Tesco Ireland's figures reveal a €90m supplier 'black hole'
Profits at Tesco Ireland were overstated by almost €90m, the Sunday Independent has learned. The giant retailer has been forced to "adjust" the profits of its Irish subsidiary by £63m (€88m) due to its previous treatment of supplier payments.
Tesco shocked the market last September when it announced that it had overstated profits by £250m (€347.5m). The main contributor was £145m (€201.5m) of supplier payments, which had been incorrectly booked as profits.
In its full-year results last week, Tesco revealed that the profit adjustment due to its treatment of supplier payments had now risen by a further £63m (€88m) to £208m (€289m).
Tesco Ireland confirmed that all of this increased profit adjustment occurred in this country, saying: "The additional amount related to income in the Irish business".
Irish suppliers to Tesco have long complained privately about the payments demanded by the retailer to stock their products. The latest results statement gives the first indication of the extent of these payments. It also seems to show that payments from suppliers to Tesco Ireland are far higher than those demanded by its UK parent.
While the original £145m profit overstatement caused by supplier payments represented just 0.33pc of Tesco's UK sales, the latest £63m adjustment is the equivalent of 3.1pc of Tesco's Irish sales. In other words, the Irish profit adjustment was proportionately more than nine times greater than in the UK. Tesco Ireland said: "We are unable to comment further on this".
These revelations will increase the pressure on Jobs and Enterprise Minister Richard Bruton to approve the draft regulations for the grocery sector. The draft regulations impose tough restrictions on the multiples' dealings with their suppliers.
Sunday Indo Business