Jump in number of company profit warnings

Jump in number of company profit warnings

The number of profit warnings issued by UK listed companies hit the highest level recorded in a second quarter since 2008, according to a report from Ernst & Young.

The accounting firm today (25 July) published its analysis of profit warnings, revealing UK quoted companies issued 66 profit warnings in the second quarter of this year, nine more than compared to the same period last year.

In the second quarter of this year, seven warnings were issued as a direct result of the EU referendum, with most companies stating uncertainty over demand and the weaker sterling meant their profits would take a hit.

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But the report also highlighted companies faced a raft of challenges before the Brexit vote, pointing to the slower global growth, as well as the impact of digital disruption as firms struggle with technological challenges.

The FTSE sectors suffering the most were support services, travel and leisure, general retailers, and media groups.

However, only one financial firm had issued a profit warning in the second quarter of this year.

For the year-to-date, UK companies issued 321 warnings from 17.4 per cent of all UK listed companies, against 297 warnings from 18.5 per cent of firms at the same point in 2015.

The report also pointed to the growing gap between the winners and the losers, as 40 per cent of the companies who issued warnings in the first half of this year also issued cautions at some point during the previous 12 months.

Alan Hudson, Ernst & Young’s head of restructuring for UK & Ireland, said it has been a “dizzying unpredictable time” since the EU referendum.

While he said the initial impact of the Brexit vote appeared to have pushed profit warnings to a second quarter high, he said ultimately it is hard to separate this uncertainty from the underlying issues that brought high levels of warnings in previous quarters.

“Many UK companies still face sluggish, disrupted and competitive markets, with Brexit adding further layers of challenge, but also opportunity.”