McDonald's has been left reeling by the most dramatic profits failure to hit the company in Britain in 30 years.

The UK arm of of the burger chain has seen its pre-tax profits slump by nearly three-quarters last year, down to £23.6 million from £83.8 million.

Nutrition experts claim the figures show people are heeding warnings about he dangers of fast food diets. The results also follow a series of public relations disasters. The global success of the protest film Super Size Me and the forthcoming renewed legal challenge of the "McLibel Two" have created unfavourable headlines for the company.

It is also facing the prospect of legal action from obese customers. The company has been forced to revamp its food line with a move away from its traditional burgers towards fruit and salads in an attempt to head off possible government regulation.

Full story p 8

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STAGNANT SALES AND BAD PRESS LEAVE A BITTER TASTE FOR BURGER GIANT'S UK BOSSES

McDonald's hit by biggest fall in profits for 30 years

The British arm of fast-food chain McDonald's has been hit by the biggest profits collapse in its 30-year history.

The US- owned burger giant revealed that its pre-tax profits slumped by almost three-quarters last year, tumbling from £83.8 million to £23.6 million.

The profits slide comes after a series of PR disasters. The film Super Size Me - showing its maker Morgan Spurlock living on a diet of McDonald's food for a month - has been playing to packed cinemas.

In addition, the company is facing a new legal challenge from the " McLibel Two", who have taken their record-breaking defamation case to the European Court of Human Rights.

The 2003 accounts for McDonald's Restaurants Limited, filed last week at Companies House, show the chain is facing its biggest challenge since it opened its first British restaurant in Woolwich in 1974. Sales of just over 1billion have stuck at the same level for five years, stalling after a quarter of a century of explosive expansion.

Meanwhile, profits are now at their lowest for at least a decade, having peaked at £104.3million in 2001.

Nutrition experts welcomed the fall in profits and said they showed that warnings about fast food were finally being heeded.

Ian Tokelove, a spokesman for campaigning group the Food Commission, said: "This shows that consumers are turning away from junk food. McDonald's have tried to convince us that they are making their food more healthy but their salads have been shown to have more fat than a burger when you take into account the dressing."

The company has struggled in the face of adverse stories in recent years. Analyst Jenny Catlin at market-researcher Mintel said McDonald's was also facing intense competition from sandwich shops and sushi bars among others.

But McDonald's, which has former Downing Street spin doctor Sir Bernard Ingham on its UK board, said the poor financial results had been expected and insisted that its new salads and drinks were starting to win back customers.

The accounts reveal that McDonald's profits have been squeezed by a combination of stagnant sales and rising costs. It has been particularly hard hit by rising rents at its 1,200 UK restaurants.

The accounts also show that the company has a £48.8 million shortfall in the pension fund for its 49,000 UK staff. McDonald's highest-paid director, almost certainly chairman Andy Taylor, was paid £520,000 last year, up from £405,000.

In a terse annual financial statement, the company said only that it "anticipates continued expansion of its operations in the United Kingdom".

The one-line statement was in stark contrast to previous accounts containing glowing descriptions of its achievements. The profits slide will have alarmed the parent board, which regards the UK as one of its most successful outposts.

The group has been struggling with falling global sales and in 2002 reported its first loss in 50 years. However, its share price has recovered over the past year, reflecting sales of options such as chicken salads.

A spokesman claimed success for its new ranges and said: "The results are in line with expectations."

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McDonald's 10 year sales and profits record in the UK
                Sales          Pre-tax profits   % fall or rise in profits
2003     £1.09 billion     £23.6 million       - 71%
2002     £1.13 billion     £83.8 million       - 19%
2001     £1.14 billion     £104.3 million      +  4%
2000     £1.10 billion     £100.1 million      + 15%
1999     £1.03 billion     £86.7 million       + 34%
1998     £ 927 million     £64.4 million       - 12%
1997     £ 840 million     £73.2 million       + 12%
1996     £ 767 million     £65.1 million       + 44%
1995     £ 684 million     £45.2 million       + 37%
1994     £ 622 million     £33.1 million       + 68%

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Not so Big Mac
It smacks of priggishness to welcome the fact that the British arm of the fast food chain McDonald's has just suffered its biggest slump in profits in its 30 year history, down by almost three-quarters on the year before. After all, it creates work for 49,000 people, whom we would not wish to see out of a job. But if these shock results presage a change in British eating habits, away from fatty junk foods towards a healthier diet, it could lengthen the lives of millions of children and young people whose obesity is storing up medical problems for them in the future. We applaud McDonald's shift towards putting healthier food on the menu - salads and juices. But it is when cheeseburgers and fries are off the menu that we will know the battle for healthy eating is won.  
 
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