Wednesday 29 October 2014

Aldi Ireland: joining the profit-dots in Aldi's UK latest Accounts

A recent article in The Irish Times indicates a possible approach to estimating the profitability of Aldi Stores in the Irish Republic.

Checking the latest accounts filed by Aldi Stores Ltd. at Companies House, it would appear that they include the UK & Ireland business of Aldi for the year ended 31st December 2013.

On Note 7, page 21 of the Aldi Stores Ltd. accounts, details are given of the tax charge for 2013:
  -   UK Corporation Tax at 23%         £51.7m
  -   Overseas tax                               £10.2m, (say €12.9m at current rates)

We have taken the corporation tax assumption that ‘Overseas Tax‘ refers to the Irish Republic, together with an estimate of Aldi Ireland turnover for 2013 and reached the following conclusions:

- Given Ireland's Corporation Tax rate of 12.5%, this implies a net profit before tax of €103m in 2013 for Aldi Ireland
- Taking €850m as an estimate of Aldi Ireland turnover for 2013, this results in a possible pre-tax net margin = 12.1% i.e. €103m/€850m  x 100

If we have joined the right dots correctly, the above guesstimate obviously raises issues ref general retail profit levels in Ireland, in what is deemed to be a highly competitive market.

Moreover, if the Tesco crisis fall-out spills over into Ireland, and combines with US/EU moves re Inverse Taxation, the resulting spotlights on the profitability of businesses operating in Ireland could eventually challenge supplier profitability.

You obviously know your sales and net profit margins on your business in the Irish Republic, and how they compare with the UK business....

The above analysis suggests that perhaps your forward projections re the Irish market contribution to your UK & Ireland business might benefit from a risk re-assessment?

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