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.

- Geoff Ho

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.