South East’s listed companies issue 89 per cent more profit warnings in 2022

The South East’s listed companies issued 70 profit warnings last year, 89 per cent more than in 2021.

This is according to EY-Parthenon’s latest Profit Warnings report, which states that 13 were issued in the fourth quarter of the year, down seven from Q3.

A profit warning is an official statement made to the stock exchange from a publicly-listed company, stating it will report full-year profits materially below management or market expectations.

Across the whole of the country, UK-listed companies issued 305 profit warnings in 2022, a roughly 50 per cent increase on the 203 issued in 2021.

Of these, half were issued due to rising costs, which is double the amount issued because of this in 2021. Of the UK’s 1,193 listed businesses, 17.7 per cent issued a profit warning, the same proportion which issued them during the 1008 global financial crisis.

The second half od the year saw the second highest amount of warnings issued since 2015, reaching 169 – 83 of which came in the fourth quarter. Of these final quarter warnings, 41 per cent cited rising costs, 24 per cent pointed to delayed or cancelled contracts and 20 per cent to weaker consumer confidence.

The FTSE sector with the highest number of warnings issued was Retailers, with 36, followed by Travel and Leisure (25), Software and Computer Services (18), Industrial Support Services (17) and Personal Care, Drug and Grocery Stores (16).

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Caroline Macaskill, Partner at EY in Reading, said: “Rising energy bills and interruptions to supply chains continue to create challenges for businesses. When combined with changes to consumer spending habits due to reduced disposable income, these stresses are now affecting new sectors and industries.

“Forecasting and planning will be vital for businesses, but will be challenging as energy and fuel costs continue to fluctuate. Resilience will be put to the test this year, however as businesses evolve to meet the new challenges head-on, new opportunities may present themselves, allowing those who can grasp them to rise above the competition.”

Sam Woodward, Turnaround and Restructuring Strategy Partner at EY, said: “Although festive trading was better than expected for many, the bar was set low by exceptional levels of consumer sector profit warnings in 2022.

“The ‘golden quarter’, a vital period for consumer companies, included a winter World Cup along with the disruption from train and postal strikes. This backdrop created a further complex layer of challenges and opportunities in addition to ongoing cost, labour, inventory, and confidence issues for consumer-facing companies. 

“Supermarkets appear to have been the main winners of Christmas 2022, while many omnichannel retailers managed to flex their offering to adapt to the impact of industrial action and performed well.

“However, as EY’s latest Future Consumer Index underlines, it will be critical for companies to keep adapting and reflecting customer priorities, which for most consumers in the short term, will be a compelling price proposition.”

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