Profit warnings by listed businesses increase by 46 per cent - report

Listed businesses in the West Midlands recorded a 46 per cent increase in the number of profit warnings in 2020, according to a new report.

EY 's Profit Warnings Report says that in total 38 profit warnings were issued by the region 's listed businesses, compared to 26 in the previous year.

The following FTSE sectors recorded the highest number of profit warnings during the year - Industrial Metals & Mining (7), Automobiles & Parts (5), Travel & Leisure (4) and Electronic & Electrical Equipment (4).

Of the West Midlands regional industries, those classified as operating in the Consumer Discretionary industries, including Retailers and Travel and Leisure sectors, recorded the highest level of profit warnings (13).

This was followed by listed businesses in Industrials (11), Basic Materials (7) and Financial Services (4).

The overwhelming majority of profit warnings from West Midlands listed companies (82 per cent) were attributed to COVID-19.

Dan Hurd (pictured), head of turnaround and restructuring strategy at EY in the Midlands, said: “Businesses operating in the Consumer Discretionary industries are often most sensitive to economic cycles, as they include automotive, household durable goods, textiles, and apparel and leisure equipment - all areas of the economy that feed into nonessential consumer items. ”

The number of UK listed companies at risk of insolvency has doubled in the last 12 months, according to data from the latest EY Profit Warnings Report.

In 2020, there was surge in the number of UK listed companies issuing three or more profit warnings in one calendar year - typically one in five of these companies enter Administration within 12 months.

Sixty-two UK listed companies issued at least their third profit warning in 2020. This represents 5 per cent of all UK listed companies, and 10% of the FTSE 350.

The 2020 total (62) is almost double that of 2019 when there were 32 and is more than double the 31 recorded in 2018.

Dan said: “Many UK businesses have been treading on thin ice for months with government support propping them up.

“While there is speculation these measures could be extended until the summer, the countdown has started, and in the comings weeks or months we 'll find out how many of these companies can keep their head above water. ”

A total of 583 profit warnings were issued by UK listed companies in 2020, this is the highest annual total in 21 years of EY research - 15 per cent higher than the previous record of 506 in 2001.

This historic high contrasts with very low levels of corporate insolvency.

Of the West Midlands ' listed businesses that issued a profit warning in 2020, six issued their third or more within a 12 months period.

The sectors with the highest percentages of companies issuing profit warnings in the UK last year, were those most affected by the implications of lockdown restrictions on consumer behaviour - for example retail, travel and leisure.

In 2020, 19 per cent of FTSE Retailers issued their third or more profit warning, while the equivalent figure for FTSE Travel and Leisure was 16 per cent.

Retail has been one of the hardest hit sectors of the pandemic, having reported the worst sales figures on record.

The final quarter of 2020 concluded with FTSE Retailers surpassing the highest annual total of profit warnings for the sector by reaching 53 - two more than the previous high set in 2008.

Lockdown restrictions have significantly impacted traditional bricks-and-mortar retailers.

Those with a good mix of digital, across multiple channels, and the capability to adapt quickly to customer demands have performed better.