Third quarter profit warning figures revealed
Listed companies in the South West issued four profit warnings in Q3 2024, equalling the previous quarter, according to the latest EY-Parthenon Profit Warnings report.
Nationally, UK-listed companies issued 84 profit warnings between July and September 2024, the highest quarterly total for two years.
The report found that profit warnings from UK-listed companies rose 11% compared with Q3 2023, and the proportion of companies that have issued a warning over the last year now stands at 19.2% – the highest rolling 12-month percentage since the pandemic and, before that, since 2001.
Leading factors behind Q3’s profit warnings included contract and order cancellations or delays, cited in 38% of warnings, the highest percentage for this reason in 15 years. Falling sales triggered also triggered a third (33%) of the quarter’s warnings.
Jo Robinson, EY-Parthenon partner and UK&I turnaround and restructuring strategy leader, said: “Uncertainty has been a persistent feature of the business environment for several years now but, unusually, this latest surge in warnings wasn’t preceded by a sudden economic downturn or one-off event. This uncertainty seemed to intensify over the summer as companies awaited the new Chancellor’s Autumn Budget and US election and were also affected by ongoing heightened geopolitical tensions. The latest profit warning data gave us a real-time indicator of this shift in business sentiment and the impact this can have on company earnings.
“Time will tell whether this rise in profit warnings is a temporary spike or indicative of a longer-term trend, but against a volatile macroeconomic and policy backdrop, coupled with profound changes in technology and consumer behaviour, abrupt adjustments to earnings expectations appear increasingly likely.
“In this environment, companies and their stakeholders must be vigilant in proactively identifying and addressing emerging issues before they escalate. The restructuring landscape may be rapidly evolving, with innovation often offering opportunities for value preservation, but prompt action is still crucial to secure the best possible range of outcomes.”
Industrials and technology lead the rise
The FTSE sectors with the highest number of profit warnings in Q3 were Industrial Support Services – which encompasses business service providers, industrial suppliers and recruitment companies – with 10 warnings issued, and Technology Hardware & Equipment, with eight.
Customer reluctance to commit to new contracts and orders was particularly pronounced in the Industrial and Technology sectors, where over 90% and 70% of the warnings, respectively, were related to either lower orders or contract delays and cancellations.
In the South West, warnings in Q3 of 2024 were spread across a number of sectors,. Companies operating within the FTSE Consumer Discretionary sector continued to issue the highest number of warnings in 2024 (five), making up more than a third (36%) of the region’s total warnings this year.
Lucy Winterborne, partner, turnaround and restructuring strategy at EY based in the South West, said: “Following a fall in the number of profit warnings last quarter, it is encouraging to see this low level sustained in Q3.
“With 14 warnings issued so far this year, four less than the same period in 2023, listed businesses across the region are continuing to adapt during challenging times. However, a fall in sales, budgetary pressures, and difficult negotiations with customers continue to contribute to the number of warnings issued. The persistence of these issues indicates that some businesses have yet to undergo necessary strategic restructuring. Addressing this will be crucial for companies aiming for sustainable growth in the coming year.”
