Profit slump warnings at record levels
PROFIT warnings are being issued by stock market listed companies at their fastest rate ever due to the economic impact of coronavirus, according to accountancy giant EY.
It said that this month, London Stock Exchange listed companies have put out 76 alerts that state that Covid-19 will impact upon their profitability, of which 47 were released last week.
Last year, businesses published 24 warnings that they would miss profit forecasts during March, and 89 in total for the first quarter.
EY senior manager Kirsten Tompkins said that the number of warnings is set to spike: “We’re still in the first stage, where companies are preserving cash and cutting back on their capital expenditure.
“We still have the flow through from low oil prices and weak sterling to come.”
Airlines, tour operators, pubs, hotels, restaurants and cinemas are among the businesses hit the hardest by the crisis, as have retailers. The travel and socialisation restrictions and the cancellation of sports events have hurt betting and gaming too.
Tompkins warned that for many of these businesses, there is a limit to their ability to minimise costs and that their sales are unlikely to catch up, increasing their financial vulnerability.
She added: “Covid-19 is fundamentally affecting companies’ ability to operate and plan on a global level. As a result, we are recording profit warnings at a pace that far exceeds anything I’ve seen in 16 years of tracking profit warnings and the 21 years that EY have been conducting this study.”
On Friday, Chancellor Rishi Sunak announced a fresh set of measures aimed at preventing the coronavirus pandemic from crippling the country and leaving workers jobless.
For the first time in the history of the UK, Sunak said that the Government will provide grants to companies that will cover up to 80 per cent of an employee’s wages, up to a total of £2,500 a month. It is hoped that this will stop businesses from laying off staff en masse.
The grant scheme will be backdated to the start of March and will be open for at least three months.
Additionally, he said that the Government’s coronavirus business loan interruption scheme will be open for business from tomorrow and will operate for 12 months, and postponed businessesvat bills.
On Tuesday closely watched economic indicators, the Markit/ CIPS PMI surveys, will show that the Covid-19 crisis has thrown the economy sharply into reverse.