Steinhoff International Impact

SNH fell 61% as corporate governance issues and related party transactions came under the spotlight. The CEO, Markus Jooste, stepped down (also from other board positions) as did the SRR CEO, Ben La Grange, though he has stayed on as SNH CFO. Dr Christo Wiese is taking over as executive chairman. The company is widely owned by institutional investors in South Africa and was a top 10 company in the JSE SWIX All Share index before yesterday.

The big concerns are around:

1. The nature of the tax structuring implied by the Swiss structure;

2. The ultimate beneficial ownership/control of Campion and whether the entity should be consolidated by SNH; and, if deemed to be controlled by SNH, the purpose of the off-balance sheet vehicle and the related accounting impact;

3. Fact that JD Group Financial Services and the Capfin business are wholly owned subsidiary of Campion, and that SNH loaned c. ZAR 310m to Capfin in 2016; and

4. The purchase by STAR of a call centre business which may have been part of the Capfin business.

PWC has been appointed to undertake an independent investigation into these matters and at this stage the impact of these irregularities is unknown.

IMPACT ON OPTIMUM FUNDS

Optimum Stable, Balanced and Managed Growth Fund invest in a variety of asset classes. This balanced approach helps investors to be cushioned against one specific event. Two of the underlying equity managers had a small position in Steinhoff. The impact of this on the Optimum portfolios is very small. The table below shows yesterday’s returns for the Optimum funds.

Fund Return for the day

Optimum BCI Stable Fund (Class C)-0.18%

Optimum BCI Balanced Fund (Class C) (Class C)-0.32%

Optimum BCI Managed Growth Fund (Class C)-0.39%

Optimum BCI Equity Fund (Class C)-0.93%

Equities as an asset class came under pressure yesterday and the market shed 1.94%. Compared to this, the funds did well to minimise the losses.

Management – Optimum Investment Group