Profit warnings increased by more than 70 percent in the final quarter at UK-listed companies, the biggest quarterly jump since the first quarter of 2001, according to Ernst & Young LLP (E&Y).
UK-listed companies issued 88 profit warnings in the fourth quarter, compared with 53 in the third quarter, hit by economic uncertainty and weakened consumer sentiment, E&Y said in a report published yesterday. In total, 206 companies issued 278 profit warnings last year, compared with 196 in the previous year.
“As evidenced by the sharp jump in the number of warnings, 2011 was a tough year for many companies and this year is likely to continue in the same vein with the gap between the winners and losers widening,” Alan Hudson, head of Ernst & Young’s UK restructuring practice, said in a statement. “Creditor patience cannot last forever and as growth becomes increasingly elusive, we expect further rounds of restructuring in the year ahead.”
Retailers issued the most warnings, 39 last year, more than the whole of 2009 and 2010 combined. The support services segment issued 33 warnings, while the software and computer services sector released 31 warnings, the most since 2008 and 40 percent more than in 2010, the report said.
The upward trend may continue this year if European finance leaders don’t resolve the sovereign debt crisis or growth in China slows or demand from the US weakens, it said.
“Moreover, there is still a risk that global unrest — especially in the Middle East and North Africa region — could continue to cause pricing and currency fluctuations, which again will put pressure on margins and make forecasting difficult,” the report said.