Covid-19 triggers profit warning hike for listed firms
EIGHTY SEVEN per cent of all profit warnings issued by UK listed companies in the last three weeks cited coronavirus, according to new analysis from EY.
Since the start of 2020, 54 profit warnings – 25 in this week alone – have blamed the impact of the virus for a material downgrade to their profit expectations, reported EY, which has been tracking UK profit warnings for over 20 years.
Restructuring partner, Taylor Dewar, said: “Covid-19 is fundamentally affecting companies’ ability to operate and plan on a global level.
“As a result, we are recording profit warnings at a pace that far exceeds anything we’ve seen in more than two decades.
“What is noticeable is the shift in pressure since the start of the month – from industrials to consumer discretionary – as the main driver behind profit warnings moves from supply chain disruption to the impact of ‘social isolation’.”
More than 40 per cent (23) of the total number of Covid-19 related profit warnings issued in the UK in 2020 so far, have come from companies in the FTSE travel and leisure sector.
Airlines, tour operators, pubs, hotels, restaurants and cinemas are amongst those most affected by travel and social restrictions, which have also had a knockon effect on betting and gaming companies due to the cancellation of sporting events.
EY recorded an exceptionally high level of profit warnings in 2019 (313) – equal to 2008 levels at the height of the financial crisis.
This year had opened in the same way, before the added pressure of Covid-19, which has created an unparalleled challenge for UK plc.
EY restructuring partner, Mona Bitar, added: “Covid-19 has generated an exceptional list of challenges in supply, demand, operations, planning and liquidity, alongside high levels of uncertainty and an ongoing backdrop of existing volatility and weak demand.
“In this rapidly moving environment, companies should be focused on four actions: putting peoples’ safety first; focusing on business continuity; building and securing liquidity; and engaging stakeholders.”
Companies such as retailer WH Smith, training provider Mind Gym, aviation services company John Menzies and plumbing group Ferguson have all warned on profits, blaming coronavirus.
Gambling firms, including William Hill, are also feeling pain.