DIA reports to the public prosecutor's office senior executives in Spain and Brazil for accounting irregularities

DIA reports to the public prosecutor's office senior executives in Spain and Brazil for accounting irregularities

The supermarket chain will lay off up to 2,100 workers in Spain after losing 352 million euros in 2018 and enter technical bankruptcy

    The Spanish chain of supermarkets DIA has filed a complaint with the prosecution against senior managers for accounting irregularities. Over the last months, the company has carried out an investigation with the aim of clarifying the facts that have given rise to certain accounting adjustments in the 2017 accounts . Once the investigation was completed and as a result of this, the company has proceeded to "file a complaint with the prosecutor's office, continuing with the exercise of diligence, responsibility and maximum transparency from the moment in which it became aware of the accounting adjustments", points out a statement.

   The audit report - carried out by KPMG - indicates that the investigation "has revealed the existence of irregular accounting practices by certain employees and senior executives in Spain and Brazil, bypassing internal controls". Likewise, the company has informed the National Securities Market Commission (CNMV) that the Remuneration Committee is analyzing the activation of the clawback clauses (reduction or refund) on the different remunerations paid to the executive directors dismissed in 2018, as the previous CEO Ricardo Currás.

On the other hand, the DIA group will dismiss "a maximum of 2,100" workers in Spain from DIA and its subsidiary Twins Alimentación after registering losses of 352 million euros last year and enter technical bankruptcy, since it has a negative net worth of 166 million euros, compared to 257.3 million positive a year earlier, according to the annual results presented by the company.

The CEO, Borja de la Cierva, has recognized that 2018 was "a turbulent year for DIA , probably the most difficult since the company was founded more than 40 years ago". De la Cierva, who runs the company since December 28 of last year, stresses that the 2018 results are a "clear indicator" that the management of the company "did not meet expectations".

In the coming days, the company will begin a process of consultations with workers' representatives to begin the process of collective dismissal in order to "ensure the future sustainability of the company," he said in a statement. The more than two thousand announced layoffs represent 8% of the direct workforce in Spain, where it has more than 26,000 employees, although Brazil, Argentina and Portugal account for around 43,000 direct jobs.

The company is immersed in a crisis in which the results do nothing but confirm the difficult momentthat it crosses, aggravated in addition by the struggle between the CEO and the maximum shareholder, the Russian tycoon Mikhail Fridman (through the Letterone fund) that has just launched a takeover bid. Despite the situation of technical bankruptcy or 'cause of dissolution', the company can continue to operate thanks to the support of creditor banks, which have guaranteed liquidity until May. However, you need a capital increase. The Board of Directors is proposing an increase of 600 million euros, which would have to be approved at the shareholders' meeting next month, while Fridman - which although controls 29% of the capital is absent from the Board since December - offers an extension of 500 million euros conditional on the success of your takeover bid.

Millionaires loses

The chain closed the year 2018 with 352.6 million euros of consolidated losses , in contrast to the 101 million profit obtained the previous year, according to the statement sent to the National Securities Market Commission (CNMV). Sales fell by 11.3% to 7,288 million euros, with declines in all the countries where it operates (Spain, Portugal, Brazil and Argentina). EBITDA (profit before taxes, amortization, interest and depreciation) fell by 47.8% to 246 million euros.

The company has presented a strategic plan 2018-2023 focusing the transformation of the commercial offer on "quality, low prices and proximity". The company promises to modernize the state of stores and review the incentive system for franchisees. Among the financial objectives for this period is to improve EBITDA from 2020, investment contained in 2019 and recovery from 2020 and single digit growth in sales.

Remuneration

Directors' remuneration last year amounted to 3.89 million euros , almost twice as much as a year earlier due to the compensation paid to the former CEO Ricardo Currás, who received 2.55 million euros compared to 898,000 euros 2017. Currás received 497,000 euros of salary, 1,65 million compensation for cessation and 404,000 euros for non-compliance with the notice period and the non-competition agreement. The remuneration of the current CEO was 125,000 euros. The company informs the CNMV that the Remuneration Committee is analyzing, for its submission to the Board of Directors, the activation of the clawback clauses on the different remunerations paid to the executive directors dismissed in 2018.