the times | Tuesday May 17 2022 35Business
“We recognise fully the seriousness of
the judge’s findings in relation to Mr
Gerrard’s conduct. We are considering
the judgment to see what we should
learn from it.”
Gerrard said he was “devastated” by
the ruling. He added: “After over 30labour costs, which the company and its
franchisees have sought to offset by
increasing prices. In the first quarter,
McDonald’s said that its menu prices in
the United States had risen by about
8 per cent on the same period last year,
prompting some of its customers to
trade down to cheaper meals or smaller
orders.
McDonald’s made its UK and Ireland
debut in Woolwich, southeast London,
in 1974. It serves four million customers
a day and employs 140,000 people in its
1,465 branches, which are 91 per cent-
franchised.
This week, McDonald’s announced a
£250 million investment programme in
which 800 of its restaurants will be up-
graded over the next four years to cater
for the growth of digital ordering,
which accounts for more than 50 per
cent of orders.most being directly managed by the
company itself.
The sites’ closure in March has been
costing the company an estimated
$50 million per month, although
takings rose immediately after the
planned closure was announced.
McDonald’s said that leaving
Russia would not change its forecast of
adding a net 1,300 restaurants this year.
Last month it reported earnings of
$1.1 billion in the first quarter of this
year, down from more than $1.5 billion
a year earlier, while revenue was nearly
$5.7 billion.
The suspension of its operations in
Russia and Ukraine cost the company
$127 million, including $100 million for
food and other inventory that has gone
to waste. As with the wider restaurant
sector, McDonald’s has been struggling
to deal with rising commodity andBreaches ‘will cost fraud office £70m’
Continued from page 33
Congo. ENRC has denied any wrong-
doing. Likewise, Dechert and Gerrard
denied acting improperly and argued in
court that the company had authorised
the lawyer to negotiate a potential civil
settlement with fraud investigators.
Reacting to yesterday’s ruling, a
spokesman for the mining company
said that while it welcomed the judge’s
findings, it was “profoundly concerned
by the very serious implications for
other Dechert clients and other sub-
jects of SFO investigations”.
A spokeswoman for Dechert said:untainted years as a solicitor I remain
sure of the appropriateness of my
actions, of my advice in relation to my
former client and of my personal and
professional integrity.
“I gave evidence to the best of my
ability and believed I was telling the
truth at all times.”
A spokesman for the SFO said that
the agency was “considering the impli-
cations of this lengthy and complex
judgment”.
Damages against the fraud office and
Dechert are to be determined at a later
hearing.O’Leary leaves rivals
in cattle class
G
ames of two halves are
familiar territory for
Michael O’Leary. The
Ryanair boss is a Man
City fan, painfully aware
of how a European campaign can
abruptly spiral from cruise control
to crash landing.
So you understand why he’s
taking no chances with the airline’s
profits guidance for this financial
year (report, page 41). He believes it
“impractical, if not impossible” to
give any. The six months from April
are no problem, with O’Leary so
confident of a getaway summer that
he’s laying on 115 per cent of pre-
Covid capacity. But after that?
Visibility from the cockpit
window is close to zero, with only
12 per cent of September bookings
“in the bag” and just 6 per cent for
October. And as for the run-up to
Christmas and the winter quarter to
March, anything could happen: the
arrival, say, of an Omicron relative
or fresh war horrors from Ukraine
or more consumer belt-tightening.
Hence O’Leary merely saying
that “we hope to return to
reasonable profitability” this year —
after the latest €355 million net loss
on top of 2020-21’s €1 billion-plus
deficit. Even so, he’s really hoping
for profits north of €1 billion. And,
whatever happens, Ryanair looks
better placed than rivals.
Yes, aviation recovery may be
“fragile”, as he puts it. But, as Davy
analysts noted, Ryanair is still the
“best placed from a market share,
growth, balance sheet, cost and
hedging position” to power through
any “headwinds” it encounters —
not least a recession. O’Leary’s
shooting for a record 165 million
passengers this year, up from
97 million last time and 149 million
pre-Covid. It’s no accident, either,
that he can rev up the growth: he
spent the pandemic preparing for it.
Unlike British Airways and
easyJet, Ryanair did not cull pilots
and cabin crew. So it doesn’t now
have their rehiring problems: ones
that have caused hundreds of flight
cancellations, with BA cutting
summer schedules and easyJet
removing seats from aircraft. Unlike
subsidised European flag-carriers —
“drunken airlines that can’t stand on
their own feet”, in O’Leary’s view —
Ryanair is not awash with debt:
€1.45 billion, cut from €2.28 billion
the previous year and heading for
zero over the next two. And, unlike
unhedged Wizz Air, Ryanair has
cleverly, or luckily, locked in 80 per
cent of this year’s fuel needs at the
equivalent of $63 to $78 a barrel —
well below $100-plus spot prices.
Add in Covid airline failures and
Ryanair’s low costs and you can see
why it’s taking market share in Italy,
Sweden, Poland and even Wizz’s
Budapest home base. O’Leary can
crank up the pressure, too, by
cutting average fares. Down 27 per
cent last year to €27 (excluding
baggage charges), they’re likely to
rise this summer. But the full-year
turnout is guesswork: a key reason
he’s giving no profit forecasts.
A wild card is Ryanair’s growth
engine: the fuel-efficient Boeing 737
Max aircraft, revamped after two
fatal crashes. Even O’Leary says “I
thought there’d be some public
reticence over flying on it”, despite itnow being the “most-tested aircraft
in aviation history”. But, with 61 of
an ordered 210 in the fleet so far,
feedback has been “very positive”.
It adds up to a formidable
competitive position, with Ryanair
valued at €15.4 billion on a flat share
price of €13.60. Yes, such leads can be
squandered, as events in Madrid
proved. But O’Leary will probably
make a better job of it than his team.Sofa, not so good
L
ess than a year on the stock
market and already three of its
four legs have fallen off. You
hope Made.com, the “digitally
native” expert in “curated furniture
and homewares” has more luck with
its tables and chairs.
It was only last June that it was
nailing investors for £200 million at
200p a share. And all via a float
crafted by JP Morgan Cazenove,
Morgan Stanley and Liberum. Now?
Shares down to 54¼p, falling 14.8 per
cent on the latest profits alert
(report, page 36). Already three
quarters of Made’s market value has
gone, at least for everyone but the
selling investors: a crew including
Level Equity, Partech and Made co-
founder Brent Hoberman of
lastminute.com fame, who together
sold almost £100 million of shares.
Lucky them. Newbie investors
have since seen February’s exit of
float boss Philippe Chainieux for
family reasons and now finance
chief Adrian Evans. To boot, newish
boss Nicola Thompson has just
taken an axe to the guidance she
gave as recently as March’s full-year
figures. She’s now noticed that skint
consumers are prioritising holidays
over buying furniture. Really?
The result? This year’s sales could
be no more than £346 million versus
top-end guidance of £500 million,
while Made could be up to
£35 million in the red on the
“adjusted ebitda” front rather than up
to £15 million in the black. Yes, Made
says it’s outperforming the online
furniture market by “at least 20
percentage points”. But year-end net
cash could be just £40 million versus
£107 million at the end of 2021. If
Made comes knocking for a top-up,
investors won’t be so easily fooled.Sour cream
N
o more Big Macs for the meat
head Putin. McDonald’s is
selling its Russian business,
employing 62,000 people, removing
the company name from its 850
restaurants and looking for a local
buyer. A non-cash hit of up to
$1.4 billion is a pricey exit. But, as its
boss Chris Kempczinski put it,
staying in the country was not
“consistent with McDonald’s values”.
Still, at least the Kremlin’s
assorted criminals can continue to
enjoy their Wall’s ice creams, served
up by a company with “the highest
standards of corporate behaviour”
— Unilever. Yes, its boss Alan Jope
says his priority is to look after its
3,000 workers in Russia. But amid a
principled corporate exodus, his
stance is increasingly hard to digest.[email protected]business commentary Alistair Osborne
Russia after 30 years
before the closures, which have since cost the company $50 million a monthBehind the story
T
he withdrawal of
McDonald’s from Russia
turns the spotlight on other
western corporations that
have suspended operations
there, and whether these will ever
resume (David Byers writes).
Scores of companies operating in
Moscow have temporarily
withdrawn their goods and services
since the invasion of Ukraine.
However, about 200,000 Russians
are still being paid by about 1,000
western companies until they decide
whether to withdraw permanently.
Under Russian law, companies that
have suspended operations must still
pay their staff.
Among the companies that have
pulled out are Nestlé, which is no
longer selling “the vast majority” of
its products in shops and
supermarkets, including coffee, pet
food and its Nesquik and Kit Kat
brands.
Unilever, which owns brands such
as Dove soap, Marmite and Ben &
Jerry’s ice cream, said in March that
it was suspending the sale of all non-
essential products, but at the end of
last month it was still selling ice
creams, including Cornetto,
Magnum and Carte D’Or.
Ikea, the furniture chain that has
been in Russia since 2000, shut its 17
stores temporarily in March but is
paying its 15,000 staff until the end
of this month until it decides what to
do. However, the company is
keeping shopping centres that it
owns, called Mega, open.
Adidas has suspended sales in
Russia, including temporarily
closing several hundred shops.
Shell is pulling out of its joint
venture with Gazprom, the Russian
natural gas group, and BP is selling
its 20 per cent stake in Rosneft, the
state-controlled oil company.
In the finance sector, Bain, the
restructuring group, has announced
that it will not work with any
Russian businesses and in any case
had put a policy in place in 2020 “to
not work for the Russian
government at any level — central,
state or departmental”.
American Express, Mastercard
and Visa cards issued by Russian
banks will not work in other
countries and cards issued
elsewhere will not work in Russia.
McDonald’s is in a rare position
because it owns outright more than
eight in ten of its Russian locations,
whereas Burger King’s stores are
owned by local franchisees. It says it
is “ending corporate support” for its
800 locations operated by Russian
franchisees, but the stores remain
open. KFC, Pizza Hut and Starbucks
have suspended their operations.OLEG NIKISHIN/GETTY IMAGESThe ruling is the
latest blow for the
SFO’s director
Lisa Osofsky