As Steinhoff limps off the market, here’s who made billions

It appears increasingly probable (in case it wasn’t obvious in December already) that shareholders in Steinhoff International will walk away with nothing.

The Whoa restructuring plan (from Wet Homologatie Onderhands Akkoord; Dutch Court-Approved Restructuring Plan Act) was approved by a Dutch court in June, with lenders agreeing to a three-year extension on the repayment of over €10 billion of debt. These entities were issued shares representing 50% plus 1 share in the group, effectively by doubling the number of shares outstanding.

An original proposal where shareholders would receive 20% of this new entity was shot down – and while there are various legal challenges under way, there is realistically no more equity value left in the group.

Shares in the zombie listing are trading at between 4c and 5c (with a market value of R400 million, if one accounts for the additional shares issued).

Steinhoff’s share price on the JSE

It is a fait accompli that the group will be delisted and become a subsidiary of a new unlisted entity under the direct control of creditors.

Since the then-auditors refused to sign off accounts in December 2017, shareholders have lost 99.9% of their investment.

To be fair, most would’ve locked in their losses at whatever price they could get. A global settlement has seen payments made to shareholders, but given the values at stake these can, at best, be described as a token.

Over the last five years, the stock attracted its fair share of speculators. It crested R5 at the end of 2021, but as prospects became gloomier, traded consistently lower until the collapse in December to a few cents.

Over this time, however, the executives in charge of trying to rescue the company were paid handsomely for their efforts.

Steinhoff CEO Louis du Preez has been paid a total of €15.5 million in the last five financial years (2023 excluded). This equates to R266 million at the respective average exchange rates.

In the days following the “events of December 2017” as the group terms it, Du Preez was paid €482 000 (R7.5 million) in strategic and retention bonuses.

He was appointed acting commercial director in December and was confirmed in that role in April. From 1 January 2019, he assumed the role of CEO.

CFO Theodore de Klerk (who acted as COO until his appointment as CFO on 1 September 2019) has been paid a total of €11 million (R198 million). Prior to his appointment, Philip Dieperink was CFO.

In all, the four executives in the CEO and CFO roles subsequent to the collapse have been paid over R600 million. This is the sum total of the management board and excludes other “key management personnel”.

	CEO total pay	CFO total pay	Total in rands
2018	€4.082m*	€2.467m	R101.8m
2019	€2.782m	€6.288m**	R145.8m
2020	€3.449m	€2.876m	R115m
2021	€3.871m	€3.306m	R127.2m
2022	€3.545m	€3.074m	R113.3m

* Including Louis du Preez’s remuneration as commercial director.

** Dieperink and De Klerk served for various periods in this year.

This number pales into insignificance when compared to the fees paid to auditors over the five years. It took about two years to restate prior accounts, at a cost of €75 million, or over R1 billion.

Audit fees

Audit fees have moderated in the years since, but the total bill for audits since the 2018 financial year is €128 million, or R2.1 billion.

Even this looks cheap when compared to the amounts paid to various firms for the “forensic investigation [PwC], advisory and restructure of the business”.

Read:
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Steinhoff deals come back to haunt it in PwC investigation [Mar 2019]

In 2018, it said “it has been necessary for the group to engage with a wide range of professional advisors, to assist the group with its investigative, legal, financial and regulatory requirements, as it seeks to stabilise and restructure the group”.

“The scale and complexity of this task has meant that the aggregate advisor costs for the reporting period have been substantial,” it added.

“The principle advisor relationships included legal advisors, financial restructuring and corporate advisory functions that support the Group on discussions and engagement with its creditors, liquidity management and operational measures, forensic investigation services and regulatory and taxation advisory services.”

Read/listen: ‘Steinhoff is technically insolvent’ (English transcript, Afrikaans podcast)

In addition, it explains, “as part of the restructuring process the Group is required to pay the advisor costs of each of the respective creditor groupings including legal advisors, financial structuring advisors and regulatory and taxation advisors”.

	Audit fees (€)	Audit fees (R)	Advisory fees (€)*	Advisory fees (R)*
2018	€38m	R590.9m	€117m	R1.8bn
2019	€37m	R598.4m	€158m	R2.6bn
2020	€20m	R363.7m	€58m	R1.1bn
2021	€18m	R319.1m	€57m	R1bn
2022	€15m	R256.8m	€28m	R479m

* Forensic investigation, advisory and restructure of the business.

In the first year, the cost of this amounted to €117 million, or nearly R2 billion. In 2019, it peaked at €158 million (R2.5 billion). The spend has moderated but the current run-rate is still around €30 million (close to R500 million).

In the five years since “the events”, Steinhoff has paid forensic accountants, lawyers and advisors a total of €447 million, or R7.5 billion.

This includes more than R500 million spent in the first half of the current financial year (€29 million).

In all, auditors, advisors and the top two executives have been paid over R10 billion since December 2017. And these fees continue to rack up.

What’s that saying … ‘Heads I win, tails you lose?’

Listen to Zwelakhe Mnguni of Benguela Fund Managers speaking to Jeremy Maggs on Moneyweb@Midday about the latest developments at Steinhoff (or read the transcript): 

You can also listen to this podcast on iono.fm here.