Supermac's writes off €21m in bad debt

GALWAY BUSINESSMAN Pat McDonagh has written off more than €21 million in bad debt from the books of his fast-food empire Supermac's over the last three years - the equivalent of more than eight years worth of pretax profits at the company.

All of the bad debt relates to a disastrous foray into the US market through Claddagh Irish Pubs, a bankrupt firm whose financial troubles led to a legal dispute between its then chief executive Kevin Blair and Supermac's.

Accounts just filed at the Companies Office show that Supermac's wrote off €6 million in an exceptional charge in 2007. The company said the writedown related to the investment in the pub chain.

This investment has now been written down to reflect a nil value as of December 31st, 2007.

Mr McDonagh could not be contacted for comment yesterday.

The charge follows writedowns of €4.17 million in 2006 and €11.09 million in 2005 as a result of Claddagh's "adverse performance".

Claddagh went into bankruptcy protection in 2006 after a dispute between Mr McDonagh and Mr Blair, a former operations manager at Supermac's main office in Galway.

The two men fell out over $21 million (€15 million) that Mr McDonagh gave to Claddagh. He claimed it was a loan, but Mr Blair claimed it was an investment.

The 2007 accounts for Supermac's Ireland Ltd show that the fast-food chain made a pretax profit of €2.48 million last year, up from €1.78 million in 2006.

Turnover at its company-owned restaurants increased 6.7 per cent to €29.15 million, although the cost of sales and administrative expenses also rose. Operating profit for the year was €2.9 million, up from €2.8 million in 2006.

The accounts do not include revenues from more than 60 franchise restaurants.

Supermac's, which was founded by Mr McDonagh in 1978, has 96 stores across Ireland and is still expanding.