In the region, 10 profit warnings were issued, the same as in 2018.
The majority of warnings issued in 2019 came in technology, electronics and telecoms sectors, which were hit in 2019 by the impact of uncertainty and trade tensions on demand.
Stuart Wilkinson, Office Managing Partner at EY in the East, commented: “2019 was a challenging year, full of twists and turns that undoubtedly contributed to a remarkably high level of profit warnings in the UK overall. A toxic combination of protracted uncertainty and rapid sector change left many companies facing an uphill struggle to meet their earnings forecasts in 2019.
“However, despite the turbulence in the last 12 months the number of profit warnings remained constant in the region and historically low, compared to the UK total.”
UK warnings ‘exceptionally high’
UK quoted companies issued 313 profit warnings in 2019, rising by 9% year-on-year (287 in 2018) to reach the highest annual total of warnings since 2015. Particularly striking is the proportion of FTSE listed companies warning in 2019 (17.8%), which marginally surpassed 2008 (17.7%), to reach an 18-year high (2001: 22.7%).
In Q4 2019, 22% of UK profit warnings blamed ‘political uncertainty’, according to the report. Over a third of warnings also pointed to delayed or cancelled contracts, a clear indication of the impact of uncertainty on earnings.
Impact of uncertainty on corporate decision making
Sectors with the largest exposure to the impact of uncertainty on consumer and business discretionary spending issued the most profit warnings in 2019.
FTSE Retailers issued the most warnings in 2019 (32), followed by FTSE Industrial Support Services and FTSE Software & Computer Services, which both issued 25 warnings, hit by the impact of delayed decision making that also led to a seven-year high in warnings from FTSE Construction & Materials.
FTSE Technology Hardware & Equipment had the highest percentage of companies warning in 2019 at 56%, with earnings hit by the US-China trade dispute and slower growth in key end-markets – especially automotive.
2020 outlook
Wilkinson concludes: “Easing political tensions and promises of UK fiscal expansion could help more companies beat depressed expectations in 2020. The median share price fall on the day of warning fell to a two-year low in the second half of 2019, which suggests that investors have priced in some of their concerns.
“But, underlying stresses and tensions mean that profit warning numbers could rise quickly again. Companies need to remain flexible, agile and alert to changes on multiple horizons.”