Warnings as tough year hits profits

PROFIT warnings from stock market -listed companies have reached their joint highest level in a decade, research from accountancy giant EY shows.

It said that businesses issued 313 profit warnings over the course of 2019, a nine per cent increase on the preceding year. The last time that many earnings alerts were released was 2015. The next highest total was the 299 warnings put out in 2014.

EY added that the proportion of companies releasing disappointing news about their future earnings is the highest it has been in 18 years at 17.8 per cent. In 2001, 22.7 per cent of companies released bad news about their trading prospects.

The accountancy giant said that the reasons why companies issued profit warnings last year include political uncertainty over Brexit and subdued business and consumer spending. In the retail sector, rising costs, cutthroat competition and changing habits are said to have been damaging.

Alan Hudson, EY head of restructuring, said: “Last year was a challenging year, full of twists and turns that undoubtedly contributed to a remarkably high level of profit warnings. A toxic combination of protracted uncertainty and rapid sector change left many companies facing an uphill struggle to meet their earnings forecasts in 2019.”

Retailers issued the most warnings in 2019 with 32, followed by support services and software and computer services, which both issued 25 warnings. The two sectors were hit by companies putting off decisions due to political instability and the uncertain direction of the economy.