Scottish listed companies proving more resilient than English counterparts

Scottish listed companies have held steady despite profit warnings surging to an all-time high during the year to date, new analysis reveals.

After nine months, the number of warnings issued by UK-quoted companies has reached a new annual high with more expected due to continued uncertainty from the pandemic, Brexit and the easing of central government support. Picture: Daniel Leal-Olivas/AFP/Getty Images

During the first three quarters of 2020, Scottish firms listed on the stock exchange issued a similar number of profit alerts to the same period last year, while the UK total hit an all-time high, according to EY.

Year-on-year, the number of warnings in the first nine months of 2020 from companies headquartered in Scotland increased by just 6 per cent – representing the smallest increase across UK home nations and English regions.

In 2020, the overwhelming majority of profit alerts from Scottish listed firms (94 per cent) have been attributed to the coronavirus crisis.

After nine months, the number of warnings issued by UK-quoted companies has reached a new annual high with more expected due to continued uncertainty from the pandemic, Brexit and the easing of central government support.

The total number of profit warnings from UK businesses in 2020 at the end of September stood at 524, setting a new record for the annual total. This figure replaces the 19-year-old record of 506 from 2001.

Colin Dempster, head of turnaround and restructuring at EY in Scotland, said: “All but one of the profit warnings from Scottish quoted companies has been attributed to Covid-19. Given the overall total for 2020 remains on par with the first three quarters of 2019, these figures indicate relative resilience by Scottish businesses.

“Time will tell if that stability is sustained as pressure mounts on one of the most prominent sectors for Scotland, the oil and gas industry. The dramatic drop in demand for fuel and continuing low oil price is putting strain on the sector and is likely to ripple throughout the supply chain.”

The profit warnings total for the third quarter (58) was both below average for the quarter (64) and 25 per cent lower than the third quarter of 2019, when there were 77.

The third quarter is typically the quietest period for corporate reporting and in 2020 this was amplified by the significant fall in earnings expectations earlier in 2020, the increase in activity as Covid restrictions were relaxed and as government initiatives kicked in.

Dempster added: “The summer offered some respite for businesses to prepare for what is expected to be an exceptionally difficult autumn and winter.

“Many businesses have managed to navigate the day-to-day stresses of the current environment by adopting survival tactics. However, with government support measures winding down and the reality of Brexit just around the corner, merely going back to basics isn’t enough.”

In the first three quarters of 2020 there were 449 profit warnings linked to Covid with the sectors where physical distancing has reduced demand and capacity being most affected.

Fiona Taylor, turnaround and restructuring strategy partner at EY, UK & Ireland, said: “Companies must recalibrate their businesses as a matter of urgency in order to secure their survival and potential to thrive in the future. It is vital they are able to adapt rapidly, and radically, to on-going change and uncertainty if they are to ensure long-term resilience.”

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