Donegal draper John McElhinney has reported a drop of more than 40 per cent to €554,371 in operating profits at his Ballybofey department store, one of the best known retail outlets in the northwest.

In business since 1971, the company that runs the store has been awaiting clearance for more than a year of a €2.2 million payment to the Revenue Commissioners to settle a tax liability under a voluntary disclosure scheme.

"Whilst formal acceptance is still awaited from the Revenue Commissioners, the directors are confident that the full liability has been discharged," said a note with the accounts for John McElhinney Ltd.

The company made the payment in the year to January 2005, when a once-off gain of €1.33 million on the disposal of a property brought pretax profits to €2.03 million. Pretax profits fell to €340,272 during the course of the following year, according to newly filed accounts.

With 22 departments, the store occupies more than 8,361sq m (90,000sq ft) at its landmark site on Main Street in Ballybofey.

Mr McElhinney made no comment when asked about the drop in profitability at his business.

"The directors are satisfied with the results for the year and are confident that the business will continue to be successful in an increasingly competitive retail environment," the accounts state.

Net debt stood at €2.03 million and accumulated profits stood at €5.93 million at the end of a financial year in which the company reported a modest increase in gross profits to €7.63 million from €7.48 million. The company is obliged to file only an abridged profit and loss account so its turnover is not publicly declared.

John McElhinney owns 99 per cent Eileen McElhinney owns 1 per cent of a business that employs 194 staff. Their day-to-day remuneration and other emoluments dropped to €104,322 last year from €164,322. However, their pension contributions increased to €566,879 from €428,181, a change that brought the total value of their emoluments to €671,201 from €592,503.

The business made a €142,380 adjustment at the start of the previous year in respect of the value of unredeemed gift vouchers.