McDonald’s UK has experienced a significant drop in pre-tax profits while nearing a £2bn turnover milestone.
- The pre-tax profit for 2023 is reported at £66.3m, a stark fall from £170.8m in 2022.
- Operating profit saw an even sharper decline, plummeting from £165.4m to £10.7m.
- Despite these challenges, turnover increased from £1.59bn to £1.83bn.
- Inflationary pressures on costs have been cited as major factors affecting financial performance.
McDonald’s UK has reported a sharp decline in its pre-tax profits, which fell by over £100m from £170.8m in 2022 to £66.3m in 2023. This substantial decrease reflects the challenging economic climate impacting the fast-food giant, although this was offset to some degree by a notable rise in turnover.
The company’s operating profit experienced a dramatic drop, reducing from £165.4m to just £10.7m. However, McDonald’s can find some reassurance in its increased turnover, which rose from £1.59bn to £1.83bn within the same period. This increase is attributed to growth in revenue from company-owned outlets, which went up from £703m to £942m, while revenue from licensees slightly decreased from £894.3m to £893.5m.
Spiralling costs, particularly in food, paper, and utilities, have been identified as significant contributors to these financial results. The economic pressures, borne from rising inflation, have placed a strain on profitability, although McDonald’s executives maintain a cautiously optimistic outlook. In an official statement, the board expressed confidence in both the company’s and the broader system’s ability to thrive despite these challenges.
Interestingly, the brand’s sales in 2024 have shown growth compared to 2023, buoyed by the strength of delivery and drive-thru services. This growth underlines the effectiveness of strategic decisions made by the company to bolster these areas of service, even amidst price hikes reported within the franchise.
The case of AG Restaurants, a major McDonald’s franchise operator in the UK, highlights some of the underlying dynamics within the market. The franchise, under the leadership of Andrew Gibson, not only increased its turnover from £120.1m in the previous year to £135.2m in 2023 but also saw its pre-tax profit rise from £1.8m to £2.3m. This performance, partly driven by price increases, suggests a variance in financial outcomes at the franchise level as opposed to the broader corporate results.
While McDonald’s UK faces significant profit challenges, its turnover growth offers a promising outlook for future stability.
