Profit warnings increased by more than 70 percent in the final quarter at U.K.-listed companies, the biggest quarterly jump since the first quarter of 2001, according to Ernst & Young LLP.
U.K.-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, said E&Y in a report published today. In total, 206 companies issued 278 profit warnings in 2011, 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 U.K. 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 in 2011, 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, said the report.
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 U.S. weakens, said E&Y.
“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,” said E&Y.