Steinhoff shares sink as CEO Jooske leaves amid 'accounting irregularities'

Steinhoff International shares plummeted on Wednesday as its chief executive officer Markus Jooste resigned with immediate effect amid "accounting irregularities", while the release of the company's 2017 numbers has been postponed.

The group, which owns more than 40 local brands in over 30 countries, said it has approached PWC to carry out an independent investigation after new information came to light related to accounting irregularities.

"Steinhoff will update the market as the aforesaid investigation proceeds. The company will publish the audited 2017 consolidated financial statements when it is in a position to do so. In addition, the company will determine whether any prior years’ financial statements will need to be restated."

The owner Poundland, Bensons for Beds and Conforama said its largest shareholder and chairman Christo Wiese will take over in an executive capacity on an interim basis.

Kepler Cheuvreux said the pending tax and accounting investigations "could show severe irregularities".

"We fear there is more to come," it said, as it moved its rating from 'hold' to 'under review'.

"The company has grown exceptionally with numerous acquisitions and the level of transparency on the numbers was extremely weak. Despite the acquisitions of profitable companies, no loss carry-forwards, the company recorded a very unusual tax rate of circa 15% and also guided that this would be the rate going forward. Should the unusual tax rate be at risk, its cash flow would obviously be at risk as well," Kepler said.

It added: "We are wondering if the investigations may not also be extended to the chairman of the supervisory board Christo Wiese, as he has been closely related to various deals and as the board chairman has to fulfil certain supervisory duties."

RBC Capital Markets changed its stance on the stock to 'sector perform' from 'outperform' as it said it may no longer trade on fundamentals.

"We think Steinhoff offers scarcity value as a leading mainly European non-food discounter and that it has a competitive advantage on account of its vertical integration. However short-term visibility over cash flows is extremely low, given the absence of recent financial information and an investigation into accounting irregularities."

RBC added: "The main risk for Steinhoff is that it is forced to refinance its debt at much higher rates or requires additional cash injections. There is a serious risk over dividend sustainability as well as a risk of continued negative newsflow on legal and accounting investigations."

At 1130 GMT, the shares were down 65% to €1.04.