern Europe, delivered a 17% increase in underlying profit – despite lockdowns in Europe.
But Steinhoff’s current debts continue to exceed its total assets, with its net debt at €9.8 billion (~R165 billion) at the end of March, from €9.5 billion a year before. However, since the end of March, Pepco listed on the Warsaw Stock Exchange, which raised proceeds of approximately €1 billion for the group - most of which was used to reduce debt.
While the board said it is satisfied that Steinhoff will be able to operate within the levels of its facilities and resources for the foreseeable future, it added that there is "significant doubt" that it could continue as a going concern after December if its agreement with claimants does not go through.
Steinhoff has offered €943 million (~R17 billion) in compensation to claimants who lost out in its share price crash. Additional contributions from insurance groups and its former auditors mean the payout "pot" could reach just over €1 billion. As part of the deal, litigants would have to drop all legal challenges against the retailer, which would not admit any liability.
Steinhoff is hoping that this payout will finally draw a line under the mass of litigation it has been facing since December 2017, when its CEO Marcus Jooste abruptly resigned, and its stock plunged.
But the settlement deal has faced various challenges in court, which must still be resolved.
In this set of results, Steinhoff increased its provision for the expected cost of the settlement from €882 million earlier last year to €1.02 billion due to change in the terms, as well as the exchange rates.
Steinhoff's share price was last at 202c after almost falling below 70c last year.