Steinhoff - Annual Financials 2017

All,

Steinhoff have finally published accounts for FY 2017. In itself that’s a huge positive. First impressions:

- First off, it is astonishing to see the scale of fraud that went undetected for such a long time. But that’s for light reading at home.

- Clearly the balance sheet has in many ways changed since and much of the figures lie within expectations, but it’s amazing to see the financials of a company that made positive EBITDA, had liquidity and had net equity value on the balance sheet - after restatements.

Below are the state of earnings as of 0917, leaving the company 12x levered (including 1x of cash) with Interest Coverage of 1.7x, due to its erroneous IG rating. On the face of it then and ignoring all consolidation aberrations (sold/lost ~50% of both Mattress Firm and Conforama and sold several other businesses) the ~70c/E at which the entire structure is trading values the company at E7bn, or 10x 2017 EBITDA or quite fully on the premise that creditors can convert into equity (likely). 

So on an aggregate level, there seems to be no reason to rush into the name, other than that the risk of failure is now markedly reduced.

We will be updating our model and analysis in due course.

Wolfgang