A Dutch court has ordered Steinhoff International Holdings NV to amend its 2016 accounts to recognize the interest of a joint-venture partner, the troubled South African retailer said Feb. 20.
In a long-awaited ruling, the Enterprise Chamber of the Amsterdam Court of Appeal ruled that Steinhoff needed to reverse its decision to consolidate 100% of discount value chain Poco, it said in a statement.
Steinhoff said it was studying the judgment, its impact on its accounts and whether it provided grounds for appeal.
The decision relates to a hearing that took place in September 2017. A ruling had been expected by Dec. 22, 2017, but had been delayed. The case predates Steinhoff's announcement on Dec. 6, 2017, that it had appointed an independent auditor to probe apparent accounting irregularities, which led to a near 90% collapse in its share price.
The company's shares fell another 1.7% to 37.13 euro cents by 12:07 p.m. in Amsterdam.
Based in Stellenbosch and incorporated in the Netherlands, Steinhoff has already indicated that its accounts for the fiscal years 2015 and 2016 will need to be restated.
The firm, which operates the Sleepy's brand in the U.S., Poundland in the U.K. and Conforama in continental Europe, is at odds with Andreas Seifert, who it described in its statement as a "former joint-venture partner of the group."
Two entities controlled by Seifert, OM-Handels GmbH and MW Holdings GmbH, brought proceedings against Steinhoff in Germany in a dispute over ownership of Poco and launched separate proceedings in the Netherlands over Steinhoff's accounting.
The case in the Netherlands centered on Steinhoff's decision, based on "certain actions" by the Seifert entities, to redeem their 50% interest in Poco and to prepare its 2016 accounts based on 100% ownership of the business, which sells furniture and household goods at more than 100 outlets across Germany. Cost of the redemption was booked as a liability to be paid once the German proceedings over ownership are settled.
However, the Dutch court ruled that Steinhoff's 2016 accounts should be altered to reflect only a 50% controlling interest in Poco and a 50% noncontrolling interest held by the Seifert entities. In addition, it ordered Steinhoff to remove reference to the payable liability to the Seifert entities.
Seifert could not be reached for comment by S&P Global Market Intelligence.