Cost of sales hits profits at Hewlett Packard’s Galway operations

Pre-tax profits at the Galway-based unit of computer giant Hewlett Packard (HP) last year plummeted in spite of revenues topping $413m.

New figures show that Hewlett Packard Galway Ltd recorded an 85% drop in profits — from $12.16m to $1.79m. This was in spite of revenues increasing by 32% to $413.79m in the 12 months to the end of October last. The profit dive arose from the firm’s cost of sales increasing at a faster rate than revenues, with cost of sales totalling $402.7m compared to $293.2m in 2013.

As a result of the high cost of sales and resulting low level of pre-tax profits, the firm’s corporate tax bill for the year totalled $1.45m compared to $2.1m in 2013.

Numbers employed by the firm increased from 455 to 487 last year, with staff costs going up by 13.65% to $44.7m. R&D spend last year increased from $29m to $30m.

In April of this year, Taoiseach Enda Kenny opened HP’s new 87,000 sq ft innovation centre at Ballybrit, Galway. HP has stated that the state-of-the-art facility confirms Galway’s status as a “centre of excellence within HP globally.”

HP has been in Ireland for 44 years with the firm investing over $1bn here over the past 20 years. The principal activity of the Galway firm is the manufacture of computer software and computer documentation – which are exported mainly from Ireland – and R&D activities.

Remuneration for directors last year increased from $441,113 to $487,906. The figures show that the firm recorded an operating profit of $2m, down from $12m in 2013. Net interest payments last year reduced profits by $218,135. The accounts also show that, in 2014, the firm operated a workforce programme that resulted in redundancies and the total payment in relation to these redundancies was $1.7m. This followed a spend of $1.2m under the same heading in 2013. The firm received a corporate tax credit relating to the 2014 redundancies totalling $213,638.

At the end of October last, the firm had shareholder funds totalling $36.6m, which included cash of $19.15m.

The firm recorded the profit after taking into account non-cash depreciation costs of $417,835 and a foreign exchange loss of $1.76m.

HP employs around 4,000 people in Ireland with most located at the firm’s Irish headquarters in Leixlip.