Eat reports turnover up, profits down; aims for 200 sites in the next three to five years; HMRC wants to reclaim £2,763,173 VAT: Sandwich shop chain Eat, which has 118 sites and was founded by Niall and Faith MacArthur, has reported turnover increased to £94,950,620 in the year to 28 June 2012, up from £87,359,331 the year before. Profit before tax dropped to £1,122,038 fro £2,719,266 the year before after an exceptional item of £652,092. The company reported sales rose 8.7% during the year and gross profit margin climbed 47 basis points. Eat stated: “The strategy continues on a twin-track of driving growth and operational performance from the existing estate and targeting new Eat store openings in a select number of prime locations. The directors consider that the business still enjoys significant opportunities for controlled growth despite the current challenging macro-economic and retail environment. The business made significant investment in the year, opening eight new stores and investing in a growth infrastructure. Management intends to develop the business further in the UK by investing in product innovation and extensions, people and a brand development programme that will elevate and further differentiate the store experience. The sub-£10 category of the food and drink sector has continued to prove relatively resilient. Eat will continue to provide customers with high quality innovative products and even greater value offerings, and to build a loyal customer base.” The company repaid £1.2m of senior bank debt during the year. Exceptional costs in the period relate to the closure and disposal of the Kingsgate Parade site and the impairment of leasehold improvements in certain stores. Eat reported that HMRC notified the company in July 2009 that it wanted to reverse a previous decision over the zero-rated VAT status of a product category – the company had previously received £519,249 in December 2008. The company stated: “The repayment by HMRC to the company followed an investigation by HMRC at the time and consequently the board will defend its position vigorously.” However, if the company is not successful in defending its position, the VAT repaid to the company, together with the amounts which would be deemed output VAT would be repayable to HMRC. At the year end, the potential VAT obligation is estimated to be £2,763,173 (2011: £2,003,680).