- Travel & leisure operators and retailers among the hardest hit
- 70 firms have issued two consecutive warnings in past 12 months
The number of UK-listed companies reporting profit warnings increased by 66 per cent in the second quarter, with a record number citing cost pressures as the reason for lower margins.
More than half of the 64 warnings issued in the quarter were from consumer-facing firms, according to EY-Parthenon’s latest Profit Warnings report. This week Direct Line (DLG) joined this list of companies, warning on margins driven up by car repair costs and the surge in used car prices, while Deliveroo (ROO) doesn't have a profit to warn about but cut revenue growth expectations significantly.
EY-Parthenon also reported eight warnings from companies in the travel and leisure sector, seven from retailers and seven from personal care, drug and grocery stores. The number of warnings was slightly lower than the 72 issued in the first quarter but still 10 per cent higher than the pre-pandemic average.
Of the 1,222 UK-listed companies, 70 have issued at least two consecutive warnings in the past 12 months. One-in-five companies delist within a year of their third warning, mostly due to insolvency, the firm said.
“Companies are facing a myriad of headwinds that will challenge even experienced management teams,” said EY-Parthenon partner Alan Hudson.
Not only have inflation and interest rates hit multi-year highs, consumer confidence has hit a record low, Hudson added.
“Over the first half of this year, we have seen profit warnings prompted primarily by cost and supply chain issues, but as we start to see a fall in consumer demand and confidence, it is likely that other underlying stresses will become exposed.”
