Charities earning just £4.50 a YEAR from shoe donation banks as private company sweeps up profits

  • European Recycling Company donated £5,500 to the Variety Club in 2009 - while making a profit of £350,000

A charity earns less than £4.50 a year from each of its shoe recycling bins despite attracting thousands of tons of donations from the public.

The Variety Club – famous for its Sunshine coaches – has a network of 7,000 branded collection points in supermarket car parks, offices and local authority tips across the country.

Their familiar love heart logo encourages the public to believe their donation goes towards helping sick, disabled and disadvantaged children.

The law says the shoe banks should have a breakdown of where the money goes

The law says the shoe banks should have a breakdown of where the money goes

But the European Recycling Company, which operates the bins, is understood to have donated only £30,000 to the charity in the past 12 months.

That is an improvement on 2009 when it gave only £5,500 to the Variety Club while published accounts suggested the firm made profits of more than £350,000.

The network of collection points is believed to generate an average of £1.9million annually in shoe sales for ERC, which is part of the German recycling conglomerate Soex Textil.

Alistair McLean, chief executive of watchdog the Fundraising Standards Board, said: ‘This is a commercial contract between the Variety Club and the ERC. It is down to the charity to negotiate the best possible contract.

‘But on the face of it this does not appear to be a good deal.’

The watchdog is investigating whether the Variety Club branded recycling bins break the law by not detailing how the proceeds of public donations are split.

An ERC spokesman said the company had a ‘very, very small margin’ on the shoes, meaning that it ‘cannot afford to pay more’ to the Variety Club.

ERC believes the figure for donations to the charity will rise to £35,000 for this calendar year.

The Variety Club has defended the use of it logo on the ERC recycling bins, claiming the money raised has helped ‘thousands of sick, disabled or disadvantaged kids’.

Nerses Ohanian's ERC processes the show bank donations

Nerses Ohanian's ERC processes the show bank donations

'The ratio is ridiculous,' said Bozena Przybyla, 56, who was giving a pair of shoes to a Variey Club bank at Tesco in Edmonton, north London.

'Obviously they have expenses, but I thought that at least 60 per cent of the proceeds would go to poor people.'

ERC is controlled by Nerses Ohanian, whose German and Swiss-based businesses makes millions a year in profits from textile recycling under the Soex brand. His registered headquarters are in the Swiss tax haven of Zug.

Mr Ohanian from ERC said: 'Whatever we pay to the charity, we have a very, very small margin and we cannot afford to pay more.

'It is very hard to pay full freight, pair the shoes, sort them and to make money. Yes, we make money, but two to three years ago it was much better because productivity per box has gone way down.

'The question is, do we pay the charity right? I don’t know how much they pay, if there is more then we have to improve to pay more, but I can tell you the profitability on recycling is 10 per cent to 15 per cent gross margin.'

ERC said that in 2010 it donated more than £19,000 from the Variety Club shoe collection. Turnover that year was just over £2m, according to figures seen by the Guardian which ERC would not confirm or deny.

Mr Ohanian's German company, Soex Textil, which recycles clothes for the German Red Cross, made close to £7m in underlying profits on sales of more than £60m in 2009, according to accounts filed in Germany.

'On the face of it this does not appear to be a good deal'

Ohanian is listed on the accounts as the sole director of ERC, but described himself as a 'passive shareholder'.

He said Soex's chief executive, Andy Haws, has responsibility for its management.

'People see the Variety Club and they say "Every shoe I put in here, its value will go through to the Variety Club",' Mr Haws said. 'Well, no, because you have operational profits, the same as the Salvation Army has, the same as Oxfam has.

'We are growing and we will continue to give bigger donations to the Variety Club. We are increasing our collections through development.

'We run a commercial business and it is important the business is sustainable and continues to grow and continues our growth to the Variety Club.

'We are not misleading, we have never misled, we have always been extremely open with the Variety Club.'

The comments below have not been moderated.

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

We are no longer accepting comments on this article.

Who is this week's top commenter? Find out now