Profit warnings in South West fall in first half of the year

Listed companies in the South West of England issued 10 profit warnings in the first half of 2024, a third less than the same period in 2023, according to the latest EY-Parthenon Profit Warnings Report.

Companies in the South West issued four warnings in the second quarter, down by three on the previous year when seven warnings were issued.

Nationally, in the second quarter of the year, the number of profit warnings issued by UK listed companies fell 26% compared with 49 warnings issued  last year – the lowest quarterly total since 2021.

Leading factors behind many profit warnings included contract issues which were cited in 29% of warnings.

As companies contended with increasing labour and supply expenditure, cost pressures rose as a key factor in profit warnings for the first time in more than 12 months and were cited in more than a quarter (27%) of profit warnings.

Jo Robinson, EY-Parthenon Partner and turnaround and restructuring strategy leader, said: “An unprecedented rollcall of global elections and geopolitical risks means that an element of uncertainty remains, potentially exerting further pressure on spending and growth.

“We can expect the economy to continue to recover, but slowly and unevenly.

“We have started to see more companies coming back to the restructuring table because they haven’t made the fundamental changes needed to adapt their operations and balance sheets to new demand, cost and competitive realities. Refinancing is a growing risk, with many companies surprised by the added levels of due diligence and time needed to refinance in this market.

“We expect all of this to drive a slow uptick in restructuring, but without necessarily a big upsurge in administration appointments, as more companies tackle their issues through restructuring plans and consensual agreements with creditors. The profit warning cycle may have turned, but we are at the start of the restructuring one.”