Six listed companies in South West have issued profit warnings since start of year

Listed companies in the South West issued six profit warnings in the first three months of the year, two less than the same period according to the latest EY-Parthenon Profit Warnings Report.

Across the UK, 18.7% of all UK-listed companies issued a profit warning in the last 12 months. In the first quarter, the number of profit warnings issued by UK listed companies fell 7% year-on-year to 70 and dropped slightly from Q4 2023, when 77 warnings were issued.

Despite the quarterly fall in warnings, the number of companies warning for the first time in 12 months reached its highest level since the first quarter of 2022, with 61% of companies in quarter one 2024 issuing a ‘new’ warning.

By the end of the first quarter of 2024, 39 companies had issued three or more warnings over the last 12 months, with just over a fifth of these companies delisting – or in the process of doing so – due to insolvency or acquisition.

Contract cancellations and delays were cited as the main reason for warnings by 29% of companies, whilst higher costs and weaker consumer confidence each accounted for 17% of warnings in the first three months of the year.

Companies within the South West operating in FTSE Consumer Discretionary sectors continued to issue the highest number of warnings, making up half of the region’s total warnings. This is an increase of one on the final quarter (October – December) of 2023.

Lucy Winterborne, turnaround and restructuring strategy partner at EY-Parthenon in the South West, said: “Whilst ongoing economic uncertainty has continued to effect businesses in the South West, there are signs of a subdued level of growth returning in 2024, which is reflected in the decrease in warnings during the first quarter of the year.

“Persistent high inflation, energy prices and interest rates will continue to impact businesses in the region, however as the year progresses, some of these pressures should begin to ease. Although businesses should not be complacent and should use this time to scenario plan to safeguard against any future economic or geopolitical shocks.”

Companies within FTSE Consumer Discretionary sectors continued to issue the most profit warnings (24) in the first quarter, accounting for 34% of all warnings during the period. The biggest growth in warnings has come in the FTSE Personal Goods sector, where over 50% of the sector warned in the first quarter alone, as earnings pressure spread further into the luxury goods sector.

The FTSE Industrial Support Services sector, which encompasses business service providers, industrial suppliers, and recruitment companies, issued nine warnings in quarter one 2024 and 18 warnings in the last six months, more than the whole of 2022, with the sector significantly impacted by falling business spending and recruitment, rising costs, and cancelled or amended contracts.

Companies in financial services sectors reported 11 warnings in the first quarter, which is the highest number since the pandemic, and before that, the Global Financial Crisis in 2008. The increase in warnings indicates challenges facing pockets of the financial industry, namely certain lenders exposed to auto finance and some parts of the wealth and asset management industry.

A high level of warnings was also seen across FTSE Retailers (7), FTSE Household Goods and Home Construction (5), FTSE Personal Goods (5) and FTSE Pharmaceuticals, Biotechnology and Marijuana Producers (5).