Profit warnings surge 50% as costs hit companies
Profit warnings among the UK’s listed companies were up by half last year on the previous 12 months, providing an early indicator of a rise in insolvencies.
Investors received 305 profit alerts in 2022 from companies blaming rising costs and declining consumer confidence.
Almost 18% of the UK’s 1,193 listed businesses issued a profit warning. That’s a similar proportion as during the global financial crisis in 2008, according to a report from EY.
The industrial sector generated the biggest rise in warnings in the final quarter of the year.
The analysis reveals that 31 companies had issued their third profit warning in less than a year and that a fifth of these had breached their banking covenants.
A quarter of the 83 profit warnings in the last three months of 2022 related to delayed or cancelled contracts, with another quarter blamed on weaker consumer confidence and two-fifths citing rising costs.
More than a third of UK-listed companies in consumer sectors issued a profit warning during the year. On Friday, Superdry became the latest retailer to warn over its profit forecast for the year, sending its shares down 17%.
The profit alerts are seen as an indicator of more company insolvencies.
Kirsten Tompkins, a restructuring analyst at EY, said: “Normally you would be looking at a nine to twelve-month lag between a spike in profit warnings and a spike in insolvencies.”