Codere’s €18m ‘inconsistencies’ in LatAm market financials


codere-financial-inconsistencies-latin-american-marketsSpanish gaming operator Codere is being forced to rejig its earnings forecasts after discovering “inconsistencies” in certain Latin American market financial figures.

On Monday, the Madrid-based Codere issued a statement alerting the Spanish stock market about a ‘significant event.’ Specifically, the company said that while it was “performing its internal control procedures, it has detected inconsistencies in the financial reporting of some of its Latam subsidiaries during 2019.”

Codere said its preliminary analysis of said inconsistencies indicate that its financial results in the first half of 2019 “amount to a maximum of €13-18 million.” Investors should expect the company’s previous projections of full-year earnings to be reduced by “approximately €20m,” but Codere said it was “already working on an action plan to mitigate the impact of this situation” on its full-year results.

Codere stressed that its preliminary probe had detected “no additional impacts” on its liquidity position “nor have any inappropriate cash outflows been found.” The company believes the fuzzy math was “an isolated incident” that only affects the Latam markets in question.

Spanish media reported that the markets in question were Colombia, Mexico and Panama. Of Codere’s overall revenue of €712.4m over the first half of 2019, those markets accounted for €216.9m (30.4%). Of Codere’s H1 earnings of €114.6m, the three markets accounted for €71.5m (61.5%).

Codere’s board of directors has requested that an “independent and highly regarded external advisor” be hired to perform a forensic analysis to “identify any material aspects related to these inconsistencies” and ensure “the highest transparency in complying with accounting and corporate governance.” Codere promised to release the findings of this analysis “through the appropriate channels.”

This isn’t the first time that Codere’s accounting practices have proven wonky. In 2015, Codere was fined €100k and four former advisers were penalized €10k apiece after a Spanish court determined that the company had understated its 2012 losses by 28%.

Last week, rumors circulated that Codere was looking to unload either a portion or all of its Uruguay-based operations to Chilean gaming operator Sun Dreams. Codere previously issued a profit warning regarding its operations in Argentina, which have suffered via the sharp devaluation in the country’s currency.

In what the company insists is an entirely separate matter, Codere’s board accepted the resignation of director Alberto Manzaneres Secades on Monday. In a statement, Secades said he was stepping down for “strictly personal reasons” that don’t allow him to reconcile his Codere director duties with his “other professional obligations.”