The troubling statistic marks the highest number of Q2 profit warnings since the early stages of the Covid-19 pandemic in Q2 2020.
Nearly one-in-five UK-listed companies have issued a profit warning in the last 12 months, with 13 companies from the FTSE software & computer services sector contributing to this number.
Four companies in the telecoms sector and six in the media sector also contributed, meaning technology, media, and telecom (TMT) companies counted for almost a third of Q2 profit warnings.
62% of warnings issued across the TMT sector cited delayed or cancelled contracts as customers postponed or cancelled spending.
Then number of profit warnings from UK companies has now increased year-on-year for the seventh consecutive quarter to reach the highest number outside of the pandemic since the 2008 financial crash.
Q2 2020 still far surpassed 2023, with 166 profit warnings recorded at the time.
The impact of rising interest rates was cited in one-in-five warnings. “The challenging economic climate and tighter lending environment continues to cause disruption and uncertainty for companies within the TMT sector as businesses revaluate their purchasing decisions and cut back on non-essential spending,” said Will Fisher, EY’s UK strategy and transactions TMT leader.
“To mitigate these headwinds, it’s imperative that TMT companies prioritise their own spending decisions and adapt to their customers’ needs,” Fisher continued.
“This includes reviewing pricing models, minimising supply chain vulnerabilities and focusing on talent retention to ensure they are on the front foot and able to capitalise on opportunities once the recovery begins.”
In addition to rising interest rates, falling sales were cited in 59% of profit warnings whilst contractual issues or delayed payments were cited in 23% of warnings, as were rising costs and overheads.
“The sustained rise in profit warnings over the last two years reflects the extraordinary mix of challenges faced by UK businesses over that timeframe. It’s now clear that the effects of these low-growth conditions are spreading to nearly all corners of the UK economy, and this quarter we’ve seen earnings pressure extend up the value chain into the mid-market,” said Jo Robinson, EY-Parthenon partner and turnaround and restructuring strategy leader for the UK and Ireland.
Last week Capacity reported that Nokia reported a profit warning ahead of releasing its results tomorrow.
“Customer spending plans are increasingly impacted by high inflation and rising interest rates along with some projects now slipping to 2024,” Nokia said.
