Galvins Wholesale forced into examinership
One of the country’s biggest drinks distributors, Galvins Wholesale, has gone into interim examinership as it struggles with a financial burden that includes €6m related to an “excise fraud”.
The details emerged after the High Court heard how the Revenue Commissioners were demanding payment of just over €6m in excise duty from the Cork-based firm.
Making the application, company director John Galvin, of Loughmahon House, Rochestown, Cork, revealed how Galvins operated bonded warehouses for the storage and sale of wines and spirits.
A bonded warehouse is where goods on which duties are unpaid are stored under bond and in the joint custody of the importer, or his agent, and the customs officers.
Galvins supplied goods to a delivery agent on foot of orders by bonded warehouses in France and Romania.
The product had been retained by the customer and Galvins received delivery confirmations that later proved to be forged.
If the deliveries had been made to bonded warehouses out of this jurisdiction but within the EU, as claimed on the false documentation, then no excise duty would have arisen or been charged.
The company is disputing the Revenue demands.
The court heard Diageo is the company’s largest trading creditor with an outstanding balance of €3.7m. Galvins claimed a repayment schedule had been negotiated with Diageo.
While the firm’s turnover grew from €23m in 2004 to €61m in 2008, it was still unable to meet its liabilities, including loans to related companies of more than €2m, the court was told.
Mr Galvin said that in 2003, the company embarked on a major expansion that had incurred significant costs and although turnover growth to €61m had been significant, it had not achieved the level for which the cost structure had been designed.
He said growth of the Carry Out franchise business had reached 52 outlets but said 75 outlets had been envisaged by this stage.
Galvins’ cashflow position had been severely impacted on by suppliers tightening credit terms to the company.
Bad debts totalled €1.5m, about which legal proceedings were being taken and the company had a further specific bad debt provision in relation to another €5m, he said.
Mr Galvin said the directors believed that both the wholesale and Carry Out businesses were attractive and profitable. He said the company continued to deliver attractive gross profit but needed to restructure its cost base to ensure it could deliver net profit.
An independent accountant said he believed the company had a reasonable prospect of survival if an examiner was appointed.
Mr Justice John Edwards appointed Barry Donohue of KPMG, South Mall, Cork, as interim examiner.
